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Zone to Win
Organizing to Compete in
An Age of Disruption
November, 2015
The Impact of Disruptive Innovation
When the Marginal Cost Approaches Zero
2
Data Science
Social Networks
Cloud Computing
Smart Phones
Internet of Things
The marginal cost of computing
The marginal cost of automating a personal transaction
The marginal cost of adding a resource to a sharing economy
The marginal cost of dynamic decision-making
The marginal cost of systemic optimization
Which wave will have the biggest impact in your world?
Burroughs – Sperry Univac – Honeywell – Control Data
MSA – McCormick & Dodge – Cullinet – Cincom – ADR
DEC – Data General – Wang – Prime – Tandem
Daisy – Calma – Valid – Apollo – Silicon Graphics – Sun
Atari – Osborne – Commodore – Casio – Palm – Sega
WordPerfect – Lotus – Ashton Tate – Borland
Informix – Ingres – Sybase – BEA– Seibel – PeopleSoft
Nortel – Lucent – 3Com – Banyan – Novell
Quest – America West – Nynex – Bell South
Netscape – MySpace – Inktomi – Ask Jeeves – Yahoo!
Blackberry – Motorola – Nokia – Sony
Leaders Who Missed Their Next Wave
Three Investment Horizons
Where the Problem Lies
4
Horizon 1
ROI in 0 to 12 mos
Horizon 2
ROI in 12 to 36 mos
Horizon 3
ROI in 36 to 72 mos
Current
Categories
Meet
Performance
Commitments
Break-Out
Categories
On-board next
generation for
future growth
Future Category
Options
Develop options
for future
growth
Do well here
Do well here too
Sticking point
Disruptive Innovation Model
It’s Not a Funnel. It’s an Hourglass!
5
Horizon 3
Horizon 2
Horizon 1
Sustaining
Innovations
Disruptive
Innovations
6
6
Engaging with Disruption
What Are You Looking to Change?
Cloud
Social
Data Science
Internet of Things
Mobile
Infrastructure
Model
Operating
Model
Bus
Model
7
Technical Operations
Redefine Price/Performance
Efficiency!
Business Operations
Redefine Productivity
Effectiveness!
Business Innovation
Redefine Market Norms
Competitive Advantage!
7
Infrastructure
Model
Operating
Model
Bus
Model
CIO sponsored
CXO sponsored
CEO sponsored
Engaging with Disruption
Three Different Games to Play—Choose One!
The higher up in the model,
the greater the disruption to absorb
The Four Zones
Organizing to Compete in an Age of Disruption
Disruptive
Innovations
Sustaining
Innovations
Incubation
Zone
Transformation
Zone
Performance
Zone
Productivity
Zone
Revenue
Performance
Enabling
Investments Horizon
3
Horizon
2
Horizon
1
Horizon
1
8
The Four Zones
Each Zone Has a Unique Funding Charter
9
• Performance Zone
• Deliver material bookings, revenues, and contribution margins
in Horizon 1
• Productivity Zone
• Deliver programs and systems for compliance, efficiency, and
effectiveness in Horizon 1
• Incubation Zone
• Deliver viable business options to catch new technology waves
in Horizon 3
• Transformation Zone
• Scale a disruptive option to material revenue (greater than 10%
of total enterprise revenue) in Horizon 2
Performance Zone: Horizon 1
Getting the Performance Matrix Right
10
TOTAL
TOTAL
TOTAL
TOTAL
TOTAL
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL
RowOwners
SourcesofRevenue(BUs)
Column Owners
Channels of Bookings (Sales)
Rows & Columns interlock at the
cell level for joint accountability
Every row and column has a
unique owner
Operating cadence:
• Weekly commits (milestones)
• Monthly status reports
• Quarterly business reviews
No row or column subtotal can be
less than 10% of total
Key Metrics: Revenue, contribution margin, churn/renewals, growth rate
Productivity Zone: Horizon 1
The Architecture of Programs & Systems
• Programs
• Customized services
• User funded
• Optimized for effectiveness
• Programs adapt to users’ needs
• Systems
• Standard infrastructure
• Centrally funded
• Optimized for efficiency
• Users adapt to system’s rules
11
Systems Interface
Systems and programs are mutually incompatible
Manage them separately—do not blend
Programs
Systems
Incubation Zone: Horizon 3
Venture-Style Independent Operating Units
12
All functions report into GM
(No shared resources with
Performance Matrix)
Each IOU run by a dedicated
General Manager
Funding & reviews outboard of the
Annual Operating Plan
Venture-Based Metrics
• Seed: Technology POC
• Series A: MVP + first customers
• Series B: Win beachhead market
• Series C: Exit to scale
Incubation Fund
CEO + Board
IOU
#1
IOU
#2
IOU
#3 IOU
#4
Finance
Human
Resources
Administration
1. Transition to Transformation Zone
2. Transition to Performance Zone
3. Spin out
4. Get bought
5. Shut down
FIVE
EXIT
PATHS
Transformation Zone: Horizon 2
Transformational Initiatives
13
*
H2 TI
H3 IOU
*H3 IOU
*
H3 IOU
*
H3 IOU*
Incubation Set
Insert a new row into the
Performance Matrix
TOTAL
TOTAL
TOTAL
TOTAL
TOTAL
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL
H1
CEO sponsored
Everyone on board
No retreat
Only one at a time
Prioritizing the Four Zones
“At Half Time” (No Transformation in Play)
Disruptive
Innovations
Sustaining
Innovations
Incubation
Zone
Transformation
Zone
Performance
Zone
Productivity
Zone
Revenue
Performance
Enabling
Investments
3
4 1
2
14
Harvest your rewards, build up your reserves
1
Prioritizing the Four Zones
Zone Offense
Disruptive
Innovations
Sustaining
Innovations
Transformation
Zone
Performance
Zone
Productivity
Zone
Revenue
Performance
Enabling
Investments
4
2
3
15
Enlist everyone in scaling the new business
Subordinate incubation to transformation
Incubation
Zone
Zone Defense
When You are the Disruptee, not the Disruptor
• Anchor business under direct attack
• Disruptive innovation undercuts the core business model
• Maintaining the status quo no longer a viable option
• Cannot fix the business in the Performance Zone
• Wrong metrics, wrong compensation, wrong leaders
• Must move the business into the Transformation Zone
• Transformational goals
• Modernize the operating model
• Neutralize the disruptive innovation
• Operational objectives
• Get the business back into a healthy state
• Put it back in the Performance Zone
16
Prioritizing the Four Zones
Playing Defense
Disruptive
Innovations
Sustaining
Innovations
Incubation
Zone
Transformation
Zone
Performance
Zone
Productivity
Zone
Revenue
Performance
Enabling
Investments
2 4
17
Enlist everyone in stabilizing the current business
Subordinate productivity to transformation
1 3
Modernizing Your Model
Each Game Plays Out in a Different Zone
Disruptive
Innovations
Sustaining
Innovations
Incubation
Zone
Transformation
Zone
Performance
Zone
Productivity
Zone
Revenue
Performance
Enabling
Investments
18
For More Information
19
Incubation
Zone
Transformation
Zone
Performance
Zone
Productivity
Zone
Create options
for the future
Make a
big change
Make the
top line
Make the
bottom line
gmoore@geoffreyamoore.com
twitter.com/geoffreyamoore
http://linkd.in/YnBwig
20
Thank You

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Zone to Win: Organizing to Compete in the Age of Disruption

  • 1. Zone to Win Organizing to Compete in An Age of Disruption November, 2015
  • 2. The Impact of Disruptive Innovation When the Marginal Cost Approaches Zero 2 Data Science Social Networks Cloud Computing Smart Phones Internet of Things The marginal cost of computing The marginal cost of automating a personal transaction The marginal cost of adding a resource to a sharing economy The marginal cost of dynamic decision-making The marginal cost of systemic optimization Which wave will have the biggest impact in your world?
  • 3. Burroughs – Sperry Univac – Honeywell – Control Data MSA – McCormick & Dodge – Cullinet – Cincom – ADR DEC – Data General – Wang – Prime – Tandem Daisy – Calma – Valid – Apollo – Silicon Graphics – Sun Atari – Osborne – Commodore – Casio – Palm – Sega WordPerfect – Lotus – Ashton Tate – Borland Informix – Ingres – Sybase – BEA– Seibel – PeopleSoft Nortel – Lucent – 3Com – Banyan – Novell Quest – America West – Nynex – Bell South Netscape – MySpace – Inktomi – Ask Jeeves – Yahoo! Blackberry – Motorola – Nokia – Sony Leaders Who Missed Their Next Wave
  • 4. Three Investment Horizons Where the Problem Lies 4 Horizon 1 ROI in 0 to 12 mos Horizon 2 ROI in 12 to 36 mos Horizon 3 ROI in 36 to 72 mos Current Categories Meet Performance Commitments Break-Out Categories On-board next generation for future growth Future Category Options Develop options for future growth Do well here Do well here too Sticking point
  • 5. Disruptive Innovation Model It’s Not a Funnel. It’s an Hourglass! 5 Horizon 3 Horizon 2 Horizon 1 Sustaining Innovations Disruptive Innovations
  • 6. 6 6 Engaging with Disruption What Are You Looking to Change? Cloud Social Data Science Internet of Things Mobile Infrastructure Model Operating Model Bus Model
  • 7. 7 Technical Operations Redefine Price/Performance Efficiency! Business Operations Redefine Productivity Effectiveness! Business Innovation Redefine Market Norms Competitive Advantage! 7 Infrastructure Model Operating Model Bus Model CIO sponsored CXO sponsored CEO sponsored Engaging with Disruption Three Different Games to Play—Choose One! The higher up in the model, the greater the disruption to absorb
  • 8. The Four Zones Organizing to Compete in an Age of Disruption Disruptive Innovations Sustaining Innovations Incubation Zone Transformation Zone Performance Zone Productivity Zone Revenue Performance Enabling Investments Horizon 3 Horizon 2 Horizon 1 Horizon 1 8
  • 9. The Four Zones Each Zone Has a Unique Funding Charter 9 • Performance Zone • Deliver material bookings, revenues, and contribution margins in Horizon 1 • Productivity Zone • Deliver programs and systems for compliance, efficiency, and effectiveness in Horizon 1 • Incubation Zone • Deliver viable business options to catch new technology waves in Horizon 3 • Transformation Zone • Scale a disruptive option to material revenue (greater than 10% of total enterprise revenue) in Horizon 2
  • 10. Performance Zone: Horizon 1 Getting the Performance Matrix Right 10 TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL RowOwners SourcesofRevenue(BUs) Column Owners Channels of Bookings (Sales) Rows & Columns interlock at the cell level for joint accountability Every row and column has a unique owner Operating cadence: • Weekly commits (milestones) • Monthly status reports • Quarterly business reviews No row or column subtotal can be less than 10% of total Key Metrics: Revenue, contribution margin, churn/renewals, growth rate
  • 11. Productivity Zone: Horizon 1 The Architecture of Programs & Systems • Programs • Customized services • User funded • Optimized for effectiveness • Programs adapt to users’ needs • Systems • Standard infrastructure • Centrally funded • Optimized for efficiency • Users adapt to system’s rules 11 Systems Interface Systems and programs are mutually incompatible Manage them separately—do not blend Programs Systems
  • 12. Incubation Zone: Horizon 3 Venture-Style Independent Operating Units 12 All functions report into GM (No shared resources with Performance Matrix) Each IOU run by a dedicated General Manager Funding & reviews outboard of the Annual Operating Plan Venture-Based Metrics • Seed: Technology POC • Series A: MVP + first customers • Series B: Win beachhead market • Series C: Exit to scale Incubation Fund CEO + Board IOU #1 IOU #2 IOU #3 IOU #4 Finance Human Resources Administration 1. Transition to Transformation Zone 2. Transition to Performance Zone 3. Spin out 4. Get bought 5. Shut down FIVE EXIT PATHS
  • 13. Transformation Zone: Horizon 2 Transformational Initiatives 13 * H2 TI H3 IOU *H3 IOU * H3 IOU * H3 IOU* Incubation Set Insert a new row into the Performance Matrix TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL H1 CEO sponsored Everyone on board No retreat Only one at a time
  • 14. Prioritizing the Four Zones “At Half Time” (No Transformation in Play) Disruptive Innovations Sustaining Innovations Incubation Zone Transformation Zone Performance Zone Productivity Zone Revenue Performance Enabling Investments 3 4 1 2 14 Harvest your rewards, build up your reserves
  • 15. 1 Prioritizing the Four Zones Zone Offense Disruptive Innovations Sustaining Innovations Transformation Zone Performance Zone Productivity Zone Revenue Performance Enabling Investments 4 2 3 15 Enlist everyone in scaling the new business Subordinate incubation to transformation Incubation Zone
  • 16. Zone Defense When You are the Disruptee, not the Disruptor • Anchor business under direct attack • Disruptive innovation undercuts the core business model • Maintaining the status quo no longer a viable option • Cannot fix the business in the Performance Zone • Wrong metrics, wrong compensation, wrong leaders • Must move the business into the Transformation Zone • Transformational goals • Modernize the operating model • Neutralize the disruptive innovation • Operational objectives • Get the business back into a healthy state • Put it back in the Performance Zone 16
  • 17. Prioritizing the Four Zones Playing Defense Disruptive Innovations Sustaining Innovations Incubation Zone Transformation Zone Performance Zone Productivity Zone Revenue Performance Enabling Investments 2 4 17 Enlist everyone in stabilizing the current business Subordinate productivity to transformation 1 3
  • 18. Modernizing Your Model Each Game Plays Out in a Different Zone Disruptive Innovations Sustaining Innovations Incubation Zone Transformation Zone Performance Zone Productivity Zone Revenue Performance Enabling Investments 18
  • 19. For More Information 19 Incubation Zone Transformation Zone Performance Zone Productivity Zone Create options for the future Make a big change Make the top line Make the bottom line