Transcript Powerpoint - Escape Velocity
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 Company Power Market Power Offer Power Execution Power
Growth rates of your major categories Performance compared to your competitors Growth rates of your target markets Differentiation of your offerings 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 Company Power Market Power Offer Power Execution Power
Are we in hot high-growth categories, or do we have category envy?
Do customers and competitors see us as the team to beat, or is that someone else?
Are we winning the key “primaries,” and are we winning them fast enough?
Do our core offers set the bar, or are we playing a lot of catch-up?
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 Company Power Market Power Offer Power Execution Power
Music, mobility, & media: All hyper-growth The team to beat in all three No current need to target market segments iPod, iPhone, iPad + iTunes, AppStore 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 A Emerging Market B Growth Market C Mature Market D Declining Market Fault Line!
End of Life E Technology Adoption Life Cycle Time
Where Are Your Resources Today?
A Portfolio Analysis Framework
High Growth Low Growth Material
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 & share growth Horizon 3 36 to 72 months Current Businesses Defend & extend the franchise Horizon 2 12 to 36 months Growth Options Explorations into future high-growth businesses Horizon 1 0 to 12 months
Portfolio Dynamics
Material High Growth Low Growth Horizon 1 “Horizon 0” Negative growth Not Material Horizon 3
Portfolio Dynamics The Impact of Performance Management
High Growth Low Growth
• Performance management focuses on meeting material commitments (Horizon 1)
Material Not Material Horizon 1
• This leads H1 managers to hoard spare resources to ensure they can meet them • That crimps H2 efforts because they compete with H1 for the same resource pool • It also makes H1 managers reluctant to exit H0 businesses
(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
TIMEFRAME
Driving Goal
HORIZON 1 (0-12 mos)
Run a Business
HORIZON 2 (12 –36 mos)
Become a Material Business
HORIZON 3 (36-72 mos)
Enter a Business Key Performance Indicators
Revenue vs plan Bookings Contribution margin Market share Wallet share
“Op Ex”
Target accts vs plan Name-brand customers Sales velocity Deal size Segment share Deal size Name-brand partners PR buzz Time to tipping point
“Time Ex”
Flagship projects
“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 Spot Sweet Spot Complex Systems Volume Operations 10 0 Government Programs Complexity 10 1 10 2 10 3 10 4 10 5 10 6 Number of Customers Enterprise Small Business Figure 3.2
10 7 Consumer Volume 10 8 10 9 Societal Entitlements
The Models are Polar Opposites
Area of Focus Research Design Sourcing Manufacturing Marketing Sales Services Complex Systems Model
Qualitative Interviews Assembled Architectures Exploit scarcity Adaptive Methodologies Relationship Marketing High-Touch Persuasion Consultative Dialogs
Volume Operations Model
Quantitative Analytics Stand-Alone Modules Exploit abundance Deterministic Processes Branding & Promotion Low-Touch Distribution 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 * Competitor 2 * Competitor 3 Competitive Set Same tier Same architecture * Create unmatchable capability in your core innovation zone Over-invest to the point that competitors cannot or will not follow Redefine buying criteria for the category by setting a new standard
Innovation Zones Pathways to Escape Velocity
Product Leadership Zone Disruptive Innovation Application Innovation Product Innovation Platform Innovation Customer Intimacy Zone Line Extension Innovation Enhancement Innovation Marketing Innovation Experiential Innovation Operational Excellence Zone Value Engineering Integration Innovation Process Innovation Value Migration Innovation
Product Leadership Innovation Types Disruptive Innovation Application Innovation Product Innovation Platform Innovation
•
Results in a new category. Not backwards compatible. Order of magnitude improvement
. • Enterprise: • Consumer: Genetic sequencing (Applied Biosystems) Online auctions (eBay) •
Also called solution innovation. New markets for existing products by finding unexploited uses.
• Enterprise: • Consumer: Fin services for high tech (Silicon Valley Bank) GPS range-finders for golf (Sky Caddie) •
Existing products in existing markets differentiated through dramatic increase in price/performance
• Enterprise: • Consumer: Telepresence (Cisco) iPad (Apple) •
Repositioning a ubiquitous product to become an enabler of entire class of new offerings built on top of that product
• Enterprise: • Consumer: Relational databases (Oracle) Game-enabling computers (Sony)
Customer Intimacy Innovation Types Line Extension Innovation Enhancement Innovation Marketing Innovation Experiential Innovation
•
Creates a subcategory to engage new customers or re-engage old ones. Underlying infrastructure remains unchanged.
• Enterprise: • Consumer: Rugged mobile computers (Symbol) Children’s Tylenol (Johnson & Johnson) •
Innovation in finer and finer elements of detail with less and less impact on the primary function of the offer
• Enterprise: • Consumer: High-quality color printing (Xerox) Fashion watches (Swatch) •
Focuses on differentiating the interaction with a prospective customer during the purchase decision process
• Enterprise: • Consumer: Pro bono executive briefings (McKinsey) American Girl stores (Mattel) •
Innovation based on differentiating the experience of the offering (as opposed to its function)
• Enterprise: • Consumer: Package status visibility (Federal Express) First class airline travel (Singapore Airlines)
Operational Excellence Innovation Types Value Engineering Integration Innovation Process Innovation Value Migration Innovation
•
Extracts direct cost from a product or service without changing its external properties
• Enterprise: • Consumer: Business Process Outsourcing (Tata) Feature phones (Nokia) •
Integrates many disparate elements into a single centrally managed system, reducing indirect operating expense
• Enterprise: • Consumer: Enterprise Resource Planning (SAP) TV/phone/video/Internet service (Comcast) •
Extracts waste from enabling processes by removing non value-adding steps from the work flow
• Enterprise: • Consumer: Lean Manufacturing Process (Toyota) Social networking (Facebook) •
Redirects the business model away from a commoditizing element in the value chain toward one more rich in margins
• Enterprise: • Consumer: Software as a Service (Salesforce.com) 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
Asymmetrically allocate their time and attention Change the game to their advantage Expect mistakes and correct them quickly Get out in front of their peers Test their relationships Are visionaries • • • • • •
Managers
Equitably allocate their time and attention Play the hand that they are dealt Take extra time to avoid mistakes Stay in step with their peers Preserve their relationships 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 Function of whole product complexity Legitimate alternatives Next growth segment 3. Whole Product 4. Partners and Allies 5. Sales Channel 6. Pricing 7. Competition 8. Positioning 9. Next Target Needed for whole product Value based Differentiation
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 Separate From Your Competitive Set
Differentiate
*
Competitor 1
*
Competitor 2
*
Competitor 3 Competitive Set
*
Leverage your unmatchable capabilities to create an unmatchable offer Failure to separate means more of the same battling day to day on price and execution
Cases Examples & Cautionary Tales Innovating to Differentiate
Case Examples
• • • • • Google Sun Workstation Amazon Kindle Apple iPhone Cisco Telepresence
Cautionary Tales
• • • • • AskJeeves IBM PS2 Sony Reader Palm Treo 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 Catch Up to Your Competition
Competitor 1
* *
Competitor 2
*
Competitive Set
*
Competitor 3
*
Neutralize Neutralize a competitor’s differentiating innovation by reaching “good enough” quickly Refocus the market back on your differentiation Failure to neutralize quickly can result in market leaving you behind
Cases Examples & Cautionary Tales Innovating to Neutralize
Case Examples
• • • • • Microsoft & the Mac Microsoft & the Web Netflix & the Web Google Apps & MSFT Office Apple & Kindle
Cautionary Tales
• • • • • Nokia & the iPhone Lotus Notes & the Web Blockbuster & Netflix Yahoo & Google Search Borders & Kindle
Catch up fast Assimilate the innovation
Price/Benefit Sensitivity Focus Neutralization Where it Matters Most
HI LO Excellence PERFORMANCE Customer PREMIUM LO Benefit Sensitivity HI
Optimize Cut Yourself Free from the Long Tail
Optimize Pct Value Delivered
25 20 15 10 5 0 A B C D E F G H I J K M N O P Q R S T U V W X
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 Y Z
Freeing Resources Trapped in Context The Six Levers Model
1.
Core Context
2.
Centralize.
Bring operations under a single authority to reduce overhead costs and create a single decision-making authority to manage risk
Standardize.
Reduce the variety and variability of processes delivering similar outputs to further reduce costs and minimize risks.
Optimize Tighten Up Your Flabby Middle
Optimize Pct Value Delivered
25 20 15 10 5 0 A B C D E F G H I J K M N O P Q R S T U V
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 W X Y Z
Freeing Resources Trapped in Context The Six Levers Model
1.
Core Context
2.
3.
4.
Centralize.
Bring operations under a single authority to reduce overhead costs and create a single decision-making authority to manage risk
Standardize.
Reduce the variety and variability of processes delivering similar outputs to further reduce costs and minimize risks.
Modularize.
Deconstruct the system into its component subsystems and standardize interfaces for future cost reductions.
Optimize.
Eliminate redundant steps, automate standard sequences, streamline remaining operations, substitute lower cost components, or otherwise cost- and resource-reduce
Optimize Redraw the Core/Context Boundary
Optimize Pct Value Delivered
25 20 15 10 5 0 A B C D E F G H I J K M N O P Q R S T U V W X
Recharter. Rearchitect. Reallocate.
1. Redefine the boundaries 2. Transfer the investment responsibilities 3. Focus on risk management & agile responsiveness Y Z
Freeing Resources Trapped in Context The Six Levers Model
1.
Core Context
2.
3.
4.
5.
6.
Centralize.
Bring operations under a single authority to reduce overhead costs and create a single decision-making authority to manage risk
Standardize.
Reduce the variety and variability of processes delivering similar outputs to further reduce costs and minimize risks.
Modularize.
Deconstruct the system into its component subsystems and standardize interfaces for future cost reductions.
Optimize.
Eliminate redundant steps, automate standard sequences, streamline remaining operations, substitute lower cost components, or otherwise cost- and resource-reduce.
Instrument.
Characterize the remaining processes in terms of the variability of key parameters and develop monitor-and control systems to manage their performance.
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”
Differentiate Neutralize Optimize Core Value Focal Point Challenge Separation Unmatchable
How far?
Time Good enough
How fast?
Cost Systemic
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 Deploy Projects Invent Products 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 Deploy Products Invent Processes 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 for Scale
Invent Tipping Point Deploy
Transition For Yield Tipping Point 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 Type of Leader Core Competence Invention Visionary Inventor Creativity Deployment Optimization Pragmatic Deployer Competitiveness Conservative Optimizer Control Transitions Pragmatic Orchestrator Collaboration Core Attribute Original Tough-minded Prepared Empathetic Decision Style Organizational Preference Intuition Integrated Teams Test-&-Adjust Line Functions Deliberation Consensus Hierarchical Organizations Cross-Functional 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 Company Power Market Power Offer Power Execution Power Vision Strategy Execution
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