# Exponential Organizations **Salim Ismail, Michael S. Malone, Yuri van Geest** | [[Strategy]]  --- > "The greatest danger in business lies not in outright failure but in achieving success without understanding why you were successful in the first place." This observation from Robert Burgelman frames the entire book. Most organisations succeed through scalable efficiency—getting bigger to capture economies of scale. But scalable efficiency is a strategy for a world of scarcity, physical assets, and predictable growth. When the substrate shifts from atoms to bits, the rules change completely. **The core insight: when something becomes information-enabled, its marginal cost of supply approaches zero.** Traditional businesses scale by adding resources proportionally—more people, more factories, more capital. Information-enabled businesses scale by leveraging resources they don't own. The result is a fundamentally different cost structure, growth curve, and competitive dynamic. Linear organisations rarely disrupt their own products. They haven't the tools, the attitude, or the perspective to do so. Their entire architecture is optimised for stability and predictable returns. This makes them extraordinarily vulnerable when a new entrant builds on information rather than assets. --- ## Core Ideas ### [[Information-Enabled Economics]] Once any domain becomes information-enabled, its price/performance begins doubling approximately annually. This applies far beyond software—it's happening in genomics, energy, manufacturing, and finance. The question for any industry: what else can be information-enabled? The strategic implication is stark. If your competitor can information-enable something you're doing with physical assets, they will eventually achieve orders of magnitude better economics. Not slightly better—10x or 100x better. ### [[Access Over Ownership]] Organisations built for scarcity optimise around ownership. You own factories, inventory, equipment, and talent. This made sense when resources were scarce and transaction costs were high. Information-enabled organisations optimise around access. They leverage external resources—community, crowd, platforms, APIs—rather than owning them internally. This keeps the core organisation small, flexible, and asset-light. **The exception matters:** when resources are genuinely scarce, ownership still wins. Tesla owns factories; Amazon owns warehouses. But if an asset is information-based or commoditised, accessing beats possessing. ### [[Purpose as Strategy]] Strong organisations have a purpose that goes beyond making money—what the authors call a Massive Transformative Purpose. This isn't feel-good mission statement territory. It's strategic. A compelling purpose attracts talent, customers, and ecosystem partners. It lowers acquisition and retention costs across every stakeholder group. It creates a gravitational force that pulls resources toward you rather than requiring you to push outward. The test: does your purpose generate a cultural movement, or just a marketing campaign? --- ## Key Insights **Linear thinking cannot compete in an exponential world.** When facing exponential growth, experts in almost every field predict linearly. They use the trends of the past to forecast an accelerating future. This is why incumbents consistently underestimate disruption—they're extrapolating from the wrong model. **Traditional organisations are designed to withstand risk and change.** All corporate planning attempts to scale efficiency and predictability, creating controlled-growth environments that reduce risk. But in a world of information-enabled competition, constant experimentation and process iteration are the only ways to reduce risk. Scalable efficiency has become the enemy of adaptability. **The substrate shift from physical to digital changes everything.** Like the shift from film to digital photography, once you change the substrate from material to informational, the match is lit for an inevitable explosion. We're perhaps 1% of the way through this transition. **Business functions can move outside the organisation.** Thanks to the liquidity of information, major functions—product design, customer support, marketing, even R&D—can be transferred to users, fans, partners, or the general public. This is not outsourcing in the traditional sense; it's leveraging communities that want to participate. **Every industry is becoming information-based.** Either by being digitised directly, or by using information to identify under-utilised assets. The sharing economy isn't just about rides and rooms—it's a template for information-enabling any asset-heavy industry. > "In an ExO world, purpose trumps strategy and execution overrides planning." **Five-year plans are obsolete.** The only viable approach is a compelling purpose for direction, real-time dashboards for feedback, and short-cycle execution plans that adapt as you learn. Strategic planning as extrapolation from the past is a suicidal practice. --- ## Connects To - [[7 Powers]] — Network effects and counter-positioning as durable advantages; information-enabled businesses often achieve both - [[Linked]] — Hub dynamics and preferential attachment explain why information-enabled winners tend to take most of the market - [[The Formula]] — Networks determining success when performance can't be measured directly - [[Antifragile]] — Access over ownership reduces fragility; small core + leveraged externalities creates optionality - [[The Unaccountability Machine]] — Requisite variety through external resources rather than internal complexity --- ## Final Thought The specific frameworks and acronyms have aged—the book is very much of its 2014 moment. But the underlying insight remains sharp: when the marginal cost of supply approaches zero, traditional competitive logic breaks down. Organisations built around physical assets and scalable efficiency will be overwhelmed by those built around information and leveraged externalities. Not because the new organisations are smarter or work harder, but because they're operating on fundamentally different economics. The strategic question isn't whether your industry will be information-enabled. It's whether you'll be the one doing the enabling or the one being displaced. And the honest answer for most incumbents: their architecture makes disruption nearly impossible from within. The same structures that made them efficient make them fragile.