Escape Velocity
Escape Velocity
Geoffrey Moore
Managing Partner
HarperCollins
• Year in, year out, we end up with the same old portfolio
• Nothing new ever achieves materiality—we are well and truly stuck
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?
Indefinitely elastic
middle
Revenue Growth
A B C D
Emerging Growth Mature Declining Fault
Market Market Market Market Line!
E
End of
Life
Material
PRESENT REWARDS
B C
A D
Not Material
FUTURE REWARDS
Typical Portfolio Pattern for a Public Company
Material
2 3
1 4
Not Material
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
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
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
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)
Horizon 0
• It also makes H1 managers
reluctant to exit H0 businesses
Not Material (because every little bit of
revenue helps)
• BU GM
• All variable compensation tied to meeting the BU’s Horizon 2
metrics
Sweet Sweet
Spot Spot
Effectiveness
Complex Volume
Systems Operations
Complexity Volume
100 101 102 103 104 105 106 107 108 109
Number of Customers
Figure 3.2
The Models are Polar Opposites
Area of Complex Systems Volume Operations
Focus Model Model
• 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
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)
• Technology
• Expertise
• Platform products
• Passionate customer base
• Scale
• Balance sheet
• Brand
• Relationships
• Business model
• Other
Making the Asymmetrical Bet
• Leverage a mega-trend
• To fill your sails with wind
• Globalization
• Changing demographics
• Digital technology
• Disruptive business models
• Regulatory interventions
• Emerging market opportunities
• Global warming
• Terrorism
• Other
The Standard to Meet
• 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
• 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
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.
Differentiation Neutralization
Productivity
Offer Power for Escape Velocity
Three Mandates to Execute in Parallel
*
* 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
• 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
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
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
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
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
Neutralize Optimize
Differentiate
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
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
Category Power
Vision
Company Power
Offer Power
Execution
Execution Power
Transforming Vision
Playbook Headlines