The new concept of ‘disruption’ was identified in the Singularity University bestseller, Exponential Organizations (van Geest & Ismail, 2015). Exponential organizations are companies that are growing ten times faster than their direct competitors. These companies reflect a growth in turnover, a product development, and profit per employee that is ten times higher than that of their competitors. In the 1980s, Peters and Waterman identified the characteristics of organizations that have displayed sustained success in their book In Search of Excellence. Now,Van Geest and Ismail are analysing contemporary trends in Exponential Organizations (ExO), by identifying the shared characteristics of businesses that are growing ten times faster than the rest of the market. These companies include start-ups such as Airbnb, Uber, and Tesla that have only been established for a few years, yet are currently worth billions.
Characteristics of the ExO
With unprecedented intent, ExOs are able to quickly identify the changing requirements of markets and people and to provide a perfectly fitted service or product to meet these needs. The needs of the customer are prioritized instead of being primarily motivated by the commercial dollar or a business model. By applying this different philosophy and approach to business, the organization is actually listening to the customer and is able to quickly and with great flexibility adjust to changing customer needs and requirements. They can often predict these needs and trends before the customer is even aware of them.
Van Geest and Ismail provide the following formula for this success:
ExO = MTP + SCALE + IDEAS.
The most important shared characteristic is having a clearly formulated explication to the 'why-question’ of the organization. The authors have termed this the ‘Massive Transformative Purpose’ (MTP). This refers to the higher purpose to make radical changes and make the world a better place. It needs to give a conscientious reply to people's search for meaning and not simply be the performing of a job. It needs to make a contribution to a larger and inspirational purpose. The answer of Airbnb and Uber is to improve the utilization of the capacity of rooms and cars respectively and so promote sustainability.
As a result, they distinguish between internally focused and externally focused success factors.
The external success factors have been combined in the SCALE principle:
- Staff on demand: have a flexible staff organization at your disposal
- Community & crowd: make active use of your public and customers
- Algorithms: analyse big data to garner new insights
- Leveraged assets: utilize the property of others
- Engagement: the human dimension as reference
The internal success factors have been bundled in IDEAS:
- Interfaces: optimal process-oriented interaction with the environment
- Dashboards: track and monitor performance
- Experimentation: provide space for new experiments
- Autonomy: decentralize responsibility
- Social technologies: maximize collaboration and collaboration tools
ExO real estate =
identification + scalability + connected community
How can commercial real estate address the versatility and exponential growth of ExOs and which conclusions can the end user draw from these organizational formats? For this purpose we can deconstruct the basic formula of the ExO into three basic principles for exponential real estate.
The ExO formula: identification + scalability + connected community
Identification: the symbolic value of the office
Staff are spending less time at the office than ever before. In the past you had to be present in the office to be productive, but this has changed. While staff are no longer coming in as often, when they are there they need to be able to experience the added value of the office in terms of networking, experience and productivity, or even rest and productivity. The employee must be inspired and reinvigorated by experiencing and living the Massive Transformative Purpose (MTP). The MTP motivates you to work for a specific organization while a visit to the office reinspires this principle through the branding of the office, interaction with colleagues, and witnessing work processes. The symbolic importance of the office as a physical representation of the MTP is paramount.
Scale: availability over ownership
Choose for scalable and flexible real estate. The availability of facilities and workplaces is more important than the ‘ownership’ of an office and facilities. Connect with multiple organizations to combine catering facilities, meeting facilities, and other hospitality services from professional providers. Do not opt for in-house facilities, but rather choose shared facilities based on the ‘sharing economy’ concept: utilize each other's assets.
This will result in the further growth of flexible rental contracts, office concepts, and providers of collaborative offices. The multi-tenant office will become the standard to facilitate growth through flexible contracts and a flexible collection of collaborative work spaces.
Connected community: from ‘location, location, location’ to 'location, network, and connection’
The concept of the office as a reinforced bastion of like-minded colleagues with an internal culture that promotes unity reinforces the might of the organizational culture. The importance of internally connecting and meaning-giving power only increases in value as described in identification. The flip-side of a culture that becomes too homogeneous is organizational blindness and ‘groupthink’. Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome. This is caused by losing contact with the external world. Salim Ismail from Singularity University compares this to the human immune system that protects the body against external influences. According to Ismail, a closed organizational culture will react in a same manner to innovation and change. This ‘keep your head down’ mentality of production results in a loss of contact and awareness of developments taking place elsewhere.
Clearly, the old real estate adage declaring the importance of ‘location, location, location’ is no longer valid. The perfect location with perfect accessibility is no longer sufficient, as it does not connect to a wider ecosystem of successful businesses, self-employed workers, and facilities. Being enclosed within the safety of the walls of the head office can be suffocating. Instead, the connected community reflects a campus-like structure for the office where interchange and interaction between teams happen intuitively. It becomes a ‘campus’ with a layered office structure that has a public appeal which the outside world can make use of, and an organizational inclination that celebrates the identification of an independent organizational culture. The ultimate goal is to promote a strong organizational culture within a broader community culture.
While this might sound somewhat abstract, the rise of collaboration ‘factories’ such as the Van Nelle Factory (Rotterdam), the Caballero Fabriek (The Hague), and the Kauwgomballenfabriek (Amsterdam) are indicative of this new trend. This trend is also apparent in the development of the branded collaborative offices of Spaces, Tribes, Seats2Meet, and HNK. The ‘Outlook’ Dutch office of Microsoft in Amsterdam is another inspirational example of advancement in office design, inspiration, and meeting. This office serves as a flagship for the new way to work and is accordingly renowned. However, it has one small disadvantage: set foot out of the office and you are surrounded by the parking lots, runways, and kerosene fumes of Schiphol Amsterdam Airport. There is little connection with the world outside. This is planet Microsoft.
Real estate should facilitate the business processes of an organization. This is accepted knowledge and remains so for 2016. The shifting demands for contemporary real estate have been identifiable as loose trends for a few years. Contracts are becoming shorter and more flexible, office space alone is insufficient, the quality of service is paramount, and the location is judged on its connectivity and accessibility to a larger network of successful companies. The building itself should also bridge the gap between the recognizability of individual corporate culture and openness to the outside world. What is truly new in all this is that the ‘why-question’ of this development has been revealed from the context of exponential organizations. This shift in office real estate has been actuated by the emergence of exponential organizations and this means that these developments will become more manifest in 2016. In the next few years, identification, scale, and connected community will prove to be the fundamental selection criteria for end users.