Exponential Organizations

  1. Staff-on-demand initiatives similar to Gigwalk are springing up everywhere: oDesk, Roamler, Elance, TaskRabbit and Amazon's venerable Mechanical Turk are platforms where all levels of work, including highly skilled labor, can be outsourced. These companies, which represent just the first wave of this new business model, optimize the concept of paying for performance to lower customer risk.
    in 2011, Insurance giant Allstate, with forty of the best actuaries and data scientists money could buy, wanted to see if its claim algorithm could be improved upon, so it can a contest on Kaggle.

    It turned out the Allstate algorithm, which has been carefully optimized for over six decades, was bested within 3 days by 107 competing teams. Three months later, when the contest ended, Allstate's original algorithm had been improved 271%. And while the prize set the company back $10,000, the resulting cost savings due to better algorithms was estimated to be in the tens of millions annually. Quite an interesting ROI.

    In fact, in every one of Kaggle's 150 contests to date, external data scientists have beaten the internal algorithms, often by a wide margin. And in most cases outsiders (non-experts) have beaten the experts in a particular domain, which shows the power of fresh thinking and diverse perspectives.
  2. In June 2012, a team at Google X built a neural network of 16,000 computer processors with one billion connections. After allowing it to browse ten million randomly selected YouTube video thumbnails for 3 days, the network began to recognize cats, without actually knowing the concept of "cats." Importantly, this was without any human intervention or input.
    Yuri van Geest calls the 5P benefits of big data: productivity, prevention, participation, personalization, and prediction.
  3. Anchoring bias: Tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions.

    Availability bias: Tendency to overestimate the likelihood of events with greater "availability" in memory, which can be influenced by how recent the memories are or how unusual or emotionally charged they may be.

    Confirmation bias: Tendency to search for, interpret, focus on and remember information in a way that confirms one's preconceptions.
    Framing bias: Drawing different conclusions from the same information, depending on how or by whom that information is presented.

    Optimism bias: Tendency to be over-optimistic overestimating favorable and pleasing outcomes.

    Planning fallacy bias: Tendency to overestimate benefits and underestimate costs and task-completion times.

    Sunk-cost or loss-aversion bias: Disutility of giving up an object is greater than the utility associated with acquiring it.
  4. Invented at Intel by CEO Andy Grove and brought to Google by venture capitalist John Doerr in 1999, OKR tracks individual, team and company goals and outcomes in an open and transparent way. In High Output Management, Grove's highly regarded manual, he introduced OKRs as the answer to two simple questions:
    1) Where do I want to go (objectives)
    2) How will I know I'm getting there? (Key results to ensure progress is made).
    Objectives are the dream; Key results are the success criteria (i.e., a way to measure incremental progress towards the objective).

    Objectives are qualitative and Key results are quantitative.
  5. As Nassim Taleb explains, "Knowledge gives you a little bit of an edge, but tinkering (trial and error) is the equivalent of 1,000 IQ points. It is tinkering that allowed the Industrial Revolution."
    • By relying on quantitative and qualitative data, a company forms a conclusion based on a series of well-considered questions:
    • * Does a product fit the need of a customer?
    • * How did a customer solve a problem or need in the past?
    • * What are the current costs created by the customer problem?
    • * Should we adapt or change our course?
    • * Are we ready to scale?
  6. The Martin Trust Center for MIT Entrepreneurship uses a Lean Startup process for corporate innovation that is similar to the one used at Adobe. It's called the 5x5x5x4 method (54). Five corporate teams with 5 complementary team members compete for 5 weeks (one to two days a week), spending no more than $5,000 to produce one innovation. The budget is ideal for testing assumptions with real customers related to the customer group, customer problem (use case), and solution (innovation concept) using different offline and online methods.
    The old saying that an expert is "somebody who tells you why something cannot be done" is truer than ever before. History has shown that the best inventions or solutions rarely come from experts; they almost always come from outsiders. That is, from people who aren't domain experts but who offer a fresh perspective.
  7. The Hewlett Foundation sponsored a 2012 competition to develop an automated scoring algorithm for student-written essays. Of the 155 teams competing, 3 were awarded a total of $100,000 in prize money. What was particularly interesting was the fact that none of the winners had prior experience with natural language process (NLP). Nonetheless, they beat the experts, many of them with decades of experience in NLP under their belts.
    The idea should pass the "toothbrush test" originated by Larry Page: Does the idea solve a real customer problem or use case on a frequent basis? Is it something so useful that a user would go back to it several times a day?
  8. Those who really want something will find options. Those who just kind of want it will find reasons and excuses.
    A common saying around Silicon Valley is "execution eats strategy for breakfast."
  9. OKRs:
    * Encourage disciplined thinking (major goals will surface).
    * Increase effective communication (everyone learns what is important).
    * Establish indicators for measuring progress (shows how far along company is).
    * Focus effort (and thus synchronize the organization).
    Here is how it works: If you're a manager at Amazon and a subordinate comes to you with a great idea, your default answer must be YES. If you want to say no, you are required to write a two-page thesis explaining why it's a bad idea. In other words, Amazon has increased the friction entailed in saying no, resulting in more ideas being tested (and hence implemented) throughout the company.
  10. “Count your life by smiles, not tears. Count your age by friends, not years. Happy birthday!”
Card Set
Exponential Organizations
Salim Ismail