This article is an excerpt from the Shortform book guide to "Exponential Organizations" by Salim Ismail, Michael S. Malone, and Yuri van Geest. Shortform has the world's best summaries and analyses of books you should be reading.
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Looking for an overview of the Exponential Organizations book? What is Salim Ismail’s key advice from the book?
In the Exponential Organizations book, Salim Ismail explains how technology companies have almost unlimited growth potential because they profit almost solely from information. Ismail’s book describes the rapid-growth strategies used by these companies to gain revenue quickly.
Read on for an overview of the Exponential Organizations book by Salim Ismail.
In the Exponential Organizations book, author Salim Ismail explains how to leverage new innovations in technology and business practice to build hugely successful companies. (Ismail calls such companies exponential organizations; in this article, we’ll call them rapid-growth companies for clarity.)
Rapid-growth companies have almost unlimited potential because they profit almost solely from information—a limitless resource that they can use more and more effectively as information technology continues to advance. In contrast, Ismail notes, traditional organizations are limited by high overhead costs, rigid top-down command structures, and the need to profit off of a finite supply of products or services.
Ismail is a renowned entrepreneur and business strategist. He’s also the founding executive director of Singularity University, a company that offers executive training and business consulting services.
What Are Rapid-Growth Companies?
Rapid-growth companies are, in simple terms, companies that experience fast and ever-accelerating revenue growth. Whereas a traditional company might consider 5% annual growth a good benchmark for success, Ismail claims that these rapid-growth companies could double their revenue every one or two years.
This is possible because rapid-growth companies are designed to take full advantage of advancements in technology and business theory. In the Exponential Organizations book, Ismail describes companies that are small, efficient, and flexible—such organizations easily adapt to change and can quickly adjust their practices for maximum customer satisfaction and profit.
|Achieve Exponential Growth by Standing Out|
Simply taking advantage of new technology and new ideas may not be enough to guarantee exponential success, especially since countless other companies will be trying to do the same thing. In Purple Cow, Seth Godin says that a successful company must be remarkable—in other words, it must stand out in some way from its competitors, like a purple cow would stand out in a field of brown cows.
Godin’s method for creating a remarkable company or a remarkable product is to brainstorm the most extreme, extraordinary, and even impractical ideas that you can come up with. Next, choose one of those ideas, and bring your company or product as close to that extreme as you can. For example, perhaps your product could have an unusual design or color scheme; something that will attract people’s attention and get them talking about it.
Rapid-Growth Companies Dominate the Market
Ismail believes that rapid-growth companies are the way of the future—even large and long-established companies are finding themselves quickly outcompeted by small, efficient, and flexible newcomers. He adds that the average lifespan of S&P 500 companies has dropped to less than a fourth of what it was in the 1920s, meaning that even some of the largest companies in America are struggling to stay relevant in the face of rapid-growth business practices. In fact, all of the companies dominating the market today have at least some of the characteristics of rapid-growth companies that Ismail lays out in this book.
(Shortform note: Some people believe that we’re in the middle of a new Industrial Revolution—that the world is being digitized, computerized, and automated in ways that are rapidly changing how we live, how we relate to technology, and how businesses operate (and succeed). What Ismail calls rapid-growth companies are the companies that are keeping abreast of these changes, leveraging new means of communication like social media, and taking advantage of the vast quantities of data now stored online and in various databases.)
According to the Exponential Organizations book, there’s no limit to how large rapid-growth companies can grow and how much revenue they can make. This is because rapid-growth companies make their money by taking advantage of information, a resource that has no limit.
|How to Profit From Data|
In this book, Ismail mostly talks about using data to boost sales and minimize costs, but there are many other ways that information can be valuable to a company. For example, you could sell the data directly; many companies will pay good money for market insights and customer information. (This is generally how free services like Facebook and Twitter make their money.)
Having data also increases the monetary value of a company. For instance, Facebook paid $21.8 billion to buy WhatsApp in 2014, which was many times what the app itself was worth. However, the real value was in the customer data that Facebook got access to with the purchase—data that it could use to improve the reach and engagement of the Facebook app.
In contrast, traditional organizations make their money from scarcity; they control a limited supply of a product or service that people want, and they sell it at a profit. However, since the product or service is limited, so is the company’s size and revenue.
(Shortform note: In Contagious, Jonah Berger explains that traditional companies run on scarcity because when the supply of a product or service is limited—or at least appears to be limited—people want to buy it while they still can. In other words, making a product seem rare or hard to get will encourage people to purchase it right away because they’re afraid of missing the chance to do so.)
Rapid-Growth Companies Thrive on Connections
Now that we’ve discussed what rapid-growth companies are and why they outperform traditional companies, let’s explore some of the specific strategies that rapid-growth companies use. First, we’ll discuss how rapid-growth companies use connection and community to boost their success.
According to the Exponential Organizations book, integrating connection and community into every aspect of a business allows it to grow far more rapidly than organizations that don’t do so. While all companies need people in order to function (employees and customers at the bare minimum), rapid-growth companies rely on connecting with people for just about every part of their business models.
Leverage Social Connections to Grow Quickly
It goes without saying that a successful business needs to have customers. However, a rapid-growth company relies not just on loyal customers, but also on a sense of community; in other words, the company becomes part of the customer’s identity. People who feel a sense of community with your company will naturally advertise for you, helping your company to grow much more quickly and cheaply than companies that rely on traditional paid marketing.
For example, consider the rivalry between Playstation fans, Nintendo fans, and Xbox fans—to an outsider, they might all seem to be part of the same community (gamers), but devoted fans of each will proselytize for their favorite console and try to convince others to buy that console (in other words, to become part of that community).
|Attract the Innovators|
While it seems logical to try to attract as many people to your company as possible, your real targets should arguably be the ones who are actively looking for something new in their lives. Get their attention by explaining how your company is groundbreaking and exciting, and why it might be just what they’re looking for. Once you win them over, they’ll be the ones to advertise you to the rest of the population.
In Purple Cow, marketing guru Seth Godin explains that this is how products and ideas move through a population. Godin explains that new ideas take hold, at first, with a relatively small number of people: the innovators and early adopters, the ones who are trying to find something new. Those people are then the ones to spread the word and get more and more people to purchase the product, adopt the idea, or join the community.
Minimize Costs, Maximize Flexibility
Another crucial strategy that enables rapid-growth organizations to outperform traditional organizations is cost efficiency—with modern technology and practices, rapid-growth companies can produce enormous revenue with minimal investment or risk. In fact, Ismail says that an entrepreneur can start a new business for as little as $100,000—in the past, such an undertaking would have cost millions.
Create Small Teams of Experts
One key way that modern organizations can run more efficiently than traditional companies is by hiring as few people as possible and relying on automation for simple tasks. Furthermore, with the internet allowing for remote work, there’s usually no reason for employees to all come together to a shared office. That means there’s also no need for the company to rent or buy office space.
Crowdsource as Much as Possible
Aside from reducing overhead costs with small, decentralized teams, rapid-growth companies also save money by crowdsourcing or outsourcing almost every part of their business model instead of committing their own assets. According to the Exponential Organizations book, this practice is called collaborative consumption. For example, Etsy doesn’t own any of the products sold on its site; it just provides a platform for sellers. Therefore, the company profits without risking any of its own assets.
You can even crowdsource the money to launch your venture in the first place. Before you officially launch your new product or service, offer preorders through Kickstarter or a similar crowdfunding site. If you don’t get enough orders to make creating the product worthwhile, simply cancel the campaign—you won’t have lost much money, so it will be easy to adjust your ideas and try again. Plus, your customers will be refunded their contributions.
How will you know which ideas are worth crowdfunding? Ismail says it’s easy to know ahead of time whether an idea will be successful or not; simply buy some ads on social media sites and see how much engagement you get. If there’s enough interest, go ahead with the crowdfunding campaign and get your new rapid-growth company started.
Exercise: Brainstorm a Rapid-Growth Company
Now that you’ve read an overview of the Exponential Organizations book, start brainstorming how you might create a rapid-growth company of your own.
- What kind of rapid-growth company would you like to create? (Think about which industry you’d like to break into and how information technology could help you do so.)
- What could be your company’s bold, transformative mission statement? (Think of something that would excite and inspire fans of your company.)
- What kind of data or information would you need to run this business, and how would you use that information? Also, consider how you might collect that information.
- How might you crowdsource some elements of your business to reduce your personal risk? (Think about who you could bring in to provide the resources you need and how you’d reach those people.)
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- How to leverage new technology and business practices to build a successful company
- How to minimize your personal risks when starting a company
- The importance of connection and community to boost success