Sustainability and Exponential Organizations

Findings and evidence from the Public market (listed companies).

The challenge of sustainability for business is one of the most demanding of our times; with the urgent topic of climate change to shake the attention, we observe a strong increase in public fundings and new policies to support the transition towards more sustainable business at vast.

At the same time, companies must also deal with the unprecedented rate of change and threats of technology disruption of the so called VUCA world: Volatile, Uncertain, Complex and Ambiguous. In 2014, Salim Ismail defined Exponential Organizations, or ExOs, those whose impact or output is larger than its peers because of new organizational techniques that leverage accelerating technologies. ExOs are companies built to exploit the opportunities of the digital age. Exponenital Organizations are made of:

• A Massive Transformative Purpose, or MTP, a statement that acts as north star for setting the direction of the company. Airbnb’s MTP is “Belong Anywhere.” The company explains its own identity being not about renting houses but about homes, a place where to belong. This acts a great attractor for customers, guests, and everyone who wants to participate in allowing people to share these feelings when travelling through the community/ platform of Airbnb. In August 2021, the MTP has coherently served as drive for social initiatives like the Afghan refugees’ program. This allows property owners to host Afghan refugees for free, with Airbnb sustaining costs and facilitating rescuing and integration in emergency times.

• Five attributes to facilitate growth: Staff on Demand and Leveraged Assets allow companies to outsource tasks to external teams and to market third parties elements. In the case of Airbnb, the company does not own any apartments but manages to facilitate market interactions and make profit of it. Community and Crowd and Engagement are about creating a business built upon social interactions, while Algorithms is about value creation through data.
• Five attributes to master and control internal interactions. Interfaces and Dashboards are about designing experiences and measuring the growth. Experimentation and Autonomy are about creating an agile culture and facilitate test and learn processes. In Airbnb and booking.com, engineers have built proprietary A/B testing frameworks to run experiments. Finally, companies must implement Social Technologies to allow teams collaboration and remote work.

The relationship between sustainability and exponential technologies is a recent field of study, revealing a potential impact in facilitating value co-generation and value delivery not only for the market but for society at large. The MTP plays here the strategic role to lead the process of transformation towards a digital and sustainable global impact: The journey to the exponential and sustainable enterprise requires in fact a consistent and continuous application of leadership.

The research
In 2019, BDO Italia, office of the international advisory firm operating in the fields of public accounting, tax and consulting and the management and IT consultancy Altea Federation, decided to conduct a research to explore the relationship between sustainability and exponential mindset in the FTSE MIB Index, the major stock market index which tracks the performance of 40 leading and most liquid companies listed on the Borsa Italiana. The 40 companies have then been grouped in seven categories to facilitate the analysis and benchmark.

The aim of the project was to create a strategic perspective matching sustainability and ExO mindset and translate it into an organizational guide to inspire, guide and implement concrete practices.

The methodological framework of reference of the analysis included the definition of two dimensions, described using a mixed set of primary and secondary data, from interviews with innovation and sustainability managers to the analysis of mandatory financial reports:

• “Sense of Purpose” or “ SoP “ makes explicit the role of the company in the evolution of society; it identifies how the company assists people, organizations, societies and nations in addressing sustainability challenges.
• “Exponential Side” or “ ExO ” synthesizes the strategic, technological and organizational components necessary to guide the company in a genuinely innovative and future-oriented path.

As displayed in Fig. 2, the “ SoP “ dimension includes 33 items between the organization’s business model and the implementation of initiatives like the stakeholder strategy while the “ ExO “ dimension is made of 51 items directly inspired from Ismail’s work. The “ ExO “ side is measured surveying the use of exponential technologies and the attributes implemented to manage the different tech initiatives. Inspired by the Massive Transformative Purpose, both dimensions share a common perspective, including Vision, Mission, and the way to implement the strategy.

Finally, each dimension has been translated into two variables:

• Width: indicating the number and variety of initiatives, policies or practices implemented by a company.
• Depth: relating to the impact of the initiatives and the amount of investment placed by the company in the SoP/ExO direction.

The scenario

The interconnection between the dimensions “ SoP “ and “ ExO “, reveals four possible profiles according to the organization’s attitude toward the subject.

• TECHNOCRAT: Companies within this space show a high score on “ ExO ” dimension and low score in “ SoP ”. They are technology driven purely from a utilitarian perspective and do not have any conscious, massive and transformative systemic role.
• WAIT-AND-SEE (WAS): In this space organizations show low score on both dimensions “ ExO ” and “ SoP ”. Being in this space means the company has not yet assumed a fully conscious systemic role, nor it is sufficiently equipped to seize the opportunities of Exponential technologies.
• IDEALIST: This profile reveals a high score on the “ SoP ” dimension and low score on the “ ExO ” one. Enterprises in this space are aware of their "purpose" and plays an actively systemic role, but they are not yet equipped to amplify and grow that role through the opportunities of Exponential technologies.
• CONSCIOUS EVOLUTIONIST: Companies in this space are the most developed, revealing high score on both “ ExO ” and “ SoP ” dimensions. They have identified their “Massive Transformative Purpose” which acts as leading force for their actions.

A desirable tension towards the "CONSCIOUS EVOLUTIONIST" quadrant should be expected, as per Fig. 3.

Here, companies are purpose-driven hence the MTP plays a systemic and sustainable role in leading the company through the implementation of technological innovations and organizational techniques to become an Exponential Organization.

Findings

Analyzing the data as displayed in Fig. 3, we have identified five main outcomes as suggestions for executives and managers in order to leverage Sustainability and Exponential technologies at their best.

1. The perfect company is yet to come. From the research we learned that there is a light correlation between “ SoP “ and “ ExO.” Companies that are more advanced in Sustainability tend to lag less behind in terms of Exponential expertise and vice-versa: said that. Being a tech-driven company does not necessarily mean being a sustainable organization nor having a meaningful social impact. The Massive Transformative Purpose has the important role to  act as a bridge between the two dimensions and to provide a joint perspective and stimuli to grow towards the “ CONSCIOUS EVOLUTIONIST ”.
2. Companies that want to succeed should distribute their efforts between the two disciplines in a consistent way through time. Right now, organizations seem to be by far more familiar with Sustainability and the relative practices than with Exponential technologies and how to implement the ExO model. This explains why the  “ IDEALIST ” profile is the most crowded of the four. Moreover, the development of different, disruptive exponential technologies and their potential combination, like A.I. and robotics, or cloud computing and AR/VR, require companies to explore various initiatives at the same time and this should be done consistently.
3. Sustainability starts with stakeholder engagement. The analysis of the “ SoP “ dimension reveals that almost no company features a mature stakeholder engagement approach; this is neither applied at a business unit level nor oriented towards a full and wide involvement in the corporate strategy. Filling this gap will be game-changing towards a true sustainable strategy of an organization.
4. Technology needs a Vision. In the “ ExO “ dimension, data showed a general lack of strategic vision about the opportunities offered by exponential and technological innovation. This reveals great uncertainty about identifying the most promising ideas along the way and how to combine them with exponential technologies. The Exponential Transformation - ExT Sprint -methodology is recommended as best practice to intervene and equip the company with a clear vision for this purpose.
5. Take inspiration by the best in class. Out of the seven categories listed in the FTSE MIB 40, Physical Infrastructures is the most developed. The need for innovation to compete in a hyper-competitive B2C market is pushing the different players towards new ways to identify competitive advantage with technological leverage and customer satisfaction. Following their attempts to explore this new discipline in combining Sustainability and Exponential technologies can be very helpful for companies to achieve true sustainable competitive advantage.

The full version of the article can be found here: Capra, S., Derchi F., & Fazio, V. (2021). “Alla ricerca del Sense of Purpose per un impatto sostenibile ed esponenziale”. Harvard Business Review Italia. July /August.  All rights reserved.