The document discusses an agenda for a startup secrets event that will cover topics like value propositions, company formation, business models, go-to-market strategies, and a session with Geoffrey Moore. The agenda indicates there will be presentations and workshops on these topics to provide insights for attendees on developing unfair competitive advantages for their startups. The document also shares examples from companies like Apperian, Acquia, and Demandware to illustrate lessons learned in startup strategies.

1. Startup Secrets
Wrap Up & Geoffrey Moore
An insider’s guide
to unfair competitive advantage
Michael J. Skok
North Bridge Venture Partners
Twitter: @mjskok
www.mjskok.com
Michael Skok

2. Agenda
• Welcome
• Highlights
 Emphasis on formation, go to market
• Awards
• Acknowledgements & thank yous
• Geoffrey Moore
Michael Skok
2

3. Startup Secrets - Agenda
• Feb 1: Value Proposition
• Feb 22: Company Formation
• Mar 7: Business Model
• Mar 29: Go-To-Market Strategy
• Apr 18: Pitch Session
• May 17: Geoffrey Moore
Michael Skok
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4. Agenda
Problem
Value
Solution
Gain Pain Prop
Ideas
Define Evaluate Build
Michael Skok
Michael Skok 4

5. Qualify the problem –
Is it “blac” & white?
Blatant Blatant
Blatant Critical
Latent
Aspirational
Critical Latent
Aspirational Critical
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6. Problem
Problems worth
solving are
usually 4U …
• Unworkable
• Unavoidable
• Urgent
• Underserved
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7. Solution
• Discontinuous innovation
• Defensible technology
• Disruptive business model
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8. Gain/Pain ratio
• Revenue • Inertia • Find (See)
• Cost savings • Switching costs? • Try
• Time • Default = do nothing • Buy
• People • Alternatives? • Implement
• Competitive advantage • Good enough = • Deploy
• Reputation good enough! • Own – eg TCO
• Etc..
• RISK on a startup Pain
Inertia,
RISK
Gain
>10
Michael Skok
8

9. Example - Apperian
 Increase revenue by 40% at counters
 Roll out 17,000iPads
 Deliver worldwide no IT touch
required
 Saved $2.5M+ in direct IT costs
Michael Skok

10. Learnings…
Michael Skok
10

11. Startup Secrets - Agenda
• Feb 1: Value Proposition
• Feb 22: Company Formation
• Mar 7: Business Model
• Mar 29: Go-To-Market Strategy
• Apr 18: Pitch Session
• May 17: Geoffrey Moore
Michael Skok
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12. Company Formation: Agenda
• Vision
• Culture
• People
 Hiring
• Team
• WORKSHOP: Hiring and forming a team
Michael Skok
Michael Skok 12

13. Building an enduring company:
Vision
(Market)
Execution Listen
(GOSPA) Learn
Lead
People,
Team Iterate
Pivot
Value
Proposition
Enduring
Startup Cultural Consistency
Michael Skok
Company
Michael Skok 13

14. Learn from the best?
• FORTUNE Tech
top 5 100 Best Company
 Google List consistently
outperform major
 SAS Institute stock indices by
 NetApp
 Zappos
300%
 DreamWorks
Michael Skok
Michael Skok 14

15. Hiring: Startup Secret
The 3As and the 3+s
Aptitude
Ability Attitude
+ Authentic
+ Awareness (self)
Michael Skok
+… PLUS (People Like US = Fit)
Michael Skok 15

16. Select ALL your stakeholders
See Video on Next Slide >>
Michael Skok
16

17. My first interview question?
What are youpassionate about?
Michael Skok
Michael Skok 17

18. Acquia
“One of the hottest companies on
the planet” - VentureBeat
Michael Skok
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19. Acquia – learning culture
See Video on Next Slide >>
“One of the hottest companies on
the planet” - VentureBeat
Michael Skok
Michael Skok 19

20. Startup Secrets - Agenda
• Feb 1: Value Proposition
• Feb 22: Company Formation
• Mar 7: Business Model
• Mar 29: Go-To-Market Strategy
• Apr 18: Mock Pitch Session
• May 17: Geoffrey Moore
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21. Agenda
1. Finding a Disruptive Business Model
2. Focusing on CORE differentiation
3. Multipliers and Levers to optimize it
4. Measuring your customer lifecycle value & cost
• WORKSHOP
Other side of the coin – GTM – next session
- Eg Segmentation, Channels etc
Michael Skok
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22. Perfect Startup Storm
Breakthrough
Business Model
New Market
Disruptive
Opportunity /
Technology
Segment
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23. Capturing your value?
• Where is your CORE value?
• Software/other technology
• Data
• Content
CORE
• Service, support
• User network
• How will you monetize it
 To your competitive advantage ?
 Where are others most vulnerable?
Michael Skok
23

24. Examples:
From my early experience:
• Symantec ~20 years ago (!)
 Symantec Antivirus for Mac (SAM)
• Best seller – Licensed Product
 Norton Antivirus for PC (NAV)
• How to change the game?
• Best seller – Subscription Service
Michael Skok
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25. Startup Secret:
Multipliers and Levers
Multiply and Leverage your CORE
Multipliers: Levers:
• Increase revenue • Reduce time
• Increase reach • Reduce costs
• Increase coverage Multipliers
• Reduce resources
Levers
CORE
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26. Strategic Partnership
• EG: “Whole Product” Strategic Partnership
Multipliers: Levers:
• Increase revenue • Reduce time to
through fuller market
services
Multipliers
solution • Reduced dev costs
Levers
Application
• Increase CORE
reachthrough their Database
Storage
sales force, channel
etc.
• Credibility
Integrate your CORE into
Michael Skok their technology stack
26

27. Russian Doll Packaging
Gives you and your customers:
• Digestible starting point
• Upsell Options
• Channel Flexibility
… and more
One of my favorite personal adages:
“Addiction before Adoption”
Michael Skok
27

28. Strategic
Friction Free, SLIPPERY Products
Tactical
Simple
Low to no initial cost
Installs easily
Proves value quickly
Plays well with others ( WHOLE product )
Easy to use
ROI is obvious
Y customers can’t live without it
Michael Skok
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29. Strategic
Demandware case study
Tactical
• WHOLE product – fulfills Value Prop
 LINK program
• Creates whole product
• Extends whole product to broader solution
• Reduces cost of integration
• Reduces time to deploy
Michael Skok
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30. LINK Technology Partners
Outcome: Ease of Innovating Through New Technologies
LINK Technology
Partners
• Extensive library of pre-
built integrations between
leading third-party
®
technologies and
LINK Technology Partners
Demandware Commerce
Benefits to
Retailers / Brands
• Accelerated Revenue Growth
• Rapid Access to Applications
• Reduced Implementation
Costs
• Early Visibility into Emerging
Technologies
Michael Skok
30

31. LINK Technology Partners
Outcome: Ease of Innovating Through New Technologies
LINK Technology
Partners
• Extensive library of pre-
built integrations between
leading third-party
®
technologies and
LINK Technology Partners
Demandware Commerce
Benefits to
Retailers / Brands
• Accelerated Revenue Growth
• Rapid Access to Applications
• Reduced Implementation
Costs
• Early Visibility into Emerging
See Video on Next Slide >> Technologies
Michael Skok
31

32. Unfair competitive advantage…
• Disruptive innovation
Yet..
• NON disruptive adoption
Michael Skok
Michael Skok 32

33. Example - Akiban
• 10x -> 100x performance improvement
• NO change to applications
• NO risk deployment (replicated data)
• Customers Gain/Pain ratio = 10 to 100
 Case study:
• Doubling revenue with Akiban
• Unworkable alternatives
– rewrite and lose revenue, with unsure outcome
Michael Skok
Michael Skok 33

34. The Refined Model
• Cost of Acquiring &Re-Engaging Customer (CARC)
• Lifecycle Value of Customer (LCV)
Multipliers
Up- Re-
Levers
sell CORE Trial
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35. Startup Secrets - Agenda
• Feb 1: Value Proposition
• Feb 22: Company Formation
• Mar 7: Business Model
• Mar 29: Go-To-Market Strategy
• Apr 18: Pitch Session
• May 17: Geoffrey Moore
Michael Skok
35

36. A Startup GTM - Agenda
Marketing & Strategies
Sales Cycle / Tactics Channel Audience
Awareness Brand Direct vs. Targeting,
Channel Segmentation
Positioning
Interest
OUTbound / INboound
Messaging Channel Personas
Understanding Development,
Social Management, Actors/Scenes
Media Etc.
Engagement
PR
Trial Strategic
Services Partners
Purchase References
• Results Oriented, Metrics, Execution Driven
• Continuous Iteration & Improvement
Michael Skok
36

37. Identity
Name
system
Brand
Essence
Every Touch Product
Point
Michael Skok

38. Identity
Name
system
Brand
See Video on Next Slide >>
Essence
Every Touch Product
Point
Michael Skok

39. Positioning 2x2
Strategic
Whatever sets you up… for a unique white space
Tactical
Define real BARRIERS
to Entry into each
segment
High
{whitespace}
a
c
The choice of
axes is critical
b Bubble sizing for
relative size of
competitors
d
Low
Low High
Michael Skok
39

40. Targeting, Segmentation:
Strategic
Example, seeking Critical Need
Tactical
Mobile
Professionals vs. Office Worker
Field Workers vs. White Collar
Services vs. Sales
Medical vs. Office
Equipment Equipment
Hospitals vs. Medical Clinics
Critical
Care vs. Diagnostics
Michael Skok
40

41. Startup Secret
Strategic
- don’t be afraid to FOCUS!
Tactical
• Narrow as possible to start!
 Think Beachhead (Geoffrey Moore)
• Which would you rather…
 Expand on success?
 Contract on failure?
• Demandware case study…
Michael Skok
41

42. Eating the Orange Segment At a Time
Segmentation Guidelines
• “Get Small, Get Big or Get Out”
• Small enough to be actionable, big
enough to be meaningful
• Can you on Next Slide >>
See Videodeliver with distinction (and
margin)?
• If you succeed, will other customers
care?
42 Copyright 2008 Demandware, Inc. - Confidential

43. Startup Secret: Customer
Strategic
“Actors” Change Through “Scenes”
Tactical
Awareness
Customer “Actors”
Actors Interest • Visionary
Segment • Technocrat
Understanding
“SCENES”
• Operator
Target
Engagement • Influencer
• Economic buyer
Trial
Underserved, • Decision maker
Uniquely valued Purchase
Michael Skok
43

44. “Driving” Startup
Strategic
Marketing & Sales
Tactical
You Customer
Control Controls
Neutral
Accelerator / Brake /Clutch
Awareness
GEARS to build Momentum
Interest
Understanding
Engagement
Trial
Purchase
Overdrive
Michael Skok
44

45. Startup Secret:
Strategic
Closed Loop, Web
Tactical
Awareness
$,Time, Resources
Conversion rate %
Interest
Understanding Closed
Loop
Engagement via Web
Trial
ULTIMATELY:
$,Time, Resources
Purchase Conversion rate %
Michael Skok
46

46. Ex: Unidesk Early Marketing
Phase: Requirements Phase: Pre-Launch Phase: Launch
Tool: Web Survey Tool: Blog, Twitter, Google Analytics Tool: Blogger PR (new media)
Goal: Build right product Goal: Awareness Goal: Interest
Key: Founder appeal Key: Compelling content/personality Key: Unique, differentiated position
Measure Everything: Weekly KPI Spreadsheet
D e a r Re a d e r,
I re c e n t ly s t a rt e d a n e w s o ft w a re c o mp a n y fo c u s e d o n v irt u a l d e s kt o p
ma n a g e me n t . It 's c a lle d U n id e s k, a n d it 's b a c ke d b y M a t rix a n d N o rt h
Brid g e , t w o o f t h e b ig g e s t n a me s in h ig h -t e c h v e n t u re c a p it a l. O u r g o a l is t o
h e lp IT d ra ma t ic a lly imp ro v e t h e w a y d e s kt o p s , la p t o p s , a n d o t h e r P C
c lie n t s a re ma n a g e d .
P l u s , you wi l l :
I'm o ffe rin g y o u a fre e $20 g ift c a rd re d e e ma b le a t a n y re t a il s t o re t h a t
a c c e p t s M a s t e rCa rd if y o u 'll re s p o n d t o a s u rv e y a n d s h a re y o u r d e s kt o p
Re c e iv e a fre e $20 g ift c a rd
ma n a g e me n t e xp e rie n c e s . I'm n o t lo o kin g t o s e ll y o u a n y t h in g . I'd ju s t like re d e e ma b le a t a n y re t a il s t o re
y o u t o t a ke a fe w min u t e s a n d a n s w e r s o me q u e s t io n s s o my t e a m c a n b e t t e r
t h a t a c c e p t s M a s t e rCa rd ™
u n d e rs t a n d y o u r d e s kt o p a d min is t ra t io n c h a lle n g e s a n d d e liv e r t e c h n o lo g y
t h a t b e s t me e t s y o u r n e e d s .
Be e n t e re d in a d ra w in g t o
T o c o mp le t e t h e b rie f s u rv e y , v is it Virt u a l D e s kt o p S u rv e y .
re c e iv e a fre e A p p le iP o d ™
T o u c h M e d ia P la y e r w it h W iF i
T h a n k y o u fo r h e lp in g t o in flu e n c e t h e n e xt g e n e ra t io n o f d e s kt o p
ma n a g e me n t s o ft w a re .
Ge t t h e c h a n c e t o jo in o t h e r IT
p ro fe s s io n a ls a s p a rt o f a n
in flu e n t ia l c u s t o me r a d v is o ry
b o a rd
Ch ris M id g le y
CT O a n d F o u n d e r, U n id e s k Co rp
C o p y ri g h t © 2 0 0 8 U n i d es k C o rp o rat i o n • 1 9 0 0 W es t P ark D ri v e • S u i t e 2 8 0 • W es t b o ro u g h • M A • 5 0 8 . 9 8 3 . 1 4 1 1
If y o u d o n o t w i s h t o recei v e fu t u re m ai l i n g s fro m U n i d es k . P l eas e em ai l U n s u b s cri b e t o u n s u b s cri b e@ u n i d es k . co m
Phase: Build pipeline Phase: Customer acquisition Phase: Production customers
Tool: Video, YouTube Tool: Webinars Tool: Forums
Goal: Understanding Goal: Engagement, Trial Goal: Purchase, Repeat Purchase
Key: Evangelist, crisp script Key: Passionate customers Key: Passionate, active customers
Michael Skok
47

47. Ex: Unidesk Early Marketing
Phase: Requirements Phase: Pre-Launch Phase: Launch
Tool: Web Survey Tool: Blog, Twitter, Google Analytics Tool: Blogger PR (new media)
Goal: Build right product Goal: Awareness Goal: Interest
Key: Founder appeal Key: Compelling content/personality Key: Unique, differentiated position
Measure Everything: Weekly KPI Spreadsheet
D e a r Re a d e r,
I re c e n t ly s t a rt e d a n e w s o ft w a re c o mp a n y fo c u s e d o n v irt u a l d e s kt o p
ma n a g e me n t . It 's c a lle d U n id e s k, a n d it 's b a c ke d b y M a t rix a n d N o rt h
Brid g e , t w o o f t h e b ig g e s t n a me s in h ig h -t e c h v e n t u re c a p it a l. O u r g o a l is t o
h e lp IT d ra ma t ic a lly imp ro v e t h e w a y d e s kt o p s , la p t o p s , a n d o t h e r P C
c lie n t s a re ma n a g e d .
P l u s , you wi l l :
I'm o ffe rin g y o u a fre e $20 g ift c a rd re d e e ma b le a t a n y re t a il s t o re t h a t
a c c e p t s M a s t e rCa rd if y o u 'll re s p o n d t o a s u rv e y a n d s h a re y o u r d e s kt o p
Re c e iv e a fre e $20 g ift c a rd
ma n a g e me n t e xp e rie n c e s . I'm n o t lo o kin g t o s e ll y o u a n y t h in g . I'd ju s t like re d e e ma b le a t a n y re t a il s t o re
y o u t o t a ke a fe w min u t e s a n d a n s w e r s o me q u e s t io n s s o my t e a m c a n b e t t e r
t h a t a c c e p t s M a s t e rCa rd ™
u n d e rs t a n d y o u r d e s kt o p a d min is t ra t io n c h a lle n g e s a n d d e liv e r t e c h n o lo g y
t h a t b e s t me e t s y o u r n e e d s .
Be e n t e re d in a d ra w in g t o
T o c o mp le t e t h e b rie f s u rv e y , v is it Virt u a l D e s kt o p S u rv e y .
re c e iv e a fre e A p p le iP o d ™
T o u c h M e d ia P la y e r w it h W iF i
T h a n k y o u fo r h e lp in g t o in flu e n c e t h e n e xt g e n e ra t io n o f d e s kt o p
ma n a g e me n t s o ft w a re .
Ge t t h e c h a n c e t o jo in o t h e r IT
p ro fe s s io n a ls a s p a rt o f a n
in flu e n t ia l c u s t o me r a d v is o ry
b o a rd
Ch ris M id g le y
CT O a n d F o u n d e r, U n id e s k Co rp
C o p y ri g h t © 2 0 0 8 U n i d es k C o rp o rat i o n • 1 9 0 0 W es t P ark D ri v e • S u i t e 2 8 0 • W es t b o ro u g h • M A • 5 0 8 . 9 8 3 . 1 4 1 1
If y o u d o n o t w i s h t o recei v e fu t u re m ai l i n g s fro m U n i d es k . P l eas e em ai l U n s u b s cri b e t o u n s u b s cri b e@ u n i d es k . co m
Phase: Build pipeline Phase: Customer acquisition Phase: Production customers
Tool: Video, YouTube Tool: Webinars Tool: Forums
Goal: Understanding Goal: Engagement, Trial Goal: Purchase, Repeat Purchase
Key: Evangelist, crisp script Key: Passionate customers Key: Passionate, active customers
See Video on Next Slide >>
Michael Skok
48

48. Remember, ROME wasn’t
built in a Day
Nor will your GTM strategy and tactics be
Listen
 R esults Learn
 O riented GTM Lead
Business Iterate
 M arketing Model
Pivot
 E xecution Product
Proposition
 D riven through iteration
• Results Oriented, Metrics, Execution Driven
• Continuous Iteration & Improvement
Michael Skok
49

49. Ex: Unidesk
See Video on Next Slide >>
Michael Skok
50

50. Startup Secrets - Agenda
• Feb 1: Value Proposition
• Feb 22: Company Formation
• Mar 7: Business Model
• Mar 29: Go-To-Market Strategy
• Apr 18: Pitch Session
• May 17: Geoffrey Moore
Michael Skok
51

51. Thank you….
Michael Skok
52

52. Case Studies
• Acquia
• Apperian
• Akiban
• Demandware
• Unidesk
• Active Endpoints
• MC10
Michael Skok
53

53. Mentors and coaches
• Adam Berrey • Steve Skidmore
• Brent Kleiman
• David McFarlane
• Jim Moran
• Carmichael Roberts
• Carlos Montero
Luque
Michael Skok
54

54. Judges
• Don Bulens
 CEO Unidesk
• Tom Ebling
 CEO Demandware
• Brent Kleiman
 Entrepreneur
• Jeff McCarthy
 GP, North Bridge
• David McFarlane
 Co-founder, CEO Akiban
Michael Skok
56

55. Congratulations to…
• Sarah Cullem
• Regina Joice
• Eric Kelsic
• Ahmed Samir Mady
• Katharine Wolf & Cecilia Chen
Michael Skok
57

56. Build around - YOU...
• What problems do you understand uniquely
well?
• What solution can you deliver uniquely well?
• What kind of disruptive business model can you
bring?
Michael Skok
58

57. Thank you….
Michael Skok
59

58. Thank you….
Michael Skok
60

59. Thank you….
Michael Skok
61

60. Thank you….
Michael Skok
62

61. Thank you….
Michael Skok
63

62. Thank YOU… Follow up online
Email
• All who mjskok@northbridge.com
participated Web
mjskok.com
Twitter
@mjskok
• Harvard iLab
 Jodi Goldstein SlideShare
/mjskok
 Neil Doyle
LinkedIn
 Gordon Jones linkedin.com/in/mjskok
Google+
bit.ly/mjskok-google
YouTube
bit.ly/mjskok-youtube
Michael Skok
64

63. Startup Secrets - Agenda
• Feb 1: Value Proposition
• Feb 22: Company Formation
• Mar 7: Business Model
• Mar 29: Go-To-Market Strategy
• Apr 18: Pitch Session
• May 17: Geoffrey Moore
Michael Skok
65

64. Startup Secrets
Wrap Up & Geoffrey Moore
An insider’s guide
to unfair competitive advantage
Michael J. Skok
North Bridge Venture Partners
Twitter: @mjskok
www.mjskok.com
Michael Skok

65. Escape Velocity
Free Your Company‟s Future
from the Pull of the Past
Harvard iLab
May 17, 2012

66. Introduction
The Hierarchy of Powers
70

67. The Hierarchy of Powers
A Framework for Analyzing Business Strategy
 Category Power Growth born from category expansion
“Big Bang” growth creates a new earnings engine
Company Power Growth born from competitive advantage
Partners go out of their way to send you business
Market Power Growth born from customer commitment
Customers go out of their way to give you business
 Offer Power Growth born from unmatchable offers
Competitors cannot or will not copy your efforts
 Execution Power Growth born from reaching tipping points
Your initiatives become the next status quo
71

68. Execution Power
Transitioning to Scale
Growth Born from Reaching Tipping Points
72

69. The Arc of Execution
Where in the Execution Life Cycle Are You?
Deploy
Invent Optimize
73

70. Time to Tipping Point
The Most Important Life Cycle Metric
Deploy

Tipping
Point
Transition
to Viable Scale
Invent Optimize
74

71. Why Tipping Points?
• Adoption is social
• People do what they see other people doing
• This leads to two mirror-image phenomena
• The Chasm: (I won‟t because you aren‟t)
• The Tornado: (I must because you are)
• Pre-tipping-point, no progress is sustainable
• As soon as you withdraw the stimulus, the population
returns to its prior state
• Post-tipping point, there is no going back
• Social dynamics institutionalize the change
75

72. Tipping Point for B2B Markets
The Technology Adoption Life Cycle
MAIN
STREET
TORNADO
EARLY
MARKET
BOWLING
CHASM ALLEY
76

73. Life-Cycle Metrics that Matter
Tracking Performance Relative to the Chasm
• Early Market
• One or more flagship customers making big-bet commitments
• In the Chasm
• Cannot support yet another big-bet commitment
• Pragmatists still holding back from entering the market
• Taking the Beachhead
• Nailed a high-pain use case
• Getting strong word-of-mouth support within target segment
• In the Bowling Alley
• Additional use cases coming on board, viral in adjacent segments
• Inside the Tornado
• Horizontal “killer app” -- hyper-growth in the category
• On Main Street
• Hyper-growth subsides – pecking order established
77

74. Tipping Point for B2C Markets on the Web
The Four Gears
VIRALITY ACQUISITION
Starter
Motor
MONETIZATION ENGAGEMENT
78

75. Four-Gears Metrics that Matter
Tracking Performance Relative to the Tornado
• Acquisition
• Rate of gaining new users
• Engagement
• Average length, depth, and frequency of user engagement
• Monetization
• Percentage of total users that participate in business model
• Virality(Positive Enlistment)
• New customers coming from existing customers over time
• Churn (Negative De-Enlistment)
• Losing existing users
• Lifetime Customer Value (ARPU/Churn)
• Projected monetization returns by class of customer
79

76. Offer Power
Return on Innovation
Growth Born from Unmatchable Offers
80

77. Offer Power
Getting a Return from Innovation
Differentiation Neutralization
Productivity
81

78. Offer Power for Escape Velocity
Three Mandates to Execute in Parallel
Differentiation Separate from your competitive set
Neutralization Keep up with evolving norms
Productivity Convert waste into value
82

79. Differentiate Differentiation
Separate From Your Competitive Set
*
* Leverage your
unmatchable
Competitor 1
capability
YOU
*
Competitor 2 to create an
*
Competitor 3 unmatchable
offer
Competitive Set
83

80. Neutralize Neutralization
Catch Up to Your Competition
*
Competitor 1
Neutralize a
*
Competitor 2
* competitor‟s
differentiation
*
* Competitor 3
by reaching
“good enough”
quickly
YOU
Competitive Set
84

81. The Difference Between the Two
Differentiation Neutralization
• Return on Differentiation
• Beyond compare
• Return on Neutralization
• Good enough
• Everything spent between the two
• Waste!
85

82. Innovating for Optimization Productivity
Focus on Productivity
YOU
*
Competitor 1
Optimize behind
the scenes
*
Competitor 2
*
*
Competitor 3
to lower costs and
free up scarce
resources
Competitive Set
Price
Deflation

83. Three Innovation Playbooks
Differentiation Neutralization Productivity
Core Metric Separation Time to market Reclaimed resources
Standard to Meet Unmatchable Good enough Best in class
Test Question How far? How fast? How deep?
These playbooks have conflicting goals
Do not combine them
87

84. No Return on Innovation
How Established Enterprises Waste Their R&D
Differentiation Neutralization
Failed
Attempts Optimization
Waste
Sources of Waste:
• Differentiation projects that don’t go far enough
• Neutralization projects that go too far and/or are too slow
• Optimization projects that don’t free up mission-critical resources

85. Category Power
Portfolio Management
Growth Born From Entering New Categories
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86. Category Maturity Life Cycle
The A-B-C-D‟s of Portfolio Management
Indefinitely elastic Utilize
Acquire middle Power Divest
Power
Declining
Power
Revenue Growth
A B C D
Emerging Growth Mature Declining Fault
Market Market Market Market Line!
Catch
(pre-Tornado)
Next E
Wave
End of
Life
Technology Adoption Time
Life Cycle
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87. How Are Your Categories Performing?
A Portfolio Analysis Framework
High Growth Low Growth
Material
Revenues
PERFORMANCE
B B
C
C
A D
A D
Not Material
POWER
B C D
A
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88. 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?
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89. Three Investment Horizons
Where Category Power Initiatives Gets Stuck
Do well here too
Break-Out
Categories
On-board next
generation for Horizon 3
future growth ROI in 36 to 72 mos
Current
Categories
Future Category
Meet Horizon 2
Options
Performance ROI in 12 to 36 mos
Commitments Develop options
for future
Sticking point growth
Horizon 1
ROI in 0 to 12 mos
Do well here
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90. Portfolio Dynamics
Horizons Meets Life Cycles
• Performance management
focuses on winning material
High Growth Low Growth revenues (Horizon 1)
• H1 managers to hoard spare
Horizon 1 resources to ensure they can
Material meet their commitments
Revenues
• That crimps H2 efforts because
they compete with H1 for the
Horizon „0‟
Horizon 2
B C same resource pool
A D
• 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
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91. The Horizon 2 Challenge
Crossing the Chasm Inside the Belly of a Whale
• All the other horizons are OK
• H1 gets first dibs at resources
• H3 gets funded outboard of the process
• H0 sneaks 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
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92. Innovation Incubation Model
It‟s Not a Funnel. It‟s an Hourglass!
Horizon 3
Horizon 2
Horizon 1
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93. The Race to Material Revenues
Rules of Thumb for Publicly Held Enterprises
• 5% - 10% of Total Revenue = Revenue Materiality
• This is the exit threshold from H2 to H1
• 0.5% - 1% of Total Revenue = On the Expense Radar
• This is the entry threshold from H3 to H2
• Horizon 2 Journey
• Grow one order of magnitude in 12 quarters
• Be more than half way after 8 quarters
• Else fold back into the base business and move on
Horizon 2 is not a stable state
Must race to get through, or die
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94. Meeting the Horizon 2 Challenge
New Prescriptions in Five Key Areas
1. Number of H2 Initiatives
• One at a time, regardless of size of your enterprise
• No limit on number of H1 or H3 initiatives
2. Planning & Budgeting
• Calendar for the 2nd quarter
• Do not blend with annual planning and budgeting process
3. Organizational Structure
• Independent BUs with direct control over all functions
• Transition to functional organization at Horizon 1
4. Metrics
• Tipping point metrics
• Crossing the Chasm (B2B) or Four Gears (B2C)
5. Talent & Compensation
• Major variable comp tied to Tipping Point success
• Affects every executive equally
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95. Conclusion
Putting the Previous in Context
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96. Escape Velocity is Hard to Create
Understanding the Dynamics of the Status Quo
• The innovator‟s dilemma
• Established enterprises focus on their best customers, who want
more of what they have, not something new.
• The asymmetry of risk for successful companies
• Breakout growth involves taking risk. The bigger you are, the
less you have to win from taking risk, the more you have to lose
• The pragmatics of annual planning in established enterprises
• Next year‟s plan is normally based on last year‟s—which means
legacy businesses get first dibs at the critical resources
• The dynamics of contemporary financial markets
• Short-term investors drive short-term compensation metrics—
breakout growth always involves a J-curve
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97. Companies Who Could Not Escape
Burroughs – Sperry Univac – Honeywell – Control Data
MSA – McCormick & Dodge – Cullinet– Cincom – ADR–
DEC– Data General – Wang -– Prime– Tandem – Daisy
– Calma These were not badSilicon Graphics – Sun –
– Valid – Apollo – companies
Informix – Ingres – Nortel– Bay Networks – Lucent
These were our best companies!
– 3Com – Banyan – WordPerfect– Lotus – Ashton Tate –
Borland– Novell – Atari – Osborne – Commodore – Casio
– Palm – Sega – Netscape – MySpace – Kodak –
Polaroid – Quest– America West – Nynex – Bell South
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98. Achieving Breakout Growth
What Does It Take to Gain Escape Velocity?
• Focus on Power before Performance
• Power fuels performance
• Performance converts power into returns
• Focus on Leadership before Management
• Leadership develops power
• Management delivers performance
• Focus on Tipping Points before ROI
• Tipping points are binary state changes in power
• Until state change is achieved, no other metrics matter
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99. gmoore@geoffreyamoore.com
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