Two events between 2006 and 2007 forever changed the business world and gave birth to what’s now known as an “Exponential Organization.”

In August 2006, Amazon launched its EC2 cloud services, now called AWS or Amazon Web Services.

Six months later, in January 2007, Apple launched the iPhone. The birth of the iPhone was an augury of a revolution in the business world. Everything in high tech turned upside down that day. All existing strategies in consumer electronics were quickly rendered obsolete. Almost instantly, the entire future of the digital world was up for grabs to those willing to pursue the implications of this new model.

These two events, occurring within months of each other, comprise the asteroid impact that changed the business world forever. This was the birth of the Exponential Organization. The iPhone created a new model for consumer engagement via the App Store and AWS allowed any startup to move computing off the balance sheet to a variable cost.

These two developments, and a slew of others that followed, allowed the cost of a Silicon Valley startup to drop from several million dollars to several thousand dollars, resulting in a Cambrian explosion of new tech companies, many becoming the first Exponential Organizations, or “ExOs.”

My dear friend Salim Ismail and I just published a book called Exponential Organizations 2.0: The New Playbook for 10x Growth & Impact.

In today’s blog (the first of a series adapted from Exponential Organizations 2.0), I’ll describe what an ExO is, what its key attributes are, how its performance compares to linear organizations, and why this new structure is so needed.

Let’s dive in…

NOTE: Understanding how to turn your business into an ExO to increase your growth and impact is a key component of my year-round Abundance360 leadership program.

What Exactly is an Exponential Organization?

It’s probably worth beginning with the definition of an Exponential Organization:

“An ExO is a purpose-driven, agile, and scalable organization that uses accelerating technologies to digitize, dematerialize, democratize, and demonetize its products and services, resulting in a 10x performance increase over its non-ExO peers.”

Instead of armies of people and large factories, ExOs are built on information technologies that take what was once physical, and then dematerialize it into software apps.

A great example of this is the transformation of music: from cassettes and CDs to iTunes and Spotify.

We estimate that there are around 20,000 ExOs worldwide.

Here are a few popular examples of ExOs:

• Airbnb, which was founded in 2008, has seen its valuation soar from $13 billion in 2014 to over $105 billion in 2022.
  
  
• GitHub, also founded in 2008 and valued at $2 billion in 2014, is now valued at roughly $7.5. Microsoft bought the company for $7.5 billion in 2018.
  
  
• Reddit was created in 2005 and as of 2014 its valuation was $412 million. The company’s valuation skyrocketed to over $14 billion in 2022.
  
  
• Uber was founded in 2009 and by 2014 the company’s valuation was $17 billion. But that figure has continued to rise, reaching over $81 billion in 2022.

But becoming a successful ExO isn’t limited to smaller, younger startups.

Big, established companies can also operate as ExOs if they adopt the right techniques (more details on this below).

For example, Apple is perhaps the biggest master of ExO techniques. The company has a simple and clear modus operandi. Sure, its design team is incredible, and it has an amazing technology supply chain, but so do other companies.

As Salim points out, Apple’s secret is its organizational design. The company forms small, hyper-disruptive teams, and places those teams at the edge of the organization. It keeps these teams secret and then directs them to disrupt some industry.

The result is that Apple has a portfolio of teams at the edge of the company analyzing different industries. When they think retail—or watches, or payments, or VR—is ready for disruption, they pounce: entering that market and folding that offering back into the vast Apple ecosystem.

That’s it.

That’s why they’re the biggest company in the world. And there is no limit to Apple’s size.

The Attributes of an ExO

So, what are the major characteristics of an ExO?

The first and most important characteristic is that every ExO has what we call a “Massive Transformative Purpose” or MTP. As the name suggests, an MTP is the ExO’s core reason for existing.

The MTP is the foundation upon which all company actions take place. This is why I’ve made creating an MTP a key focus for all members of my Abundance360 program. In our world of accelerating technological change and increasing abundance, if you don’t have a clear MTP to help you filter and focus, you’ll go crazy!

Beyond an MTP, there are 10 key attributes that define and power ExOs.

The first five characteristics are outward-facing traits and are encapsulated by the acronym SCALE:

1. Staff on Demand: Increasing speed and functionality by leveraging external workers according to need rather than hiring internal employees. 
   
   
2. Community and Crowd: Attracting, engaging, and leveraging communities and the crowd, whose like-mindedness adds to creativity, validation, and even funding efforts.
   
   
3. AI & Algorithms: Leveraging automated functions (machine learning, deep learning, etc.) to obtain new insights and automate operations and services.
   
   
4. Leveraged Assets: Accessing, sharing, renting, or otherwise outsourcing assets to remain nimble and reduce capital expenditures.
   
   
5. Engagement: Leveraging outside interest through gamification, digital reputation systems, incentive programs, and crypto economics to create network effects and positive feedback loops.

The next five attributes of an ExO are inward-facing. They are represented by the acronym IDEAS:

1. Interfaces: Different ways of interacting, processing, and automating the SCALE attributes so the organization is doing the right work at the right time. 
   
   
2. Dashboards: Making real-time information, with essential company and employee metrics based on Objectives and Key Results (OKRs), accessible to everyone internally, with short feedback loops.
   
   
3. Experimentation: Introducing lean startup methodology in all departments, with new ideas and processes, culturally enabling rapid, validated learning.
   
   
4. Autonomy: Instituting a flat structure that allows individual employees or multidisciplinary teams to operate independently and effectively.
   
   
5. Social Technologies: Leveraging peer-to-peer collaborative tools to facilitate transparent, real-time conversations across the organization.

Here’s a helpful visual metaphor for the ExO model, using the brain and its 2 hemispheres:

Why This Matters

As I’ve said before, we’ll experience more progress in the next decade (2023–2033) than we saw in the past century (1923–2023).

Much of this progress will be driven by technological developments, including the continuing march of Moore’s Law and what I call key “Metatrends,” ranging from the rise of AI to extending the human healthspan extension by 20+ years.

Yet in the midst of all these technological advancements, there is one disruption that is so stunning, so positive, and so unprecedented in human history that we still have trouble imagining that it can possibly be true.

That disruption is abundance.

The human story over the past 100,000 years has been continuously defined by hardships and shortages, including food, health, and shelter. In fact, scarcity has been the driving force for our species since we emerged.

However, when you consider all the tech advances underway, the continuing influence of the 6 D’s (specifically Digitize, Dematerialize, Demonetize, and Democratize), and network effects with 8 billion people participating, we will witness the emergence of a new world. This future will be defined by unprecedented abundance for everyone, even the most impoverished.

But the prospect of true abundance comes with challenges.

One of those challenges is speed. Specifically, our ability to adapt to this new reality will be an enormous test for our established institutions, social orders, and collective and personal relationships to the world.

Humanity needs to evolve its organizations and enterprises to better deal with these potentially civilization-threatening challenges.

The ExO model offers a tool that is better adapted to our fast-moving, dynamic environment.

It has the flexibility, adaptability, and velocity of execution to navigate our continuously accelerating world.

In the next blog in this series on ExOs, we’ll look more closely at the concept of a Massive Transformative Purpose (MTP), your company’s most important asset.