The term ‘exponential organisation’ was first introduced in a 2014 book by the Singularity University founding director Salim Ismail and co-authors Michael Malone and Yuri van Geest. An exponential organisation is one governed by an assumption of abundance, where the typical constraints of linear organisations – for example, building more offices in new locations and equipping them with the requisite staff and facilities – are bypassed through clever use of technology that enables low organisational demands.
Airbnb is a typical exponential organisation: instead of establishing new locations for guest houses and hotels, building and equipping those locations, maintaining the properties, and sourcing and retaining staff, Airbnb accumulates listings around the world without incurring the capital expenditure to which most hotel groups are subject, leveraging technology to deliver a seamless and enjoyable customer experience that is often largely self-governable.
The DNA of exponential organisations
What nearly all exponential organisations have in common is a digitised supply chain that enables rapid scaling and frictionless customer experiences, often across global markets. They make use of technological innovations to compete on even footing with even the largest organisations, and then leverage an abundance mindset to move faster and more effectively than their bigger competitors.
Essentially, an exponential organisation is structured in such a way that they are able to fully realise the benefits of the digital economy. And within this, the COO plays a critical, often unseen role in ensuring the organisational building blocks are in place to enable the realisation of the exponential organisation.
In an EY study, half of the global COOs polled were closely engaged in discussing the role that operations can play in business transformation, with 57% seeing this as a fundamental part of creating organisational value. This is key to shifting the role of the COO from a largely operational one to a more strategic one.
The COO balancing act
Since the COO controls how organisational resources are allocated and prioritised, he or she must ensure that such resources are in the right place at the right time to enable the effective execution of exponential organisational strategy. However, in the same EY study, only half of COOs polled had identified opportunities to get operations involved with strategic decision-making. This creates a dilemma for the COO: their function within the organisation demands a firm focus on current demands, while their longer-term and arguably greater impact rests firmly in the future.
Technology has a critical role to play in enabling the COO to execute on broader strategy initiatives that can take a linear organisation – one focused on exploiting vertical market dominance – to an exponential one. Predictive analytics, for example, can combine sensor-based data with machine learning and AI capability to equip COOs with live insights into the current performance of the digitised supply chain. This frees up some of the COO’s time to focus on the more high-yield strategic initiatives that will ensure the organisation’s long-term competitiveness and sustainability.
A to-do list for the exponential COO
A recent IDC infographic pointed to the top five business priorities for executives right now, including reducing external supplier costs, outperforming the competition, improving security (necessitated by increased connectivity), regulatory compliance, and improved customer service. However, the priorities are going to shift greatly over the next few years, with one key priority falling straight in the ambit of the COO: improving adaptability and flexibility of the supply chain.
The fundamental role of the traditional COO is to ensure that operations quality, efficiency and customer services are improved and optimised through their interventions. In a digital economy, I would argue there is a new dimension fundamental to the effective functioning of the COO: removing friction within the organisational value chain by effecting a digital supply chain. Customer demands for personalised service and individualised products means organisations need to be highly responsive to individual needs and desires. The growing complexity of doing business also requires technological intervention to ensure COOs are not left treading water, endlessly dealing with current problems and challenges and losing sight of the longer-term strategic value that will elevate the business.
COOs can start laying the foundation of a future exponential organisation now by focusing on five key actions, namely:
1. Improved customer centricity;
2. Investment in smart automation;
3. Enabling predictive business decision-making;
4. Ensuring total visibility across all lines-of-business; and
5. Leveraging a digital innovation platform powered by IoT, blockchain, AI, machine learning and analytics, to enable secure process automation, better decision-making, and faster and more accurate responses to customer demands.
by Mehmood Khan, Chief Operating Officer at SAP Africa