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    Why are Exponential Organizations (ExO) emerging in every industry?

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    A Heraclitus of Ephesus (a pre-Socratic Greek philosopher) said more than 2,500 years ago, “the only permanent thing is change”. And since then, everything has been changing. However, nowadays everything changes faster than ever. Why? Because we are living a technological revolution, which is impacting every area of our lives, business and society.

    In 1965 Gordon Moore (CEO of Intel) predicted that the number of transistors in a microprocessor doubles about every two years, which happened to be right and it’s nowadays known by the “Moore’s Law”. The impact of this is that the performance of computing technologies evolves in an exponential way. That means that every second year the performance of computing gets double, which provide us with an exponential growth (e.g. 1, 2, 4, 8, 16, 32, 64, 128, etc.).

    Let’s put an example to explain the relevance of exponentials. If the average person moves forward one meter ahead with each step, that means that if the person moves 30 steps, then will move forward 30 meters. Easy. However, let’s imaging that each step was exponential, meaning that the first step would be 1 meter, the second step 2 meters, the third step 4 meters, the fourth step 8 meters, the fifth 16 meters, and so on. The final result of 30 exponential steps would be more than one billing meters (1,073,741,824 meters), which would be more than 84 loops to the Earth. Who could guess the result of the exponential steps as we did for the linear ones? The issue is that our brains work very well with linear, but we can’t predict exponential.

    Going back to Moore’s Law and how computing performance grows in an exponential way, this is the reason why we all currently have mobile phones in our pockets that are millions of times more powerful that the computer that brought the Apollo XIII to the Moon more than 50 years ago. What will be the computing power we all will have in our pockets (or somewhere else) in a few years? No one can’t tell, but will be more powerful that we can imagine.

    On top of this, Ray Kurzweil (American inventor and futurist, and also co-founder of Singularity University) extended Moore’s Law with his “Law of Accelerating Returns”, according to which the rate of change in a wide variety of systems, including all type of technologies, tends to increase exponentially.

    Nowadays, there is a new set of technologies emerging that we never had before, such as Artificial Intelligence, Robotics, 3D Printing, Drones, Biotechnology, and many more. All of them are possible because the exponential grow of computing power and all of them are also doubling every two years. All of them are exponential technologies and are impacting not only our daily lives, but also every industry.

    In fact, according to the World Economic Forum, we are officially at the early stages of the Fourth Industrial Revolution, which is happening because the emergence of all these exponential technologies at the same time and the combination of all of them.

    As we saw before in the example about exponentials, it’s really difficult to predict what will happen in the upcoming years, but we can try to understand the dynamics that exponential technologies are generating and the implications they have in our lives. In the book “Bold”, Peter Diamandis and Steven Kotler described the chain reaction of technologies with the 6D’s, which are the different phases that any domain go through when we apply exponential technologies to it: First of all everything becomes Digital, after that we face a time of Deception, eventually everything gets Disrupted, costs go down and we experience a huge Demonetization and also a Dematerialization of product and services and, finally, all technologies arrive to everyone and we see the most powerful effect of all of them: Democratization. Actually, democratization of technology is the main cause of the two main reasons why exponential technologies are forcing traditional organizations to evolve into something new. Let’s see both.

    First, democratization of technology is removing entry barriers for new competitors, not only for existing tech companies, such as Google, Apple and Amazon; but even for young people with new ways of thinking. We are living in a time where what used to be accomplished by nations or large organizations, is now being done by individuals. There are several cases of young people who are making great impact just because they have access to resources and technology we didn’t have before. For example, the 14-year old boy  Jack Andraka  who discovered a new method for detecting early stages of pancreatic cancer just by researching Google. This new method is thousands of times cheaper and over 90 percent more accurate than the previous alternatives. Another great example is  Danit Peleg , a 20-year-old student who created her own 3D-printed fashion collection at home. Now she is showcasing her designs at international fashion shows and disrupting an entire industry.

    Second, democratization of technology is generating a new age of abundance, which is disrupting most of current business models that are based on selling a scarce product/service. As Peter Diamandis and Steven Kotler described in the bestseller “Abundance”, with the emergence of exponential technologies, nine billion people have access to clean water, food, energy, health care, education, and everything else that is necessary for a first world standard of living. Now, we see how companies that used to have a business model focused on scarcity are being disrupted by those new type of organizations that have a business model that leverage abundance. For example, the main reason why Kodak was disrupted with the emergence of digital photography was that while its business model was focused on selling a scarce resource (films with 24 or 36 photos), the digital revolution generated a new landscape where the user could make an abundance of photos, and free. On the other hand and at the same time, Instagram developed a new business model leveraging the new abundance scenario. The more pictures people can do and share, the better for Instagram’s business model. That’s the reason why, at the same time that Kodak was going bankrupt, Instagram was acquired by Facebook by 1 Billion USD in 2012 and also with 13 employees. And remember, Instagram was also founded by two twenties, Kevin Systrom (27) and Mike Krieger (24) in 2010. In 2018, Kodak revenues were of $1,3 Billion USD, while Instagram revenues were $9 Billion USD.

    In 2014 and after several years of research, Salim Ismail described the model of this new breed of business that are successfully leveraging the new technology revolution in his bestseller “Exponential Organizations (why new organizations are ten times better, faster and cheaper than yours (and what to do about it)”. An Exponential Organization (ExO) is a purpose-driven entity that leverages new exponential technologies and a set of common organizational attributes that allow them to tap into and manage abundance to scale exponentially as technology does. Some examples of ExOs are Airbnb, which is tapping into an abundance of places to stay and is currently the biggest hotel chain in the world without owning a single room or building; Instagram, which is tapping into an abundance of pictures and is currently the most valuable photo company without producing or selling cameras; Netflix, which is tapping into an abundance of content and is currently the fastest growing television network with no cables; and Uber, which is tapping into an abundance of drivers and is currently the largest taxi company, owning no vehicles. None of these companies existed fifteen years ago.

    Exponential Organizations

    As it happens with evolution in nature, businesses also need to evolve and adapt in order to keep its position in the market. In upcoming articles, we will describe further the ExO model and how to evolve an existing organization into an ExO, as Salim Ismail, Michelle Lapierre and myself (Francisco Palao) described in the book “Exponential Transformation: Evolve your organization (and change the world) with a 10-week ExO Sprint“.

    As we saw before, predicting the future is not possible in the age of exponential technologies. So as Abraham Lincoln said, “the only way to predict the future is by creating it”. Just do it wisely and take into account what many other successful Exponential Organizations have done in order to lead this new age.

    Now the question is the following: If you are a business leader, what are you doing if you are not creating one of these Exponential Organizations?