Being Exponential : The Value Imperative
The Top100 Exponential Organizations were identified in 2015. It was asserted that these will deliver higher levels of resilience and impact. So, how have these Top100 Exponential Organizations performed over the years? Have they created Value or Otherwise?
While towards the end of Q1’22 we were seeing the decline of COVID after it impacted our personal and professional lives globally for nearly 2 years, the business world got shaken up by the Russia-Ukraine conflict and the cascading manifestations in the form of supply chain challenges, high inflation, and a potential recession.
And, with the ongoing meltdown in the financial markets, while the pundits are yet again asking “Has the Bubble burst?” the serious entrepreneurs, intrapreneurs, and business leaders who want to make a difference are continuing to ask a more vital and relevant question: “What can I/we do to be successful?”
The onset of the 21st century has witnessed not only accelerated change and disruption but also the emergence of a new breed of organizations that have revolutionized how to achieve superior performance benchmarks and grow significantly faster than their peers and the incumbent organizations across arenas and geographies.
In 2014, the seminal book titled EXPONENTIAL ORGANIZATIONS by SALIM ISMAIL was released to decode and share the secret sauce behind the radically better performance of these successful firms. Over the years, the book has emerged to be a best-seller business and entrepreneurship book of all time.
As part of the book writing, Salim and a global team of 160 ExO experts across 45 countries researched a large number of start-ups and scaleups as well as several incumbent organizations through the lens of what got called the ExO success formula – the 11 exponential attributes of MTP + SCALE + IDEAS.
The study identified the Top100 Exponential Organizations (the most scalable and adaptable) among the large number of companies assessed. All of these Top100 Exponential Organizations shared some key noteworthy characteristics.
They all had a Massive Transformative Purpose (MTP) and had leadership that wanted to create and leverage abundance toward a better future. They were exploring and exploiting disruptive technologies such as Artificial Intelligence & Machine Learning, 3D Printing, Robotics, Blockchain, Internet of Things (IoT), and Cloud amongst others towards not just digitization but more significantly embracing radically different ways of working in terms of dematerialization, democratization, and demonetization across different geographies, industries, and arenas.
They were either driving or changing consumer behaviors. They were pursuing strategies and practices to be scalable, adaptable, and flexible. They were targeting and expected to break the mold and be different from the conventional organizations seen in the 20th century, and hence potentially deliver different outcomes.
In fact, Salim Ismail had said the below in the Exponential Organizations book.
Has the success formula of MTP + SCALE + I.D.E.A.S = Sustainable Better Business Performance stood firm over time?
We set out to analyze how these Top100 Exponential Organizations have performed over the last several years.
Given that majority of these organizations were (and many of them still are) unlisted private firms, and hence the lack of robust datasets providing business performance data across various financial, operational, customer, employee, and social metrics - we focused on their VALUATION as the core measure of their success leveraging multiple proprietary and public data sources.
Out of the Top100 Exponential Organizations, 73 continue to operate as independent corporate identities, with several of them getting publicly listed over the last 8 years. Out of these 73 organizations, we could establish the initial and recent data with respect to their valuation for 46 of them and form a point of view on whether they did well or otherwise. For the remaining 27, there was no concrete data (either the initial valuation or recent or both) available to form a conclusion with respect to their business performance.
27 of the Top100 Exponential Organizations got acquired including a few involving several prominent and high-value deals over the last 8 years (since the release of the list). Out of these 27 organizations, we could establish their valuation numbers for 11 of them whilst for the remaining 16, we have no concrete data (again, either the initial or acquisition valuation or both) available.
So, what have been the key Insights?
Most of these acquisitions were driven by the incumbents (and in some cases non-incumbents as well) seeking to fast-track their business performance trajectories by leveraging the exponential growth patterns the exponential organizations had accomplished within a very short period of their existence. Even in cases where there is no concrete performance and valuation data available for the acquired organizations in their new homes – anecdotal evidence shows that these Exponential Organizations have continued to perform well and in fact added growth boosters by transforming the ways of thinking and working across the wider acquiring organization.
At the same time, we also witnessed value creation by the Top100 ExOs in the form of coming out with IPOs/public listings.
We can not ignore the fact that over the last few months, the valuation for some of these as well as other listed Top100 Exponential Organizations have gone down in line with the broader turmoil in the global financial markets. But, the 'attractive' valuations they attracted at the times of their IPOs is a testimonial to their being considered by the investors as 'growth' and 'future-ready' organizations.
Collectively, the 57 organizations amongst the Top100 for which we had concrete the initial and the recent/acquisition valuation data available delivered a median CAGR (compounded annual growth rate) of 25.76% during the assessment period of 2014-2022.
These levels of shareholder returns are 100% higher than the broader benchmark S&P500 (with a CAGR of 12.9%) and even better than the 24.0% CAGR achieved by the Fortune100 Top10 Exponential Organizations over the same assessment period (as reported in the recent report on the Fortune100 ExOs).
The rising stars amongst the analyzed Top100 Exponential Organizations, with initial valuations of less than $100 million delivered the highest returns of nearly 47X.
Even though the larger firms amongst the Top100 Exponentials with beginning valuations of more than $100 billion in 2014 delivered the lowest increase of 4.6x, it’s still higher than the 2.2x valuation change of the broader benchmark S&P500 index constituents.
So, what's the secret sauce for such exponential returns by the Top100 Organizations?
We had deep-dived into the success stories of some of the Top100 firms to extract the key growth drivers and shared those through individual spotlights as well as a consolidated article earlier in the Insights Newsletter. In a nutshell, there are 6 key factors that one could consider truly enabled these Exponential Organizations to outperform their peers (other startups, scale-ups as well as the incumbents).
As it’s often said, every crisis is an opportunity, and never let an opportunity go waste.
It would be perhaps an understatement to say that we are living in an era of VUCA on steroids. So, if you are an entrepreneur, an intrapreneur, or a business leader, the current era is an opportunity for you to learn from the Top100 Exponential Organizations and embrace the ExO success formula of MTP + SCALE + IDEAS and lead from the front to create a new venture or nurture your existing organization (startup, scale up or an incumbent) that is future-ready, thrives and stays ahead of the curve.
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