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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How do rapid-growth businesses grow so quickly? How do they minimize costs while gaining more revenue than traditional companies?
In Exponential Organizations, renowned entrepreneur and business strategist Salim Ismail explains how rapid-growth businesses leverage new innovations in technology and business practice to succeed. He claims that this is why rapid-growth businesses dominate the market today.
Keep reading to learn the four main strategies of rapid-growth businesses, according to Ismail.
Rapid-Growth Businesses—A Fast-Track to Success
According to Salim Ismail, rapid-growth businesses 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, Exponential Organizations.
The Four Main Strategies
In this article, we’ll explore some of the specific strategies that rapid-growth businesses use. Ismail says that 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.
#1: Leverage Social Connections to Grow Quickly
It goes without saying that a successful business needs to have customers. However, a rapid-growth business 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. |
#2: Craft a Bold Mission Statement to Attract Customers
To build a community, Ismail says that a rapid-growth business should have a bold, transformative mission—a commitment to making a positive change in the world. In the age of information, an appealing mission statement can make the difference between exponential growth and immediate failure; there are so many companies in the modern market that people will need a reason to support yours, specifically. People who agree with your company’s mission will become your customers, and they’ll help to bring in other customers as well.
| Crafting a Mission Statement An effective company mission statement should be short and memorable; a few sentences at most. It should also reflect a long-term and large-scale goal: something that will inspire people to join you and stay with your company for a long time. For example, Tesla’s mission statement is “Accelerating the world’s transition to sustainable energy.” In one sentence, it tells you what the company believes in (renewable energy) and what it wants to accomplish (converting the entire world to new, more environmentally-friendly energy sources). Imagine if, instead, the company’s mission statement was simply, “Sell electric cars.” While that is what Tesla does, a statement like that isn’t likely to inspire anyone to join the Tesla community or advertise Tesla to their friends. Remember that a mission statement isn’t set in stone—if you find that your current mission isn’t serving your purposes (or attracting new customers) anymore, don’t be afraid to change it. |
Ismail adds that, for the same reasons, it’s practically required for new companies to be socially conscious and to support social justice. While an inclusive, socially conscious mission statement will help your community to grow, a reputation for prejudice or discrimination is sure to drive people away.
(Shortform note: A socially conscious mission statement alone isn’t enough to give your company a good reputation—you need to back it up with socially conscious action. Some common examples of socially conscious actions are making donations to charity, engaging in volunteer work, and making sure that your business practices are both worker-friendly and environmentally friendly.)
#3: Minimize Costs, Maximize Flexibility
Another crucial strategy that enables rapid-growth businesses to outperform traditional organizations is cost efficiency—with modern technology and practices, rapid-growth businesses 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.
(Shortform note: While Ismail says that it can take around $100,000 to start a business, entrepreneur Chris Guillebeau says that you can actually do so for as little as $100. In The $100 Startup, Guillebeau explains that all you really need to start a company is an idea, a website, and a way to process payments. Then, as your company grows, you can ensure that you keep turning a profit by only spending money on things that directly boost your sales and by making sure that you price your products or services appropriately. Price things based on the value your customers get, rather than how much it costs you to provide that product or service.)
#4: 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.
(Shortform note: Although Ismail presents a small, remote team as a cost-saving measure, when you select your staff, make sure that you’re not just looking for the employees with the lowest salary requirements. As Reed Hastings says in No Rules Rules, one of the most important things you can do for a company is to hire and keep only the best employees—at any cost. In other words, use your small, remote workforce as an opportunity to invest more in each employee, rather than as an excuse to spend as little money as possible.)
Having a small, decentralized staff will of course reduce the company’s overhead costs, but Ismail says there are other benefits as well. For example, small teams allow for greater flexibility and greater risk-taking. In other words, it’s easier for a small team to make and implement a potentially risky plan because there are fewer people to win over and fewer possible conflicts of interest or personality.
Flexibility and risk-taking are crucial for any modern company because the world has become too complex to predict, and technology advances so quickly that you can’t predict how it will disrupt your industry. Therefore, Ismail says it’s much better to have (possibly risky) products or services with quick turnaround times from conception to sales, and a company that can adapt to changes as they happen, rather than relying on inevitably flawed “safe” models and predictions. In fact, he says that the single riskiest thing a company can do is not take risks—a company that plays it safe is sure to be forced out by a bolder competitor.
(Shortform note: Risk analyst Nassim Nicholas Taleb says that taking risks—putting your Skin In the Game—has numerous benefits besides the chance for reduced costs or increased revenue. First, putting something of your own (like your company, your money, or your job) on the line will keep you focused and inspire you to work harder. However, perhaps even more importantly, Taleb says that taking chances and observing the results is the only way to learn about an increasingly complicated world; direct experience will teach you things that no formal education or predictive model could prepare you for.)
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Like what you just read? Read the rest of the world's best book summary and analysis of Salim Ismail, Michael S. Malone, and Yuri van Geest's "Exponential Organizations" at Shortform.
Here's what you'll find in our full Exponential Organizations summary:
- 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
