I am a bit of a nerd for books about business strategy and growth, and one that was recommended by a mentor is “Exponential Organizations” by Salim Ismail. The book is a guide for how businesses can re-position themselves for the rise of technology. If successful, companies can experience growth like Google, Tesla and Alibaba, but if they get left behind, they can end up disrupted like Kodak, Blockbuster or Nokia.
Emerging companies are growing faster than ever before by leveraging new innovative ways of working.
The book nicknames companies that are experiencing growth of over 10x as ‘exo’s’. Typically, exo’s exhibit common features like the ability to be nimble, constant innovation, utilizes the latest technology, highly engaged with the community and has a strong corporate culture.
Many legacy businesses have struggled to maintain rapid growth because they were unable to compete with technological advances and changing consumer preferences. The average lifespan of an S&P 500 has decreased from 67 years in the 1920s to 15 years today. But not all is lost. The book walks through the features of an exo and how big business can leverage these characteristics to compete in the current environment.
I have picked out some of the features of exo’s that I believe are critical for modern companies to compete today:
- Having a purpose that resonates with stakeholders. The book calls this a Massive Transformative Purpose or an MTP. This is an aspirational statement that captures both internal and external audiences to motivate, inspire and transform. It provides coherency, attracts talent and supports a cooperative culture. An example is outdoor apparel and equipment retailer Kathmandu. Its MTP is ‘World Ready’ – The slogan states what the organisation wants to accomplish, preparing people for their next outdoor adventure.
- Leveraging the community and the crowd. Companies that can successfully leverage the crowd are able to create a sense of loyalty, community and engagement. This will result in better idea generation, innovation, feedback loops and a group of passionate and dedicated consumers. Apple is the poster child, developing such a strong sense of brand loyalty that consumers line up for hours just to purchase the newest product.
- Constant innovation. A company must continually disrupt itself in order to stay competitive and profit making. The company’s staff should feel encouraged to think creatively and suggest new ideas. Emerging companies don’t have the legacy technological systems and organisational politics that can act as a roadblock for some larger organisations. New products are being produced cheaper and better. This is driving accelerated innovation in technologies like solar energy, 3D printing, robotics and DNA sequencing. Legacy businesses need to continually disrupt themselves to reposition for the future. For example, Netflix started off as a DVD postage service and disrupted the business model completely to become the streaming service it is today.
Have a safe and happy holiday season.
This article is by Emilie O’Neill, ESG & Equity Analyst of eInvest Future Impact Small Caps Fund (Managed Fund) (Ticker: IMPQ) and is not financial advice. Speak to your financial adviser or broker for more information. I’m sure they’ll be happy to help you. Don’t forget to always read the Product Disclosure Statement (PDS) for the active ETF you are invested in. To find out more and to find the PDS please visit einvest.com.au