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

1. 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

2. “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

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

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

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

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

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

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

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

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

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

12. • “89% of the Fortune 500 companies from 1955 are not on the list in 2014.”

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

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

15. Market Cap to a Billion

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

17. 2006: valuation $140B Nokia vs. Waze

18. 2006: valuation $140B Disruption: Jan 2007: announcement iPhone Nokia vs. Waze

19. 2006: valuation $140B Disruption: Jan 2007: announcement iPhone Oct 2007: acquired by Nokia for $8.1B Nokia vs. Waze

20. 2006: valuation $140B Disruption: Jan 2007: announcement iPhone Oct 2007: acquired by Nokia for $8.1B Nokia vs. Waze Dec 2007: Waze founded

21. 2006: valuation $140B Disruption: Jan 2007: announcement iPhone 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

22. 2006: valuation $140B Disruption: Jan 2007: announcement iPhone Oct 2007: acquired by Nokia for $8.1B Jun 2012: valuation $8.2B Nokia vs. Waze Dec 2007: Waze founded Disruption: in 4 years time 10x amount of sensors for Waze

23. 2006: valuation $140B Oct 2007: acquired by Nokia for $8.1B Jun 2012: valuation $8.2B Nokia vs. Waze Jun 2013: acquires Waze for $1.1B Disruption: Jan 2007: announcement iPhone Dec 2007: Waze founded Disruption: in 4 years time 10x amount of sensors for Waze

24. 2006: valuation $140B Disruption: Jan 2007: announcement iPhone Oct 2007: acquired by Nokia for $8.1B Jun 2012: valuation $8.2B Nokia vs. Waze Jun 2013: acquires Waze for $1.1B Apr 2014: acquires Nokia for $7.2B Dec 2007: Waze founded Disruption: in 4 years time 10x amount of sensors for Waze

25. 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.

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

27. Linear vs. Exponential

28. 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

29. 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

30. 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

31. 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.

32. Attributes

33. 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.

34. 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.

35. 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.

36. 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.

37. 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.

38. 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.

39. Attributes Community & Crowd

40. 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.

41. 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.

42. 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.

43. 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.

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

45. 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%.

46. 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.

47. 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.

48. 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

49. 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.

50. 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.

51. 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.

52. 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.

53. 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.

54. 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.

55. 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)

56. Attributes

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

58. Best ExOs

59. 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.

60. Best ExOs MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

61. Best ExOs MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

62. Best ExOs MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

63. Best ExOs MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

64. Best ExOs MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

65. Best ExOs MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

66. 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

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

68. Strategies

69. 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.

70. 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

71. 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.

72. 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

73. 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

74. Corporate Example MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

75. Corporate Example MTP Staff on Demand Interfaces Community & Crowd Dashboards Algorithms Experimentation Leveraged Assets Autonomy 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.

76. ExO performance improvement

77. ExO Market Cap improvement

78. 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

79. 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

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