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Escape Velocity

The document discusses how companies can achieve "escape velocity" and free themselves from being stuck in the past. It argues that companies focus too much on short-term performance rather than building long-term power. It presents a framework called the "Hierarchy of Powers" to help companies consciously manage power across different levels - category power, company power, market power, offer power, and execution power. The document provides analysis and case examples to illustrate how to assess current power levels and identify opportunities to build power in order to achieve sustainable growth and escape the pull of the past.

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0% found this document useful (0 votes)
216 views89 pages

Escape Velocity

The document discusses how companies can achieve "escape velocity" and free themselves from being stuck in the past. It argues that companies focus too much on short-term performance rather than building long-term power. It presents a framework called the "Hierarchy of Powers" to help companies consciously manage power across different levels - category power, company power, market power, offer power, and execution power. The document provides analysis and case examples to illustrate how to assess current power levels and identify opportunities to build power in order to achieve sustainable growth and escape the pull of the past.

Uploaded by

Spil_vv_IJmuiden
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 89

Escape Velocity

Free Your Company’s Future


from the Pull of the Past

Geoffrey Moore
Managing Partner
HarperCollins

Paper & eBook format

Release Date: Sept 6, 2011


Introduction
The Problem: We’re Stuck

• Technology and globalization keep changing the game


• Extraordinary opportunities, each also a threat

• We must engage with these new growth opportunities


• But face massive internal resistance to reallocating resources

• Year in, year out, we end up with the same old portfolio
• Nothing new ever achieves materiality—we are well and truly stuck

• How can we achieve escape velocity?


• How do we free ourselves from the pull of the past?
Companies Who Did Not Escape

• Burroughs - Sperry Univac - Honeywell - Control Data


– MSA – Cullinet – Cincom – ADR - Digital Equipment
Company - Wang - Data General – Prime – Apollo -
Tandem - Kodak – Polaroid - Lucent – Bay Networks -
Nortel - Compaq – Gateway – Packard Bell - Lotus -
Ashton Tate – WordPerfect - Borland – Software
Publishing – Aldus - Novell – Banyan - Motorola –
Nokia - Pacific Bell - Quest - America West – Nynex –
AT&T – Silicon Graphics – Sun – Ingres – Informix
The Mistake We Keep Making
• We focus on performance, not on power
• Performance Is critical to success, and we are good at managing it
• Power fuels performance; without it there is no performance
• So we must continually renew power if we are to perform long term

• But we do not know how to manage power consciously


• We recognize power when we see it
• But we lack the frameworks and metrics to go out and acquire it
• And our systems do not hold us accountable for doing so

• So instead we manage performance more intensely


• Which, of course, consumes even more power
• Making us even more anxious as performance gets harder to create
• Making our focus on performance even more intense

Beware the performance trap!


The Solution: Manage Power Directly

• Focus on power first, then on performance


• Create a “power generation” plan before your performance plan
• Allocate resources to power programs before performance budgeting
• Focus on go-to-market resources more than R&D

• Drive accountability for power into the operational plan


• Add power metrics to performance metrics
• Earmark resources for power program usage only
• Modify the compensation plan so that power objectives matter to all

• Use the Hierarchy of Powers to frame the effort


• Provides a common vocabulary to get everyone on the same page
• Structures power issues in ways that are directly addressable
The Hierarchy of Powers

Category Power Growth rates of your major categories

Company Power Performance compared to your competitors

Market Power Growth rates of your target markets

Offer Power Differentiation of your offerings

Execution Power Speed and impact of your key initiatives

Goal : Align all of the above to achieve escape velocity


The Hierarchy of Powers
How Much Power Do You Have Today?

Category Power Are we in hot high-growth categories, or do we have


category envy?

Company Power Do customers and competitors see us as the team to


beat, or is that someone else?

Market Power Are we winning the key “primaries,” and are we


winning them fast enough?

Offer Power Do our core offers set the bar, or are we playing a lot of
catch-up?

Execution Power Can we make stuff happen and make it stick, or are we
continually pushing the reset button?

Where do we have anchor strengths?


Where do we have to do better?
Case Example: The Power of Apple

Category Power Music, mobility, & media: All hyper-growth

Company Power The team to beat in all three

Market Power No current need to target market segments

Offer Power iPod, iPhone, iPad + iTunes, AppStore

Execution Power All of the above in less than one decade

And that is why Apple is currently


the most highly valued company in high tech
“Mere Mortals” Case Examples

Cisco – Sybase – Agilent – Cognizant Akamai


– BEA – Adobe – Amdocs Documentum –
SAP – Activant – Lawson BMC – Agile –
McAfee – Autodesk Synopsys – Rackspace
– TeleAtlas Symbol – Compuware
Our Agenda

Present frameworks for each level of the Hierarchy of Power to


• Assess the current landscape of threats and opportunities
• Identify the most attractive “power plays” for your company
• Guide the planning and execution of those plays
Category Power
Reengineering Portfolio Management
Category Power Diagnostic

• Where is category growth contributing to our overall growth objectives?


Where is lack of category growth inhibiting our growth objectives?
• Organizations tend to over-commit to their legacy franchises in large low-growth categories
• To the degree we participate in multiple categories, how well balanced is
our overall portfolio in terms of contribution to current earnings, current
growth, and future growth objectives?
• Common pattern: strong on current earnings and future growth, weak on current growth
• In light of the above, do we need to enter a new category, divest ourselves
from a category we are currently in, or stay the course with our current
portfolio?
• Most companies stay with their current positions regardless—this is the pull of the past
• Is there time to develop our category position organically, or must we
leverage M&A as well?
• For companies over several billion dollars is size, the answer is almost always the latter
Category Maturity Life Cycle

Indefinitely elastic
middle
Revenue Growth

A B C D
Emerging Growth Mature Declining Fault
Market Market Market Market Line!
E
End of
Life

Technology Adoption Time


Life Cycle
Where Are Your Resources Today?
A Portfolio Analysis Framework

High Growth Low Growth

Material

PRESENT REWARDS
B C

A D

Not Material

FUTURE REWARDS
Typical Portfolio Pattern for a Public Company

High Growth Low Growth

Material

2 3
1 4
Not Material

What is the first question the board asks?


Why don’t we have more businesses in Quadrant 2?
Pursuing Growth in a Mature Category
Successive Generations of R&D Have Diminishing Impact

High Growth Low Growth

Material

Not Material
What’s Going On?
• Market is well established and highly material
• Customer relationships are established, products are well known
• Cost of sales is low

• R&D investments continue to improve the product


• For a while, better is better, and new R&D drives revenue growth
• After a while, good enough is good enough, pricing deflates, growth stalls

• Unit growth continues, but revenue growth flattens


• Lots of competitors meet the good enough standard
• Market bifurcates into commodity (growing) & value-add (shrinking)

Overfeeding a herd of aging cash cows—


waste of good fodder
Pursuing Materiality for an Emerging Category
Successive Attempts at Market Development fail to Cross the Line

High Growth Low Growth

Material

Not Material
What’s Going On?
• Next-generation initiatives are not transitioning to materiality
• Products are immature, relationships are few
• Cost of sales is high

• Growth rates are high, but off a small base and at a high cost
• Overlay sales forces, dedicated marketing, complex services
• The more revenue you target, the higher the added cost

• Field organization cannot bear the cost burden


• Must prioritize resources to make the current quarter
• Next-generation initiatives are left to get by as best they can

Underfeeding a herd of hungry heifers—


never reach material size
Freeing Your Company’s Future
The Three Horizons Model
Step-Out
Businesses

On-board next
generation for
revenue growth Horizon 3
& share growth 36 to 72 months
Current
Businesses
Growth
Defend & Horizon 2 Options
extend the 12 to 36 months
franchise Explorations
into future
high-growth
Horizon 1 businesses
0 to 12
months
Portfolio Dynamics

High Growth Low Growth

Horizon 1
Material

Horizon 2

Horizon 0
“Horizon 0”
Negative growth

Not Material

Horizon 3
Portfolio Dynamics
The Impact of Performance Management
• Performance management
focuses on meeting material
High Growth Low Growth commitments (Horizon 1)

• This leads H1 managers to


Horizon 1 hoard spare resources to
Material ensure they can meet them

• That crimps H2 efforts because


they compete with H1 for the
Horizon 2

same resource pool

Horizon 0
• It also makes H1 managers
reluctant to exit H0 businesses
Not Material (because every little bit of
revenue helps)

• Horizon 3 is unaffected by any


of these portfolio dynamics
Horizon 3
The Horizon 2 Gap
• All the other horizons are OK
• H1 gets first dibs at resources
• H3 gets funded outboard of the process
• H0 is snuck in under the covers

• H2 is out in the cold


• H2 competes directly with H1 for resources
• H1, under pressure to meet current obligations, does not release
resources willingly
• H2 cannot compete with H1, particularly when metrics and
compensation focus on material returns in the current year

This is not a failure to invest in R&D innovation


This is primarily a go-to-market problem
Meeting the Horizon 2 Challenge
Best Practices in Four Key Areas

• Planning & Budgeting


• Organizational Structure
• Metrics
• Compensation

These practices adapt venture capital ideas


to enterprise realities
Best Practices: Planning & Budgeting
Separate Resource Pools for Each Horizon
• Organize planning and budgeting by horizon
• All funding requests are attached to one horizon only

• Funding requests compete within each horizon


• Funding request do not compete across horizons

• Executive team determines overall resource allocation


• Sets percentages for H1, H2, and H3
• Functions each directed to allocate according to overall plan
• Special attention is paid to all market-facing functions
• Interlock to ensure functional allocations align with corporate priorities

Don’t fund next-generation R&D


if you are not willing to fund the go-to-market surcharge
Best Practices: Organization
Business Unit Structure for Horizon 2
• Line function structure is the default model for enterprises
• Best way to achieve efficiencies at scale
• Best support for professional and career development

• Integrated business unit with dedicated resources key to H2


• BU structure achieves much greater effectiveness
• Faster and more agile to adapt to changing market dynamics

• BU structure is virtual and temporary


• Team is seconded from the line functions, reports directly to BU GM
• Participants are 100% dedicated to BU which covers all their costs
• GM reports directly to CEO or EVP for Next-Gen Businesses
• Organization dissolves once H2 initiative graduates to H1
Best Practices: Metrics
Different Metrics for Each Horizon

HORIZON 1 HORIZON 2 HORIZON 3


TIMEFRAME
(0-12 mos) (12–36 mos) (36-72 mos)

Driving Run a Become a Enter a


Goal Business Material Business Business

Key Revenue vs plan Target accts vs plan Name-brand customers


Performance Bookings Sales velocity Deal size
Indicators
Contribution margin Deal size Name-brand partners
Market share Segment share PR buzz
Wallet share Time to tipping point Flagship projects

“Op Ex” “Time Ex” “Cap Ex”


Best Practices: Compensation
Everyone is on the Hook
• CEO and his or her direct reports
• Significant variable compensation tied to each Horizon 2
initiative achieving its core metrics

• BU GM
• All variable compensation tied to meeting the BU’s Horizon 2
metrics

• Business Unit participants


• Significant variable compensation tied to the BU meeting its
Horizon 2 metrics

Horizon 2 initiatives are “must win” battles


Be careful how many you undertake
Company Power
Making Asymmetrical Bets
Company Power Diagnostic

• Which power game are we playing: Complex Systems or Volume


Operations? Which power tier are we on: Tier 1, Tier 2, or Tier 3?
• Achieve escape velocity relative to your reference competitors on the same tier with the
same business model
• For that game and that tier, what is our ranking relative to our peers? Do
we want to proactively change our game, our tier, or our ranking?
• Normally you do not change your game, but you do change your tier or ranking
• Do we have crown jewels that could power this change in state? Are
there disruptive market forces in play that could enable us (or our
competitors) to gain new power?
• To achieve escape velocity requires exceptional force: it cannot be done incrementally
• Are we making a sufficiently asymmetrical bet to distance ourselves from
the competition definitively and sustainably?
• Most organizations fall short on this criterion. People are too afraid to make an error of
commission and so they fall into making an error of omission
Two Business Architectures
Complex Systems vs. Volume Operations

Sweet Sweet
Spot Spot
Effectiveness

Complex Volume
Systems Operations

Complexity Volume
100 101 102 103 104 105 106 107 108 109
Number of Customers

Government Small Societal


Enterprise Consumer
Programs Business Entitlements

Figure 3.2
The Models are Polar Opposites
Area of Complex Systems Volume Operations
Focus Model Model

Research Qualitative Interviews Quantitative Analytics

Design Assembled Architectures Stand-Alone Modules

Sourcing Exploit scarcity Exploit abundance

Manufacturing Adaptive Methodologies Deterministic Processes

Marketing Relationship Marketing Branding & Promotion

Sales High-Touch Persuasion Low-Touch Distribution

Services Consultative Dialogs Closed-Loop Transactions

For escape velocity initiatives,


choose one as your competitive frame of reference
The Power of Tiers
• Three Tiers
• Tier 1: Flagship enterprises
─ Cisco, Microsoft, Singtel
• Tier 2: Known brands with niche followings:
─ Juniper, Mozilla, T-Mobile
• Tier 3: Brand-less companies with low prices
─ OEM/ODM supply chain companies

• Tier strategy
• Markets support all three tiers for both architectures
• Escape velocity initiatives can focus on winning the #1
position in your current tier or moving up a tier
Achieving Escape Velocity
Asymmetrical Bets Change the Balance of Power

*
Competitor 1
* Create unmatchable
capability in your core
innovation zone
*
YOU
*
Competitor 2
Over-invest to the point
that competitors cannot
*
Competitor 3
or will not follow

Competitive Set Redefine buying criteria


Same tier for the category by
Same architecture
setting a new standard
Innovation Zones
Pathways to Escape Velocity

Product Customer Operational


Leadership Intimacy Excellence
Zone Zone Zone

Disruptive Line Extension Value


Innovation Innovation Engineering

Application Enhancement Integration


Innovation Innovation Innovation

Product Marketing Process


Innovation Innovation Innovation

Platform Experiential Value Migration


Innovation Innovation Innovation
Product Leadership Innovation Types
Disruptive • Results in a new category. Not backwards compatible. Order
Innovation of magnitude improvement.
• Enterprise: Genetic sequencing (Applied Biosystems)
• Consumer: Online auctions (eBay)

Application • Also called solution innovation. New markets for existing


Innovation products by finding unexploited uses.
• Enterprise: Fin services for high tech (Silicon Valley Bank)
• Consumer: GPS range-finders for golf (Sky Caddie)

Product • Existing products in existing markets differentiated through


Innovation dramatic increase in price/performance
• Enterprise: Telepresence (Cisco)
• Consumer: iPad (Apple)

Platform • Repositioning a ubiquitous product to become an enabler of


Innovation entire class of new offerings built on top of that product
• Enterprise: Relational databases (Oracle)
• Consumer: Game-enabling computers (Sony)
Customer Intimacy Innovation Types
Line Extension • Creates a subcategory to engage new customers or re-engage
Innovation old ones. Underlying infrastructure remains unchanged.
• Enterprise: Rugged mobile computers (Symbol)
• Consumer: Children’s Tylenol (Johnson & Johnson)

Enhancement • Innovation in finer and finer elements of detail with less and
Innovation less impact on the primary function of the offer
• Enterprise: High-quality color printing (Xerox)
• Consumer: Fashion watches (Swatch)

Marketing • Focuses on differentiating the interaction with a prospective


Innovation customer during the purchase decision process
• Enterprise: Pro bono executive briefings (McKinsey)
• Consumer: American Girl stores (Mattel)

Experiential • Innovation based on differentiating the experience of the


Innovation offering (as opposed to its function)
• Enterprise: Package status visibility (Federal Express)
• Consumer: First class airline travel (Singapore Airlines)
Operational Excellence Innovation Types
Value • Extracts direct cost from a product or service without
Engineering changing its external properties
• Enterprise: Business Process Outsourcing (Tata)
• Consumer: Feature phones (Nokia)

Integration • Integrates many disparate elements into a single centrally


Innovation managed system, reducing indirect operating expense
• Enterprise: Enterprise Resource Planning (SAP)
• Consumer: TV/phone/video/Internet service (Comcast)

Process • Extracts waste from enabling processes by removing non-


Innovation value-adding steps from the work flow
• Enterprise: Lean Manufacturing Process (Toyota)
• Consumer: Social networking (Facebook)

Value Migration • Redirects the business model away from a commoditizing


Innovation element in the value chain toward one more rich in margins
• Enterprise: Software as a Service (Salesforce.com)
• Consumer: From razors to razor blades (Gillette)
Selecting Your Core Innovation Type

• Good fit with your crown jewels


• Play in the innovation zone you are most qualified for

• In demand at this point in the category’s life cycle


• Product leadership plays best in secular growth categories
• Customer intimacy and operational excellence are better for
cyclical growth categories

• Has not been preempted by your competition


• When you attack your competitors’ strengths, it is not likely you
will become unmatchable any time soon
Crown Jewels Checklist

• Technology
• Expertise
• Platform products
• Passionate customer base
• Scale
• Balance sheet
• Brand
• Relationships
• Business model
• Other
Making the Asymmetrical Bet

• Restrict the competitive set


• One architecture, one tier to escape from

• Over-invest in the core innovation zone


• To the point where competitors cannot or will not follow

• Leverage a mega-trend
• To fill your sails with wind

• Leverage one or more crown jewels


• To win and to retain dominant power
Disruptive Mega-Trends

• Globalization
• Changing demographics
• Digital technology
• Disruptive business models
• Regulatory interventions
• Emerging market opportunities
• Global warming
• Terrorism
• Other
The Standard to Meet

• Customer base adopts enthusiastically


• Never-before-seen price/performance

• Ecosystem rallies to support


• Everyone wants to get onto the new bandwagon

• Reference competitor is left behind


• Cannot or will not compete on these terms

• Investors revalue the franchise


• Moves the P in the P/E ratio
Executive Leadership Style Required
We Must Look to Leaders instead of Managers
Leaders Managers
• Asymmetrically allocate their • Equitably allocate their time
time and attention and attention
• Change the game to their • Play the hand that they are
advantage dealt
• Expect mistakes and correct • Take extra time to avoid
them quickly mistakes
• Get out in front of their peers • Stay in step with their peers
• Test their relationships • Preserve their relationships
• Are visionaries • Are pragmatists

Look to managers drive on the straight stretches


Look to leaders to take you through the turns
If We Fail, Why We Fail

• Performance bias
• Compensated for performance only, no accountability for power
• Always safer to play the hand you are dealt
• Leads to privileging managers over leaders

• Internally focused and driven


• All about making our numbers
• Lose sight of our mission to be in service to the world
• Not adapting to mega-trends
Market Power
Guaranteeing Early Wins for
Asymmetrical Bets
Market Power Diagnostic
• Is targeting a market niche a priority for our current strategy to succeed?
• Are we looking to start a fire?
• Is the market segment we have targeted big enough to matter, yet small
enough to win decisively?
• Pay attention to your fish-to-pond ratio
• Are our market-specific commitments sufficiently focused and intense to
assure we will win market power?
• Your whole product must blow away the competing alternatives
• Are we winning market power fast enough?
• Normally a sign either your target market or whole product is not sufficiently focused
• Are we capturing a price premium commensurate with the unique value
proposition we provide?
• Same problem as above. Discounting means you have not cleared the bar
• Do we have a clear line of sight to expansion growth opportunities in
adjacent market segments?
• Market segments must also be pathways to future growth
Understanding Market Segments
Think of the Dynamics of Presidential Elections!
The Logic of Market Power

• Markets are self-referencing communities


• People buy what their peers buy
• People are loyal to what their segment is loyal to

• Clear winners are a must


• In the absence of a clear winner, people hesitate
• If the situation persists, the market fragments with no winner

• Winning is contagious
• People in adjacent segments are influenced
• Partners want to get on the winning bandwagon
9-Point Market Strategy Framework
Capturing the Target Market

Key sponsor 1. Target Customer


2. Compelling Reason to Buy Core problem
Complete solution 3. Whole Product
4. Partners and Allies Needed for whole
product
Function of whole 5. Sales Channel
product complexity
6. Pricing
Value based
7. Competition
Legitimate alternatives
8. Positioning
Differentiation
9. Next Target
Next growth segment
Target Market Initiatives

• What are TMIs?


• Massive attacks on highly focused targets
• A separate playbook based on Crossing the Chasm and
Inside the Tornado
• Taught by the Chasm Institute, facilitated by CI, The Chasm
Group, and TCG Advisors
• Not covered in this material

• Why invest in a TMI?


• Ensures early wins
• Dramatically accelerates initial adoption
• Jump-starts broader adoption from a position of power
Eight Great Reasons for a TMI

• Gaining market adoption for a disruptive technology


• Penetrating a new geography
• Getting out from behind the market leader
• Anchoring a turnaround
• Solving for the “stuck in neutral” problem
• Capitalizing on a great niche opportunity
• Exploiting the “granularity of growth”
• Capitalizing on a market in transition
Additional Frameworks

Target Market Initiatives are the core curriculum of The Chasm Institute (
www.chasminstitute.com)

There are currently over 300 slides in library illustrating frameworks that
pertain to this topic.

Please contact them for further information.


Offer Power
Allocating Resources Asymmetrically
Offer Power Diagnostic
• Is this offer a proven hit, a potential hit (escape velocity candidate), or
more of a product-line filler?
• This establishes the basis for the type of innovation investment (see following)
• For proven hits, have we neutralized our reference competitors’
innovations sufficiently to keep them in our competitive set?
• This is all about getting to “good enough” fast enough
• For escape velocity initiatives, is this offer sufficiently differentiated to gain
escape velocity from its competitive set? What can we do to amplify its
differentiation further?
• This is all about being beyond compare
• For product line fillers, have we optimized these to the maximum for gains
in resource utilization and cost reduction?
• This is all about spending the minimum to fill a space in a product line
• Where are we wasting resources chasing a competitor’s tail, going
beyond good enough but falling short of beyond compare?
• This is where established enterprises waste the preponderance of their innovation
Offer Power
Getting a Return from Innovation

Differentiation Neutralization

Productivity
Offer Power for Escape Velocity
Three Mandates to Execute in Parallel

Differentiate Separate from your competitive set

Neutralize Catch up to your competition

Optimize Reduce the drag of legacy


Differentiate Differentiate
Separate From Your Competitive Set

*
* Leverage your
Competitor 1 unmatchable capabilities
*
YOU to create an
unmatchable offer
*
Competitor 2
*
Competitor 3 Failure to separate means
more of the same
battling day to day on
Competitive Set
price and execution
Cases Examples & Cautionary Tales
Innovating to Differentiate
Case Examples Cautionary Tales

• Google • AskJeeves
• Sun Workstation • IBM PS2
• Amazon Kindle • Sony Reader
• Apple iPhone • Palm Treo
• Cisco Telepresence • HP Halo

Separate yourself from the pack


Sustain the gap
Leverage Crown Jewels for a 10X Effect
• Salesforce.com
• SaaS for a 10X reduction in installation and operating costs

• Skype
• Peer-to-peer IP telephony for a 10X reduction in long distance charges

• Wikipedia
• Open source collaboration for a 10X increase in speed and a 100X
reduction in cost for encyclopedia development and maintenance
• VMWare
• Cross-platform virtualization technology for a 10X reduction in IT capital
equipment purchase and maintenance

• Akamai
• Internet overlay network for a 10X improvement in content delivery
latency reduction
Neutralize Neutralize
Catch Up to Your Competition

Neutralize a competitor’s
*
Competitor 1 differentiating innovation

*
by reaching “good
enough” quickly
* 2
Competitor
* 3 Refocus the market

*
Competitor back on your
differentiation

*
YOU
Failure to neutralize
quickly can result in
Competitive Set
market leaving you
behind
Cases Examples & Cautionary Tales
Innovating to Neutralize
Case Examples Cautionary Tales

• Microsoft & the Mac • Nokia & the iPhone


• Microsoft & the Web • Lotus Notes & the Web
• Netflix & the Web • Blockbuster & Netflix
• Google Apps & MSFT Office • Yahoo & Google Search
• Apple & Kindle • Borders & Kindle

Catch up fast
Assimilate the innovation
Price/Benefit Sensitivity
Focus Neutralization Where it Matters Most

HI Operational
COST PERFORMANCE
Price Sensitivity

Excellence

Leadership
Product
Customer
LO CONVENIENCE
Intimacy PREMIUM

LO HI

Benefit Sensitivity
Optimize Optimize
Cut Yourself Free from the Long Tail

Pct Value Delivered


25

20

15

10

0
A B C D E F G H I J K M N O P Q R S T U V W X Y Z

Attack the bottom 10% of your workload:


1. Centralize this population under a single manager
2. Freeze maintenance
3. Install a “no surprises” end of life program
Freeing Resources Trapped in Context
The Six Levers Model
1. Centralize. Bring operations under a single authority to
reduce overhead costs and create a single decision-making
authority to manage risk
2. Standardize. Reduce the variety and variability of processes
Core Context delivering similar outputs to further reduce costs and minimize
risks.
Optimize Optimize
Tighten Up Your Flabby Middle

Pct Value Delivered


25

20

15

10

0
A B C D E F G H I J K M N O P Q R S T U V W X Y Z

Engage the “flabby middle” of your workload:


1. Target the big pockets of resource waste
2. Isolate them through API-like process firewalls
3. Reengineer to streamline
4. Reintegrate
Freeing Resources Trapped in Context
The Six Levers Model
1. Centralize. Bring operations under a single authority to
reduce overhead costs and create a single decision-making
authority to manage risk
2. Standardize. Reduce the variety and variability of processes
Core Context delivering similar outputs to further reduce costs and minimize
risks.
3. Modularize. Deconstruct the system into its component
subsystems and standardize interfaces for future cost
reductions.
4. Optimize. Eliminate redundant steps, automate standard
sequences, streamline remaining operations, substitute
lower-cost components, or otherwise cost- and resource-
reduce
Optimize Optimize
Redraw the Core/Context Boundary

Pct Value Delivered


25

20

15

10

0
A B C D E F G H I J K M N O P Q R S T U V W X Y Z

Recharter. Rearchitect. Reallocate.


1. Redefine the boundaries
2. Transfer the investment responsibilities
3. Focus on risk management & agile responsiveness
Freeing Resources Trapped in Context
The Six Levers Model
1. Centralize. Bring operations under a single authority to
reduce overhead costs and create a single decision-making
authority to manage risk
2. Standardize. Reduce the variety and variability of processes
Core Context delivering similar outputs to further reduce costs and minimize
risks.
3. Modularize. Deconstruct the system into its component
subsystems and standardize interfaces for future cost
reductions.
4. Optimize. Eliminate redundant steps, automate standard
sequences, streamline remaining operations, substitute
lower-cost components, or otherwise cost- and resource-
reduce.
5. Instrument. Characterize the remaining processes in terms
of the variability of key parameters and develop monitor-and-
control systems to manage their performance.
6. Outsource. Drive processes out of the enterprise entirely to
further reduce overhead, variabilize costs, and minimize
future investment. Incorporate vendor use of monitor-and-
control systems into Service Level Agreement.
Three Innovation “Playbooks”

Neutralize Optimize
Differentiate

Core Value Separation Time Cost

Focal Point Unmatchable Good enough Systemic

Challenge How far? How fast? How deep?

Mixing Modes of Innovation Creates Waste


One Playbook per Project!
Return on Innovation
Differentiation Neutralization

Failed
Attempts Optimization

Waste
Sources of Waste:
• Differentiation projects that don’t achieve unmatchable results
• Neutralization projects that try to differentiate at the same time
• Optimization projects that don’t attack the critical costs
The Good News About Waste

• Waste is money that is in your budget today

• If you stop wasting it, there is no downside

• If you spend it on better things, there is upside

• What are you waiting for?


Execution Power
Getting to the Tipping Point
Execution Power Diagnostic
• Are we clear about the state of each of our lines of business and the
corresponding execution mode that should be emphasized?
• Organizations tend to emphasize what they are best at, not necessarily what is required.
To a man with a hammer, everything looks like a nail.
• Do we have the right kinds of leaders in charge, given the execution
discipline that is required?
• Again, organizations tend to leave the same people in place for the life of a line of
business, which is often not good either for the business or the people.
• Have we highlighted the lines of business that are in transition, either from
invention to deployment (the escape velocity transition) or from
deployment to optimization (the maturation transition)?
• These are the times of greatest risk to lose power, and it is critical that everyone pay
close attention until the transitions are complete.
• With respect to the transition programs, do we have clear milestones and
metrics and visibility to ensure we know when they have reached their
tipping points?
• The answer here is almost certainly “not today,” as this is a novel idea. But it is essential
to install these disciplines if your enterprise is to achieve its highest ambitions.
The Arc of Execution
Complex Systems Enterprises

Playbooks
Pro
i l ity Deploy fita
b
a la b ility
Sc

Projects Products

Invent Optimize
From Projects to Playbooks
Scaling the Complex Systems Model

• Communication
• From rolodex relationships to referrals into target market
• Distribution
• From founder led to target market expert driven
• Adoption
• From technological possibilities to target use cases
• Whole Product
• From customer bespoke to partner friendly
• Monetization
• Solution-based, calibrated by amount of cost and risk relief
The Arc of Execution
Volume Operations Enterprises

Partners
Pro
i l ity Deploy fita
b
a la b ility
Sc

Products Processes

Invent Optimize
From Products to Partners
Scaling the Volume Operations Model

• Communication
• Pushed , personalized, and pulled
• Distribution
• Physical or virtual as convenient for consumer
• Adoption
• Viral word-of-mouth referencing
• Whole Product
• Self-organizing ecosystem pursuing its own gains
• Monetization
• Frictionless, far-reaching, and fair
Catalyzing Escape Velocity
The “Tipping Point” Role of Programs

Transition Transition
for Scale Deploy For Yield
 

Tipping Tipping
Point Point
Invent Optimize
Catalytic Programs

• Mini-TALCs
• Early adopters
• Chasms
• Beachheads and bowling alleys
• Tornadoes
• Main Streets

• Different from business as usual


• Not best efforts
• Not pay as you go
• Not what you see is what you get
• Committed to create persistent change in state
• Measured and evaluated against that commitment
Four Modes of Execution

Execution Mode Invention Deployment Optimization Transitions

Visionary Pragmatic Conservative Pragmatic


Type of Leader
Inventor Deployer Optimizer Orchestrator

Core Competence Creativity Competitiveness Control Collaboration

Core Attribute Original Tough-minded Prepared Empathetic

Decision Style Intuition Test-&-Adjust Deliberation Consensus

Organizational Integrated Line Hierarchical Cross-Functional


Preference Teams Functions Organizations Teams
Staffing Leadership Roles

• Let category growth be the guide


• Adjust management dynamics to market dynamics

• Transition the offerings through the modes


• Follow the arc of execution

• Maintain the modes


• Most people excel at one mode—play to their strengths

• Adjust the mechanisms to the mode


• Organization, compensation, metrics
Transformation Initiatives
Playbook Headlines for Transforming
Vision, Strategy, & Execution
Transformation Zones

Category Power
Vision
Company Power

Market Power Strategy

Offer Power
Execution
Execution Power
Transforming Vision
Playbook Headlines

• Category Power Review


• Category Maturity Landscape Overview
• Growth/Materiality Matrix Assessment
• Three Horizons Opportunity Scan
• Company Power Review
• Crown Jewels
• Vector of Sustainable Differentiation
• Relevant Mega-trends
• Reference Competitor
• Market Power Review
• Market Segmentation
• Target Market Segments
Transforming Strategy
Playbook Headlines

• Company Power Review


• Crown Jewels
• Vector of Sustainable Differentiation
• Relevant Mega-trends
• Reference Competitor
• Market Power Review
• Market Segmentation
• Target Market Segments
• Offer Power Review
• Differentiation Priorities
• Neutralization Priorities
• Productivity Optimization Priorities
Transforming Execution
Playbook Headlines

• Market Power Review


• Market Segmentation
• Target Market Segments
• Offer Power Review
• Differentiation Priorities
• Neutralization Priorities
• Productivity Optimization Priorities
• Execution Power Review
• Arc of Execution Status Check
• Transition Program Assessment
• Leadership Staffing Review

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