Linear vs Exponential Thinking – Are You Ready to Switch?

Salim Ismail, in Exponential Organizations, explains the differences between how most leaders think today and how the leaders of exponential organizations think. The challenge is whether you ready to switch?

The following story of how two companies entered the same business demonstrates the difference. In 2007, Nokia decided it wanted to offer its phone users navigation and mapping services. It pursued Navteq which dominated the in-road traffic sensor industry. Controlling those sensors would enable it to provide real-time traffic monitoring information for mapping and mobile users. With it, Nokia could head-off two companies entering that market: Google and Apple. The cost: $8.1 Billion.

Meanwhile, Waze chose to use crowdsourced location information by leveraging the GPS sensors on its user’s smartphones and other source to capture traffic data. Within two years, it has as many sources as Navteq; in four years it had 10 times more sources. Most important, the cost of adding each new source was virtually zero as was the improved GPS capabilities that came with each smartphone’s upgrading. In contrast, Navteq paid a fortune to upgrade each time. In 201,  Google purchased Waze for $1.1 Billion.  Moreover, by 2012, Nokia’s market valuation dropped from $140B to $8.2B.

Nokia’s linear thinking was to acquire physical assets for growth; Waze leapfrogged the world of physical sensor by piggybacking on users’ smart phones.  Similar thinking has guided other exponential organizations including such popular ones as: Airbnb (offering overnight stays without owning hotel rooms) and Uber, Lyft and BlaBlaCar, (which leverage under-used cars for travel).

Exponential Organizations, according to its thought leaders, which include Peter Thiel and Elan Musk, who are involved with Singularity University, Space X, Tesla and X-Prize,  use new organizational techniques that leverage accelerating technologies and non-owned assets to have a disproportionately large – at least 10X larger impact or output. Such organizations include: Quirky (10x faster in product development), Local Motors (1000x cheaper to produce new car models, and 5-22x faster process for doing so), Tangerine (an online back with 7x more customers per employee and 4x more deposits per customer).

The key is to have a Massive Transformative Purpose (MTP). Building on Simon Simek’s work, this isn’t a mission statement that tells people WHAT you do, but focuses on an aspirational WHY (do the work) for both the person and the organization:

Ismail details two aspects of the Exponential Thinking:

• Creativity for growth, using the acronym SCALE:
  • Staff on Demand (new organizational system to manage talent)
  • Community and Crowd (input from outsiders)
  • Algorithms
  • Leveraged assets
  • Engagement
• Structure for order, control and stability, using the acronym IDEAS:
  • Interfaces
  • Dashboards
  • Experimentation
  • Autonomy
  • Social

I invite you to read the book, and appreciate many examples of companies around us that are, in the spirit of Jim Collin’s “big hairy audacious goals (BHAGs)”, now developing MTP to guide exponential organizations.

Are you ready to switch to Exponential Thinking?

Jerry Cahn, PhD, JD., is a NYC Vistage Chair and speaker on topics related to creativity/innovation and corporate accountability for culture and strategy.

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