Exponential Organizations - Why new organizations are 10x better, faster and cheaper than yours (and what to do about it)

Yuri van Geest
- Co-Author Exponential Organizations
- Dutch Ambassador of SU
- Managing Director of the
Singularity University Summit Europe
- Co-Founder Quantified Self Europe
- Co-Founder Lean Startup Machine NL

“Exponential Organizations is the mostpivotal book in its
class.” - John Hagel
•
“Exponential Organizations should be required reading for
anyone interested in the ways exponential technologies
are reinventing best practices in business.” - Ray Kurzweil
“The most transformational business book I’ve ever read”
- Ken Losch
"Connecting the worlds of innovation with new
imagination ; the authors explore this new world and share
their toolbox” – Daan Roosegaarde
“Exponential Organizations is a must read business book
this fall” – Om Malik

Technologies
3D Printing
$40,000 (2007) to $100 (2014) 400x in 7 years

Technologies
Industrial Robots
$500,000 (2008) to $22,000 (2013) 23x in 5 years

Technologies
Drones
$100,000 (2007) to $700 (2013) 142x in 6 years

Technologies
Solar Energy
$30 per KWh (1984) to $0.16 per KWh (2014) 200x in 30 years

Technologies
Sensors (3D LIDAR)
$20,000 (2009) to $79 (2014) 250x in 5 years

Technologies
Neurotech (BCI devices)
$4,000 (2006) to $90 (2011) 44x in 5 years

Technologies
Nanotech (Graphene)
Projected: 80% price drop in production costs between 2014-2020

Technologies
Biotech (DNA sequencing)
$10,000,000 (2007) to $1,000 (2014) 10,000x in 7 years

•
“The average half life of a
business competency has
dropped from 30 years in
1984 to 5 years in 2014.”

•
“89% of the Fortune 500
companies from 1955 are
not on the list in 2014.”

•
“The average lifespan of
an S&P 500 company has
decreased from:
67 years (1920’s) to
15 years (today).”

•
“In the next 10 years
40% of all S&P 500
companies will
disappear from this list”

•
Technology accelerates
-> Threat to companies
Key case study to
illustrate this

2006: valuation $140B
Nokia vs. Waze

Disruption: Jan 2007: announcement iPhone
Nokia vs. Waze

Oct 2007: acquired
by Nokia for $8.1B
Nokia vs. Waze

Oct 2007: acquired
by Nokia for $8.1B
Nokia vs. Waze
Dec 2007:
Waze founded

Oct 2007: acquired
by Nokia for $8.1B
Nokia vs. Waze
Dec 2007:
Waze founded
Disruption: in 4 years time 10x amount of sensors for Waze

Oct 2007: acquired
by Nokia for $8.1B
Jun 2012: valuation $8.2B
Nokia vs. Waze
Dec 2007:
Waze founded

Oct 2007: acquired
by Nokia for $8.1B
Nokia vs. Waze
Jun 2013: acquires
Waze for $1.1B
Dec 2007:
Waze founded

Oct 2007: acquired
by Nokia for $8.1B
Nokia vs. Waze
Jun 2013: acquires
Waze for $1.1B
Apr 2014: acquires
Nokia for $7.2B
Dec 2007:
Waze founded

Takeaways
Our organizational structures have evolved mainly to
manage scarcity of people, money and assets /
resources.
The concept of ownership works well for scarcity
Accessing or sharing works better in an abundant,
information-based world.

Key Point
While the information-based world is now moving
exponentially, our organizational structures are
still very linear (especially larger and older ones)

Key Challenge
We’ve learned how to scale technology (mainly cloud
computing since 2006)
Now it’s time to scale the organization: strategy,
structure, processes, culture, KPIs, people and systems

Software is eating the
world, in all sectors
In the future every
company will become a
Mark Andreessen software company
founder of Netscape,
renowned Venture Capitalist
Andreessen-Horowitz

ExOs: Everything will become digital
• social, mobile & online for
front-end functions
• nanotech, robotics, 3D
printing, sensors, AI
• crowdsourcing (leveraging the
crowd), DIY*, P2P**, crowd
companies, AI, Nanofactories
•
*Do-It-Yourself: Movement of people who create things without the help of experts or professionals
•**:Peer-to-Peer: a decentralized network leveraging direct interactions between people

Definition
An Exponential Organization (ExO) is one whose
impact (or output) is disproportionally large — at
least 10x larger — compared to its peers because
of the use of new organizational techniques that
leverage exponential technologies.

Attributes
MTP
The Massive Transformative Purpose (MTP) is the
higher, aspirational purpose of the organization,
capturing the hearts and minds of those both inside
and (especially) outside of the organization.

Attributes
MTP
Quirky - Quirky’s Massive Transformative Purpose is to ‘make invention
accessible’. To enable this, they provide people with the possibility to go through
a full product cycle in just 29 days instead of the normal 300 days.

Attributes
Staff on Demand
Staff on Demand is a necessary characteristic for
speed, functionality and flexibility in a fast-changing
world.
Rather than ‘owning’ employees, ExOs leverage
external people for simple to complex work –
even for mission critical processes.

Attributes
Staff on Demand
Procter & Gamble - To check how and where its merchandise is being
placed on Walmart shelves around the world, P&G uses the Gigwalk platform
to instantly leverage thousands of people who are paid a few dollars.

Attributes
Community & Crowd
Most ExOs are attracting and leveraging their
community or the general public to scale.
The crowd can be leveraged by harnessing
creativity, innovation, validation and even funding.

Attributes
Community & Crowd
GitHub - GitHub is an open source developer community with 6.5 million
members and 14.2 million repositories. Its members rate and review the code
of others and collaborate on further improving it.

Attributes
Algorithms
As the world turns into data and information,
ExOs are leveraging Algorithms, including
Machine Learning and Deep Learning to get new
insights about their customers and products.

Attributes
Algorithms
UPS - 55,000 trucks in UPS’s American fleet make 16 million deliveries daily.
By applying telematics and algorithms, UPS efficiently reroutes the trucks,
saving 85 million miles a year, resulting in cost savings of $2.55 billion.

Attributes
Leveraged Assets
Rather than trying to own assets, ExOs access,
rent or share assets to stay nimble – outsourcing
even mission critical assets.
Leveraged assets are comprised of Cloud
computing, Hackerspaces and assets from
customers as input for business.

Attributes
Leveraged Assets
Square - The popular Square payment device - currently valued at $5 billion -
was prototyped at TechShop. The company did not have to buy expensive
machinery to build the prototype but could use the assets TechShop provided.

Attributes
Engagement
Engagement is comprised of digital reputation
systems, gamification and incentive prizes, which
create network effects and positive feedback loops.

Attributes
Engagement
Allstate - The insurance company Allstate ran a contest on Kaggle to
improve its Claim algorithm. It was bested in 3 days by 107 competing teams.
When the contest ended, Allstate’s original algorithm had been improved
271%.

Attributes
Interfaces
When implementing the externalities (SCALE), ExOs
use customized filtering and matching processes –
which we call Interfaces – to process the output of
external attributes into the internal organization,
using algorithms and workflow software.

Attributes
Interfaces
Uber - Uber, the on-demand car service currently valued at $17 billion, uses
interfaces to allow users to find and get matched with the best drivers.
Because of this it costs Uber essentially zero to add an additional driver.

Attributes
Dashboards
In order to measure and manage the performance
of an ExO, a real-time, adaptable dashboard with
essential company and employee metrics and short
feedback loops is implemented – accessible to
everyone in the organization.
Lean value & growth metrics + learning metrics + OKRs

Attributes
Dashboards
Google Ventures - Although only 5 years old, Google Ventures has $1.5
billion and 225 portfolio companies under management. It is considered one
of the best VCs as it relies heavily on Lean metrics and OKRs.

Attributes
Experimentation
ExOs use the Lean Startup methodology and other
techniques inside different organizational
departments to constantly experiment with new
ideas and processes, culturally enabling risk-taking
and failure. Processes are constantly being tweaked
with fast feedback loops.

Attributes
Experimentation
General Electric - GE implemented the FastWorks program inside their
organization to stimulate innovation and experimentation. Currently 40,000
employees have joined the program, resulting in 300 pilot projects.

Attributes
ExOs have a flat organization, allowing self-organizing,
multi-disciplinary teams and / or
Autonomy
individual employees to operate with decentralized
authority.
A good example of this trend is the Holacracy model.

Attributes
Autonomy
Valve - Valve is a gaming company with a completely flat organization. Its 330
employees have full decision-making authority, which resulted in a higher
revenue-per-employee number than competitors, even beating Apple & Google.

Attributes
Social Technology
ExOs leverage collaborative tools, such as file sharing,
activity streams, wikis, telepresence, virtual reality and
emotional sensing to manage real time, zero latency
conversations.
When implemented it creates transparency and
connectedness and lowers an organization’s
information latency.

Attributes
Social Technology
Atos - Atos estimated that their 80,000 employees spend 5-20 hours a week
on e-mails while only 15% was considered useful. To reduce the e-mail load,
the company started to use the internal network blueKiwi (20% reduction)

I-D-E-A-S
Promote
Non-Political,
More Human
Organizations

Best ExOs
MTP
Staff on Demand Interfaces
Community & Crowd Dashboards
Algorithms Experimentation
Leveraged Assets Autonomy
Engagement Social
Google - The search giant has many initiatives that brought exponential
growth, consider PageRank, Adwords, Google+ and Android. Or GoogleX with
it’s innovative moonshot projects such as Glass and the autonomous car.

Best ExOs
MTP
Engagement Social
GitHub - GitHub is an open source developer community with 6.5 million
members and 14.2 million repositories. This is 109x more repositories per
employee compared to its competitors.

Best ExOs
MTP
Engagement Social
Airbnb - A community marketplace for accommodations active in 34,000
cities and 190 countries, currently worth $14 billion. With 800,000 listings
worldwide, Airbnb has 90x more listings per employee than hotel chains such
as Hyatt.

Best ExOs
MTP
Engagement Social
Uber - It costs Uber essentially zero to add an additional car or driver to its
fleet. Consider the impact when they move horizontally and offer new
services: postal delivery, limo service, groceries, gifting, medical services, etc.

Best ExOs
MTP
Engagement Social
Tesla - Automotive software company with 6,000 employees and a market
value of $30 billion. This is more than half of either GM or Ford, who both
have 200,000 employees. Cars update themselves every week via a
download.

Best ExOs
MTP
Engagement Social
Xiaomi - Low-end Android smartphone company, focusing on performance,
quality and customer experience. Has a flat structure consisting of 4,300
employees of which 30% is in R&D.

Best ExOs
MTP
Engagement Social
Kaggle - Platform that hosts algorithm contests in which 185,000+ data
scientists compete for prizes and recognition. in every one of Kaggle's 150
contests to date, external data scientists have beaten the internal algorithms.

Rent, don’t own assets, people & resources
Takeaways
Marginal cost of supply is dropping exponentially
for the first time ever (besides marginal costs of
demand) >>> double viral loops or network effects

Startups vs. Corporates
Source: Joi Ito, director MIT Media Lab

Education from
outside sources
Board
Management
Implement
Diversity
Leadership
Skills
Strategies
Transform Leadership
Singularity University - One outside source is
Singularity University. Its mission is to educate,
inspire and empower leaders through its programs.

Acquire
Identify
Partner
Invest
Strategies
Leverage ExOs
Acquire General Electric - GE identified Quirky as a
valuable ExO. In 2013 they started a partnership by
opening up GE patents. Recently GE also invested
$30 million

Incubators
Accelerators
Hackerspaces
Create your
own
Strategies
Leverage Ecosystem
Telefonica - The mobile phone operator created
Wayra: multiple global incubators that stimulate local
ecosystems. Currently 400 startups are on board.

ExO at the
Edges
Black Ops
Team
Copy GoogleX
Strategies
Disrupt [X]
IDEO - The design firm realized they were open to
disruption. They created a Black Ops Team with the
challenge to disrupt itself, resulting in OpenIDEO

Strategies
Coca-Cola - Invested in rolling out Slingshot water
purifiers and Exocenters, to bring 100 million liters of
water to 45,000 people across 20 countries by 2015.
Migrate
towards an
MTP
S C A L E
I D E A S
ExO Lite

Corporate Example
MTP
Engagement Social
ING Direct / Tangerine - Canadian bank that handles 1,800 customers
and $40,000 in deposits per employee (7x and 4x improvement compared to
other Canadian banks). Tangerine created Cafes to engage with the
community.

Corporate Example
MTP
Engagement Social
Haier - Chinese appliance maker with 80,000 employees organized in 2,000
self-managed units with decision-making authority. The company is constantly
improving processes which contributed to $30 billion in sales for 2013 alone.

EXPONENTIAL
ORGANIZATIONS
(e)Book by
Salim Ismail – Yuri van Geest – Peter Diamandis
Michael Malone
Amazon Bestseller 3 months in a row in pre-order phase
First book published by Singularity University Press
Go to www.exponentialorgs.com to ORDER
or take the FREE SURVEY

SINGULARITY UNIVERSITY
SUMMIT EUROPE
19-20 November 2014 | DeLaMar Theater Amsterdam
Official European launch and presentation of
the book Exponential Organizations
Go to http://global.singularityu.org/summits/amsterdam/
to BUY your tickets

Yuri van Geest
Co-Author Exponential Organizations
+31 6 113 19 290 @vangeest
Yuri.vangeest@singularityu.org
www.exponentialorgs.com

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