Tuesday, April 28, 2015

Why an Exponential Organization May Bury Your Company

New Breed of Competitor Innovates Ten Times faster!

By Marc Dresner, Senior Editor, IIR

In just the past five years a new breed of competitor has emerged. And chances are it is ten times faster, more efficient and more capable of innovating than your company.

They’re called “exponential organizations” and, as the name suggests, they scale amazingly well.

With a few notable exceptions—Apple, Google, Amazon—these aren’t (at least initially) big name players, but according to Salim Ismail, Founding Executive Director of Singularity University, they can outperform them by a factor of ten on a variety of metrics.
Salim Ismail

Procter & Gamble takes about 300 days to go from a new idea to a product on the shelf at Walmart. Quirky does that in 29 days.”

“Procter & Gamble takes about 300 days to go from a new idea to a product on the shelf at Walmart. Quirky does that in 29 days,” noted Ismail, co-author of “Exponential Organizations: Why New Organizations are Ten Times Better, Faster and Cheaper than Yours (and what you can do about it).”

Traditional organizations, Ismail observes, tend to be hierarchical, centralized and closed, and they operate around an “ownership” model predicated on scarcity (of people, resources, assets, platforms, etc.).

In contrast, ExOs—as he calls them—function in a way that’s fundamentally different; they embrace and leverage openness, transparency and abundance.

ExOs focus outward, not inward, and according to Ismail this gives them an edge in a world where the pace of technological advancement is increasing exponentially.

“The external world is now moving so fast that if you try to do innovation solely from inside, you’re dead.”

“The external world is now moving so fast that if you try to do innovation solely from inside, you’re dead,” said Ismail in a podcast interview with Forward Focus.

Ismail—who, by the way, launched and ran Yahoo’s Brickhouse internal incubator—added that companies that cling stubbornly to innovating from within will more likely than not strangle their own innovation pipeline.

“When you try to do a traditional skunkworks, the immune system of the company will attack you.”

“When you try to do a traditional skunkworks, the immune system of the company will attack you,” he said, “because our traditional organizational structures are built to withstand change and withstand risk and keep doing the same thing.”

Editor’s note: This same argument was made by Steve Blank in an earlier interview with Forward Focus. Check it out here.

Another of ExOs’ distinguishing (and potentially alarming) characteristics is that they like to play in different sandboxes.

Accordingly, Ismail says large, established companies at the top of a category are particularly vulnerable to being disrupted by them.

“We think they are sitting ducks.”

“Most large companies are stuck in a particular vertical trying to build products and services for that vertical. We think they are sitting ducks,” Ismail said.

It’s this propensity to hunt for opportunities outside its resident category—maybe more so than its design capability and underlying technology supply chain—that Ismail credits with Apple’s success.

What Apple does…

“What Apple does—unlike any other big company in the world—is they take a small, disruptive team, keep them completely stealth, put them at the edge of the organization and say, ‘go attack another industry,’ leveraging an information capability and then adding to their platform,” said Ismail.

“Apple has no theoretical limit to their market cap,” he added. “I fully expect they will be the first trillion-dollar company because they are not stuck in one marketplace.”

In this podcast with Forward Focus—FEI’s expert interview series—Salim Ismail acquaints us with the exponential organization and what it will take for established companies to compete.



Editor’s note: Salim Ismail will be delivering a keynote at the 13th Annual Front End of Innovation taking place May 18-20 in Boston.

For more information or to register for FEI 2015, please visit www.frontendofinnovation.com


Ps. REGISTER TODAY with code FEI15BL and SAVE $100!


ABOUT THE INTERVIEWER
Marc Dresner is IIR USA’s sr. editor and special communication project lead. He is the former executive editor of Research Business Report, a trade publication for the marketing research and consumer insights industry. He may be reached at mdresner@iirusa.com. Follow him @mdrezz.

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