Author Archives: Geoffrey Moore

About Geoffrey Moore

Geoffrey A. Moore is an author, speaker and business advisor to many of the leading companies in the high-tech sector, including Cisco, Cognizant, Compuware, HP, Microsoft, SAP, and Yahoo! Best known for Crossing the Chasm and Zone to Win with the latest book being The Infinite Staircase. Partner at Wildcat Venture Partners. Chairman Emeritus Chasm Group & Chasm Institute

How Incumbents Can React to Disruption

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How Incumbents Can React to Disruption

GUEST POST from Geoffrey A. Moore

Think back a couple of years and imagine …

You are Jim Farley at Ford, with Tesla banging at the door. You are Bob Iger at Disney with Netflix pounding on the gates. You are Pat Gelsinger at Intel with Nvidia invading your turf. You are virtually every CEO in retail with Amazon Prime wreaking havoc on your customer base. So, what are you supposed to do now?

The answer I give in Zone to Win is that you have to activate the Transformation Zone. This is true, but it is a bit like saying, you have to climb a mountain. It begs the question, How?

There are five key questions executives facing potential disruption must ask:

1. When?

If you go too soon, your investors will lose patience with you and desert the ship. If you go too late, your customers will realize you’re never really going to get there, so they too, reluctantly, will depart. Basically, everybody gets that a transformation takes more than one year, and no one will give you three, so by default, when the window of opportunity to catch the next wave looks like it will close within the next two years, that’s when you want to pull the ripcord.

2. What does transformation really mean?

It means you are going to break your established financial performance covenants with your investors and drastically reduce your normal investment in your established product lines in order to throw your full weight behind launching yourself into the emerging fray. The biggest mistake executives can make at this point is to play down the severity of these actions. Believe me, they are going to show, if not this quarter, then soon, and when they do, if you have not prepared the way, your entire ecosystem of investors, partners, customers, and employees are going to feel betrayed.

3. What can you say to mitigate the consequences?

Simply put, tell the truth. The category is being disrupted. If we are to serve our customers, we need to transition our business to the new technology. This is our number one priority, we have clear milestones to measure our progress, and we plan to share this information in our earnings calls. In the meantime, we continue to support our core business and to work with our customers and partners to address their current needs as well as their future roadmaps.

4. What is the immediate goal?

The immediate goal is to neutralize the threat by getting “good enough, fast enough.” It is not to leapfrog the disruptor. It is not to break any new ground. Rather, it is simply to get included in the category as a fast follower, and by so doing to secure the continuing support of the customer base and partner ecosystem. The good news here is that customers and partners do not want to switch vendors if they can avoid it. If you show you are making decent progress against your stated milestones, most will give you the benefit of the doubt. Once you have gotten your next-generation offerings to a credible state, you can assess your opportunities to differentiate long-term—but not before.

5. In what ways do we act differently?

This is laid out in detail in the chapter on the Transformation Zone in Zone to Win. The main thing is that supporting the transformation effort is the number one priority for everyone in the enterprise every day until you have reached and passed the tipping point. Anyone who is resisting or retarding the effort needs to be counseled to change or asked to leave. That said, most people will still spend most of their time doing what they were doing before. It is just that if anyone on the transformation initiative asks anyone else for help, the person asked should do everything they can to provide that help ASAP. Executive staff meetings make the transformation initiative the number one item on the agenda for the duration of the initiative, the goal being at each session to assess current progress, remove any roadblocks, and do whatever possible to further accelerate the effort.

Conclusion

The net of all of the above is transformation is a bit like major surgery. There is a known playbook, and if you follow it, there is every reason to expect a successful outcome. But woe to anyone who gets distracted along the way or who gives up in discouragement halfway through. There is no halfway house with transformations—you’re either a caterpillar or a butterfly, there’s nothing salvageable in between.

That’s what I think. What do you think?

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Journeying Through the Technology Adoption Lifecycle

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Journeying Through the Technology Adoption Lifecycle

GUEST POST from Geoffrey A. Moore

Like everything else in this Darwinian world of ours, customer journeys evolve with changes in the environment. Ever since the advent of the semiconductor, a compelling source of such changes has been disruptive digital technology. Although we are all eager to embrace its benefits, markets must first work through their adoption life cycles, during which different buying personas come to the fore at different stages, with each one on a very different kind of journey. So, if you plan to catch the next wave and sell the next big thing, you’re going to need to adjust your customer journey playbook as you go along. Here’s a recap of what is in store for you.

Customer Journeys in the Early Market

The early market buying personas are the visionary and the technology enthusiast, the former eager to leverage disruption to gain first-mover competitive advantage, the latter excited to participate in the latest and greatest thing. Both are on a journey of discovery.

Technology enthusiasts need to get as close to the product as possible, seeing demos and alpha-testing prototypes as soon as they are released. They are not looking to be sold (for one thing, they have no money)—they are looking to educate themselves in order to be a reliable advisor to their visionary colleague. The key is to garner them privileged access to the technical whizzes in your own enterprise and, once under NDA, to share with them the wondrous roadmap you have in mind.

Visionaries are on a different path. They want to get as clear an understanding as possible of what makes the disruptive technology so different, to see whether such a difference could be a game changer in their circumstances. This is an exercise in imagineering. It will involve discussing hypothetical use cases, and applying first principles, which means you need to bring the smartest people in your company to the table, people who can not only communicate the magic of what you have but who can also keep up with the visionary’s vision as well.

Once this journey is started, you need to guide it toward a project, not a product sale. It is simply too early to make any kind of product promise that you can reliably keep. Not only is the paint not yet dry on your own offer, but also the partner ecosystem is as yet non-existent, so the only way a whole product can be delivered is via a dedicated project team. To up the stakes even further, visionaries aren’t interested in any normal productivity improvements, they are looking to leapfrog the competition with something astounding, so a huge amount of custom work will be required. This is all well and good provided you have a project-centric contract that doesn’t leave you on the hook for all the extra labor involved.

Customer Journeys to Cross the Chasm

The buying personas on the other side of the chasm are neither visionaries nor technology enthusiasts. Rather, they are pragmatists, and to be really specific, they are pragmatists in pain. Unlike early market customers, they are not trying to get ahead, they are trying to get themselves out of a jam. In such a state, they could care less about your product, and they do not want to meet your engineers or engage in any pie-in-the-sky discussions of what the future may hold. All they want to do is find a way out of their pain.

This is a journey of diagnosis and prescription. They have a problem which, given conventional remedies, is not really solvable. They are making do with patchwork solutions, but the overall situation is deteriorating, and they know they need help. Sadly, their incumbent vendors are not able to provide it, so despite their normal pragmatist hesitation about committing to a vendor they don’t know and a solution that has yet to be proven, they are willing to take a chance—provided, that is, that:

  • you demonstrate that you understand their problem in sufficient depth to be credible as a solution provider, and
  • that you commit to bringing the entire solution to the table, even when it involves orchestrating with partners to do so.

To do so, your first job is to engage with the owner of the problem process in a dialog about what is going on. During these conversations, you demonstrate your credibility by anticipating the prospective customer’s issues and referencing other customers who have faced similar challenges. Once prospects have assured themselves that you appreciate the magnitude of their problem and that you have expertise to address its challenges, then (and only then) will they want to hear about your products and services.

As the vendor, therefore, you are differentiating on experience and domain expertise, ideally by bringing someone to the table who has worked in the target market segment and walked in your prospective customer’s shoes. Once you have established credibility by so doing, then you must show how you have positioned the full force of your disruptive product to address the very problem that besets your target market. Of course, you know that your product is far more capable than this, and you also know you have promised your investors global domination, not a niche market solution. But for right now, to cross the chasm, you forsake all that and become laser-focused on demolishing the problem at hand. Do that for the first customer, and they will tell others. Do that for the next, and they will tell more. By the time you have done this four or five times, your phone will start ringing. But to get to this point, you need to be customer-led, not product-led.

Customer Journeys Inside the Tornado

The tornado is that point in the technology adoption life cycle when the pragmatist community shifts from fear of going too soon to fear of missing out. As a consequence, they all rush to catch up. Even without a compelling first use case, they commit resources to the new category. Thus, for the first time in the history of the category, prospective customers have budget allocated before the salesperson calls. (In the early market, there was no budget at all—the visionary had to create it. In the chasm-crossing scenario, there is budget, but it is being spent on patchwork fixes with legacy solutions and needs to get reallocated before a deal can be closed.)

Budget is allocated to the department that will purchase and support the new offer, not the ones who will actually use it (although they will no doubt get chargebacks at some point). That means for IT offerings the target customer is the technical buyer and the CIO, the former who will make the product decision, the latter who will make the vendor decision. Ideally, the two will coincide, but when they don’t, the vendor choice usually prevails.

Now, one thing we know about budgets is that once they have been allocated they will get spent. These customers are on a buying mission journey. They produce RFPs to let them compare products and vet companies, and they don’t want any vendor to get too close to them during the process. Sales cycles are super-competitive, and product bake-offs are not uncommon. This means you need to bring your best systems engineers to the table, armed with killer demos, supported by sales teams, armed with battle cards that highlight competitor strengths and weaknesses and how to cope with the former and exploit the latter. There is no customer intimacy involved.

What is at stake, instead, is simply winning the deal. Here account mapping can make a big difference. Who is the decision maker really? Who are the influencers? Who has the inside track? You need a champion on the inside who can give you the real scoop. And at the end of the sales cycle, you can expect a major objection to your proposal, a real potential showstopper, where you will have to find some very creative way to close the deal and get it off the table. That is how market share battles are won.

Customer Journeys on Main Street

On Main Street, you are either the incumbent or a challenger. If the latter, your best bet is to follow a variation on the chasm-crossing playbook, searching out a use case where the incumbent is not well positioned and the process owner is getting frustrated—as discussed above. For incumbents, on the other hand, it is a completely different playbook.

The persona that matters most on Main Street is the end user, regardless of whether they have budget or buying authority. Increasing their productivity is what creates the ROI that justifies any additional purchases, not to mention retaining the current subscription. This calls for a journey of continuous improvement.

Such a journey rewards two value disciplines on the vendor’s part—customer intimacy and operational excellence. The first is much aided by the advent of telemetry which can track product usage by user and identify opportunities for improvement. Telemetric data can feed a customer health score which allows the support team to see where additional attention is most needed. Supplying the attention requires operational excellence, and once again technology innovation is changing the game, this time through product-led prompts, now amplified by generative AI commentary. Finally, sitting atop such infrastructure is the increasingly powerful customer success function whose role is to connect with the middle management in charge, discuss with them current health score issues and their remediation, and explore opportunities for adding users, incorporating product extensions, and automating adjacent use cases.

Summing Up

The whole point of customer journeys done right is to start with the customer, not with the sales plan. That said, where the customer is in their adoption life cycle defines the kind of journey they are most likely to be on. One size does not fit all, so it behooves the account team to place its bets as best it can and then course correct from there.

That’s what I think. What do you think?

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Metaphysics Philosophy

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Metaphysics Philosophy

GUEST POST from Geoffrey A. Moore

Philosophy is arguably the most universal of all subjects. And yet, it is one of the least pursued in the liberal arts curriculum. The reason for this, I will claim, is that the entire field was kidnapped by some misguided academics around a century ago, and since then no one has paid the ransom to free it. That’s not OK, and with that in mind, here is a series of four blogs that taken together constitute an Emancipation Proclamation.

There are four branches of philosophy, and in order of importance they are

  1. metaphysics,
  2. ethics,
  3. epistemology, and
  4. logic.

This post will address the first of these four, with subsequent posts addressing the remaining three.

Metaphysics is best understood in terms of Merriam-Webster’s definition: “the philosophical study of the ultimate causes and underlying nature of things.” In everyday language, it answers the most fundamental kinds of philosophical questions:

  • What’s happening?
  • What is going on?
  • Where and how do we fit in?
  • In other words, what kind of a hand have we been dealt?

Metaphysics, however, is not normally conceived in everyday terms. Here is what the Oxford English Dictionary (OED) has to say about it in its lead definition:

That branch of speculative inquiry which treats of the first principles of things, including such concepts as being, substance, essence, time, space, cause, identity, etc.; theoretical philosophy as the ultimate science of Being and Knowing.

The problem is that concepts like substance and essence are not only intimidatingly abstract, they have no meaning in modern cosmology. That is, they are artifacts of an earlier era when things like the atomic nature of matter and the electromagnetic nature of form were simply not understood. Today, they are just verbiage.

But wait, things get worse. Here is the OED in its third sense of the word:

[Used by some followers of positivist, linguistic, or logical philosophy] Concepts of an abstract or speculative nature which are not verifiable by logical or linguistic methods.

The Oxford Companion to the Mind sheds further light on this:

The pejorative sense of ‘obscure’ and ‘over-speculative’ is recent, especially following attempts by A.J. Ayer and others to show that metaphysics is strictly nonsense.

Now, it’s not hard to understand what Ayer and others were trying to get at, but do we really want to say that the philosophical study of the ultimate causes and underlying nature of things is strictly nonsense? Instead, let’s just say that there is a bunch of unsubstantiated nonsense that calls itself metaphysics but that isn’t really metaphysics at all. We can park that stuff with magic crystals and angels on the head of a pin and get back to what real metaphysics needs to address—what exactly is the universe, what is life, what is consciousness, and how do they all work together?

The best platform for so doing, in my view, is the work done in recent decades on complexity and emergence, and that is what organizes the first two-thirds of The Infinite Staircase. Metaphysics, it turns out, needs to be understood in terms of strata, and then within those strata, levels or stair steps. The three strata that make the most sense of things are as follows:

  1. Material reality as described by the sciences of physics, chemistry, and biology, or what I called the metaphysics of entropy. This explains all emergence up to the entrance of consciousness.
  2. Psychological and social reality, as explained by the social sciences, or what I called the metaphysics of Darwinism, which builds the transition from a world of mindless matter up to one of matter-less mind, covering the intermediating emergence of desire, consciousness, values, and culture.
  3. Symbolic reality, as explained by the humanities, or what I called the metaphysics of memes, which begins with the introduction of language that in turn enables the emergence of humanity’s two most powerful problem-solving tools, narrative and analytics, culminating in the emergence of theory, ideally a theory of everything, which is, after all, what metaphysics promised to be in the first place.

The key point here is that every step in this metaphysical journey is grounded in verifiable scholarship ranging over multiple centuries and involving every department in a liberal arts faculty—except, ironically, the philosophy department which is holed up somewhere on campus, held hostage by forces to be discussed in later blogs.

That’s what I think. What do you think?

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Strategizing Execution

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Take a Tip from the Oil Industry

Strategizing Execution

GUEST POST from Geoffrey A. Moore

When it comes to executing any market development playbook, the work should be organized around the same checklist of factors that structured our earlier blog on marketing strategy. Here is the overall framework to keep in mind:

The first four focus on constructing the ROI engine, the second four, on activating it. Or, to use the parlance of the oil industry, the first four represent the upstream work that locates and extracts the trapped value of an oil reservoir. This is the work of product management. The second four represent the downstream work of refining, distributing, and monetizing the end product. This is the work of product marketing. Both functions should report to a product line manager to ensure that end-to-end coordination is maintained throughout.

When a category is working its way through the Technology Adoption Life Cycle, the roles of the product manager and the product marketing manager change dramatically at each stage. In the early market, neither function has yet been staffed, as it is simply too early to organize for scaled deployment, but for the following three phases of the bowling alley, the tornado, and Main Street, these two functions lead the charge.

For the upstream product manager, here’s how the market development playbook evolves:

In the bowling alley, as we discussed at length in the earlier post on market power, the trapped value is due to a broken mission-critical process that needs substantial re-engineering only made possible by next-generation technology. The product manager needs to become an expert in this use case, and their role calls for them to both guide the product development roadmap and orchestrate the ecosystem to ensure the right partners show up at the right time.

In the tornado, trapped value has migrated from specific use cases to a whole host of potential applications. As a result, demand is widespread, infrastructure owners have budget for the new category and plan to spend it this year, and the goal is to win as much market share as one can. Product roadmaps are driven by feature competitions with others in category, and time to market with the next hot feature is the top concern. Partner recruitment now shifts to the sales side of the house where the goal is to win more market share by expanding distribution coverage beyond the limits of the direct sales force. The product manager supports this effort by driving a “partner-ready” track in the product development roadmap.

On Main Street, the “trapped value” is less like an oil reservoir and more like shale oil—it’s still there, but it is highly diffuse, collecting in small local pockets. Here the end user is in the best position to advocate for the improvements that would help most. Budgets are limited, however, so improvements need to be add-ons that are discretionary, ideally available through a digital-direct transaction.

Turning now to the downstream side of the market development checklist, here’s how the product marketing manager’s playbook evolves:

In the bowling alley, sales plays are consultative, organized around a diagnostic/prescriptive approach which the product marketing manager must continually update as more and more is learned about the problem process and how to fix it. The sales channel is direct, and the pricing is value-based, calibrated by the cost impact of not fixing the problem process. The offer competes with the status quo and the incumbent vendor who will push back with the best “good enough” response it can muster. The positioning has to make clear why that does not fill the bill and how the disruptive offer will take the problem off the table once and for all.

Inside the tornado, sales plays are competitive, organized around battle cards that are competitor-specific, which the product marketing manager must continually update to reflect the latest releases from the competition. Pricing is organized around company status in the market pecking order. Where there is proprietary technology involved, the gorilla sets the premium price for the category overall, chimps can set local pricing in their market segments if they are sufficiently differentiated to keep the gorilla out, and monkeys license or clone the gorilla technology and then compete on lowest price. Where there is no proprietary technology to create a barrier to entry, the same pecking order emerges, but it is much more fluid, meaning that it is much easier for a prince to depose a king than it is for a chimp to displace a gorilla. In all cases, competitions tend to get resolved via product versus product comparisons on features and benefits.

On Main Street, sales plays are transactional, ideally delivered through a digital self-service channel. Here the product marketing manager normally cannot rely on sending prospects to the corporate website—it is typically way too noisy a channel for this body of work—but instead either spin up a separate portal or work with a third-party digital distributor. Pricing and packaging matters a ton in any transactional business model, so the product marketing manager is responsible for frequent A/B testing or comparable experimentation on an ongoing basis. The competition is rarely direct—you are the incumbent vendor at this stage—but you must keep an eye out for the next-generation disruptor who sees your profit pool as a sitting duck. The more you can bolster your core offer with add-ons, the higher the switching costs for your end users, the less likely the challenger can penetrate your market.

Wrapping up

This concludes the sixth and final post in the Hierarchy of Powers series. Here are the links to the other five:

Framing Strategy

Strategizing Category Power: Portfolio Management

Strategizing Company Power: It’s a Team Sport

Strategizing Market Power: Target Market Initiatives

Strategizing Offer Power: The Importance of Overcommitting

I encourage you to print them out and staple them together as a reference guide to keep handy as you take on your next market development challenge.

That’s what I think. What do you think?

Image Credit: Unsplash, Geoffrey Moore

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The Importance of Over-committing

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Strategizing Offer Power

The Importance of Over-committing - Strategizing Offer Power

GUEST POST from Geoffrey A. Moore

Offer power is a function of competitive separation that creates a material difference in customer benefit such that your offer is chosen over its closest alternatives. Separation, in turn, is created by over-committing to a single vector of innovation, taking it to a level that the competition either cannot or will not match. Whatever vector of innovation you choose will define your core, your claim to fame, the capability that sets you apart from the rest. Every other form of innovation will be context, meaning it will still meet market standards but will not differentiate your offering.

With respect to offer power, the most common strategic mistake is to spread the R&D budget across multiple vectors of innovation, making progress on all fronts but never achieving a level of competitive separation that is truly impactful. To offset this tendency, best practice begins with over-committing to a single value discipline, along the lines described by Michael Treacy and Fred Wiersema in The Value Disciplines of Market Leaders. They call out three such disciplines: product leadership, customer intimacy, and operational excellence. Those of us in Silicon Valley might add a fourth, disruptive technology, but the key point is to be asymmetrical in the allocation of resources to take one, and only one of these disciplines, “all the way to bright.”

Value disciplines tend to align with customer sensitivity to price and performance, as illustrated by the diagram below:

Geoffrey Moore Value Disciplines

Each quadrant in this model prioritizes a different value proposition. For customers who want performance at any cost, disruptive technology is a good bet, albeit coming with risks and issues that other customers would not accept. For enterprise customers, who typically are looking for productivity gains, product leadership fills that bill. For customers who are just looking to check the box with a minimum offer, economy is their watchword, and operational excellence is the main path. And finally, for customers who need the offer but don’t want to be bothered, convenience is the value proposition that resonates most, and customer intimacy is needed to design the experience accordingly.

Whatever offer power strategy you prioritize will act as a filter on your R&D budget allocation to ensure maximum return on innovation. Here is a way to look at the landscape:

Geoffrey Moore Return on Innovation

There are three ways to get a return on R&D innovation. The first is the one we have been focused on thus far—differentiation that leads to customer preference. But there are two other sources of return, both of which have value in their own right. The first of these is neutralization. This is innovation focused on catching up to some other competitor’s differentiation in order to neutralize their competitive advantage over you. Thus, while Apple is acknowledged as a master of differentiation, Microsoft is a master of neutralization, as once-market-leading and now-defunct enterprises like WordPerfect, Lotus, Ashton-Tate, Novell, and Netscape will all testify. Neutralization allows your customer base to stay current with next-generation product advancements without having to change out vendors. The key point for vendors to keep in mind is that when neutralizing you are trying to catch up, not get ahead, and so the goal is to get to “good enough” as fast as possible and then go no further.

A third type of return on innovation comes from optimization, improving the production and delivery of your current offering without materially changing its features or benefits. This allows you to sustain market positions in mature categories, enabling you to compete on price or capture the savings for other purposes. Because this effort is associated with operational excellence, people often do not recognize it as a form of innovation, but one need only look at what Amazon has done to reengineer the entire retail experience end to end to realize how foolish an idea this is.

One final point: not all innovations create a return. Failed attempts are an inevitable element in any portfolio of innovation attempts, the key being to follow the mantra, win or learn! That said, by far the more common reason that innovation investments fail to create a return is that they fall short of delivering a meaningful impact. This is true of:

  • Investments in differentiation that do not go far enough to create meaningful competitive separation. Typically, the team was unwilling to be sufficiently asymmetrical in its resource allocation. As a result, while its products are indeed different, they are not so in a sufficiently compelling way to impact customer preference. This is how Oldsmobile and Mercury lost their franchises in the US auto market.
  • Investments in neutralization that do not get to market fast enough to get your offer into the consideration set. Typically, the team making an extra effort to outperform the competitor at their own game, a low-percentage bet at best, but in so doing has left the playing field uncontested in the meantime. By the time you get back in the game, it is too late. This is how Nokia lost its market leadership position in smartphones to Apple.
  • Investments in optimization that do not go deep enough to make a material difference. Typically, teams avoid the hard work of process re-engineering and settle for an “across-the-board cut,” which saves money but actually weakens rather than improves performance.

That’s what I think. What do you think?

Image Credit: Unsplash, Geoffrey Moore

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Strategizing Market Power

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Target Market Initiatives

Strategizing Market Power - Target Market Initiatives

GUEST POST from Geoffrey A. Moore

Market power derives from addressing an urgent mission-critical use case in a particular vertical industry requiring a specialized solution that the incumbent vendors either cannot or will not provide. Power aggregates around a single vendor who is the first to provide an end-to-end solution (what Ted Levitt taught us to call the whole product), typically with the support of partners whom the vendor has recruited to the task. Once success has been verified, prospective customers rally around the new solution, making it the de facto standard for that market segment, effectively excluding all other competition. This dramatically lowers the cost of acquisition and maximizes the lifetime value of the addressable market.

The mechanism for obtaining market power is called a target market initiative. It begins with the selection of a target market segment. Here the criteria for selection are three:

  1. Big enough to matter. The goal is to win well over 50% of the total segment within a three-year horizon, with the resulting revenue providing a material portion of the organization’s total revenue, and an even more meaningful portion of its profit contribution.
  2. Small enough to lead. Again, if your organization is going to win over 50% of the segment within a three-year period, the segment must be small enough to make this feasible given your current size and funding.
  3. Good fit with your crown jewels. To address an intractable problem requires breakthrough capability that others do not have, or what we like to call your “crown jewels.” These accelerate your path to success and provide a barrier to entry to protect your market segment leadership position once it is attained.

The playbook for running a target market initiative is described at length in Crossing the Chasm. It is organized around the following set of factors:

  • Target Customer. The bullseye target is the business process owner for the broken mission-critical process. They will provide the subject matter expertise. A secondary target is their executive sponsor. They will create budget to fund the effort.
  • Compelling Reason to Buy. The use case has to be both mission-critical and urgent, in order to overcome a pragmatist’s normal inertial resistance to embracing anything categorically new. Here pain, not gain, is the source of the trapped value that moves the customer to lean in and collaborate, and all your sales and marketing should be focused on the relevant pain points and their remedies.
  • Whole Product. This is the bill of materials for the complete solution, everything the customer needs to take the problem off the table, with nothing extra added. It is designed backward from the customer’s problem, not forward from your supply chain or your financial goals and objectives.
  • Partners and Allies. Whatever is on the whole product’s bill of materials that is not provided by your company must come from a partner. One of the functions of a target market initiative is to orchestrate the coming together of such partners to ensure timely delivery of the whole product. The focus is on completing the solution, not adding sales coverage.
  • Distribution. Target market initiatives require a direct sales channel to execute a consultative sales process, organized around a diagnostic/prescriptive approach, supported by marketing that speaks directly to the business process owner and their executive sponsor. This must not be outsourced, as it is through these direct interactions that you establish your company as the market segment leader.
  • Pricing. Pricing is value-based, calibrated by the consequences of the current as-yet-to-be-fixed broken mission-critical business process. Discounting is never appropriate as the customer is far more concerned about addressing their urgent needs than saving on the purchase price.
  • Competition. There are two classes of competitors in play. The first is the incumbent vendor who is not solving the problem satisfactorily at present but who could throw people at it in an attempt to get to “good enough.” The other is a vendor with breakthrough capabilities similar to yours who has not made the commitment to deliver the whole product but who has a partner that might try to do so.
  • Positioning. You are the breakthrough vendor who has made the whole product commitment, meaning you have demonstrated a deep understanding of the customer’s industry and its problem process, and you have developed a repeatable solution that will get better as each new instantiation leads to more useful features and a more engaged ecosystem of partners.
  • Next Target Customer. For start-ups, this will normally be an adjacent segment, either a new use case from the same customer base or the same use case from a different segment. For established enterprises whose size dictates that target market segments can never be material to total revenues, winning a target market segment creates a hook for M&A as well as makes you a lot more knowledgeable about which companies are worth acquiring.

Target market initiatives are the most reliable play in the B2B innovation playbook, as witnessed by the staying power of Crossing the Chasm, currently in its fourth decade of being in print, pushing two million copies in total sales worldwide. In closing, then, let me leave you with eight great reasons for building one into your next annual plan:

  1. Gain market adoption for a disruptive technology. This is the classic chasm-crossing play.
  2. Penetrate a new geography. Establish your reputation as a worthy vendor.
  3. Get out from behind the market leader. Gorillas can never defend themselves against highly focused chimps. All they can do is try to isolate you from making any further progress.
  4. Anchor a turnaround. When your enterprise has been on a losing streak, it is critical to “win one for the Gipper.” Target market initiatives are your best bet.
  5. Solve for the “stuck in neutral” problem. When the macro economy is in the doldrums, and customers are slow to buy anything, a truly problematic use case overcomes their hesitancy.
  6. Capitalize on a great niche opportunity. There are use cases where the size of the market is small, but the trapped value is enormous, and you can build a major franchise without ever leaving the segment, as has happened in CAD, Wall Street, health care, and aerospace.
  7. Exploit the “granularity of growth.” In mature markets where average growth rates are in the low single digits, there are always pockets of double-digit growth around problematic use cases. You just need to target them directly.
  8. Capitalize on a market in transition. As markets are working through long-lead transitions, short-term progress can be made locally rather than globally. The evolution of the hybrid workplace would be a current example.

That’s what I think. What do you think?

Image Credit: Pexels, Geoffrey Moore

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Company Power Strategy is a Team Sport

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Company Power Strategy is a Team Sport

GUEST POST from Geoffrey A. Moore

Company power is primarily a function of the amount of ecosystem support for your offerings, which in turn is due largely to the market-making opportunities you create for partners to resell or flesh out your whole product. Market share leaders enjoy the most extensive ecosystem support because their installed base creates the majority of partner opportunities.

Let me note, however, that in the context of our Hierarchy of Powers framework, market share is a misnomer. The correct phrase would be category share. That’s because in our taxonomy markets are defined by groups of customers whereas categories are defined by groups of competitors. When financial analysts talk about market share, they are referring to category share, and it is your share of the category that sets the upper bounds of the opportunities you can create for ecosystem partners, the percentage of the total category you can make available to the ecosystem.

After category share, the next most important determinants of company power are barriers to entry and barriers to exit, or what we often just call “stickiness.” Because sticky offerings create ongoing opportunities for up-sell and cross-sell, as well as resist being displaced by lower-cost competitors, they enable vendors to sustain above-commodity pricing margins for the life of the category.

Gorilla Royalty Game

The strongest form of stickiness comes from proprietary technology that is category-enabling, the kind that Oracle has had in databases, Qualcomm in smartphones, Microsoft in operating systems, and Intel in microprocessors. When a category consolidates around such companies, it creates a hierarchy of company power we call a Gorilla Game, entailing three roles — gorilla, chimp, and monkey. In the absence of proprietary technology, categories form an analogous hierarchy with much lower switching costs, something we call a royalty game, organized around a parallel set of roles — king, prince, and serf. Cellular telephony, Wintel PCs, WiFi networking, and DRAM memory chips all exemplify categories with this latter type of structure.

The difference in stickiness between these two hierarchies creates dramatic differences in market capitalization. In the gorilla game, the gorilla dominates the category for the entirety of its life cycle, and thus its market cap gets a very high premium indeed. Chimps also have proprietary technology, hence stickiness, but are not the market standard, hence more limited scope. Their best play is to develop an independent ecosystem organized around high-value use cases specific to particular vertical markets, the way the Unix workstation vendors competed successfully against PCs with CAD-like applications for cinema, semiconductor, oil exploration, fluid dynamics, and high-frequency trading. And finally, there is a very large market open to being served by monkeys who are able to clone the gorilla technology and deliver a plug-compatible alternative at a much lower price.

When it comes to royalty games, the absence of proprietary technology with high switching costs leads to a much more fluid hierarchy of power. The category leader is still the king, but it can be deposed by some up-and-coming prince, the way that Compaq displaced the IBM PC, the way that Micron can challenge Samsung in DRAMs, the way that Aruba can challenge Cisco in Wi-Fi. Here the low-cost providers, whom we termed the serfs, have an easier time gaining entry into a large and growing market, but a harder time sustaining even the most modest of margins, as there is always some hungrier low-cost competitor looking over their shoulder.

Overall, the key takeaway is that, while the gorillas and gorilla games get the bulk of the attention, especially from the investment community, all six of these strategies are perfectly viable provided you play within the parameters of your role. The key is not to hallucinate about what role that is.

That’s what I think. What do you think?

Image Credit: Pexels, Geoffrey Moore

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Portfolio Management and Category Power

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Portfolio Management and Category Power

GUEST POST from Geoffrey A. Moore

Portfolio management is the most consequential and the most challenging element in strategic planning. There is typically a ton of data, but none of it can really speak to the host of underlying risks that underpin long-range investments in net new lines of business, ones that pay off primarily in the out years. The best one can do is leverage experience, frameworks, and pattern recognition to navigate what are inevitably uncharted waters. With that in mind, here are some things to keep in view.

  1. Category Maturity Life Cycle: Tornadoes versus Main Street. Who doesn’t want a growth portfolio? To get one, however, means your enterprise must have meaningful plays in categories that are undergoing secular growth. Secular growth happens when net new budget is being created for a new purchase category across a broad spectrum of customers, a phase in technology adoption we have termed the tornado. Once the tornado has passed, the category will have an established place in these customers’ budgets going forward, a stage in the life cycle we call Main Street, one that is characterized by cyclical growth. Cyclical growth rewards inertial momentum, the goal being to leverage incumbency to grow wallet share more than market share. Secular growth rewards disruption, the goal being to displace an established profit pool by leveraging an emerging one. These dynamics transcend the efforts of most companies to influence (gorilla leaders being the exception), so assessing category power is first and foremost getting clarity on the hand you have been dealt. That will shape your ambitions for next year’s performance and set a baseline for future investment.

  2. Valuation: Growth investors versus value investors. Both forms of growth, secular and cyclical, are valued by investors for their respective risk-adjusted returns, but in different ways for different reasons. Growth investors are looking for a big pop and are willing for you to take considerable risk to get it. Value investors by contrast seek predictably consistent performance—an earnings-oriented approach that outperforms bonds with a minimum of additional risk. Both groups discount the value of the other group’s approach which exposes the market cap of established enterprises to a “conglomerate discount,” a painful penalty given that their stock is the major currency that will fund any M&A. Managing for shareholder value, in other words, gets hung up on the question, which shareholders? The reality is that most publicly held companies have a mix across the board, so the salient issue to address is how much of our operating budget should we commit to the current year versus the out years? Having a principled discussion on this topic leading to a definitive commitment is essential to creating a coherent strategy.

  3. Capital market status: PE-backed versus publicly held. Strategic planning in privately held enterprises is typically more straightforward because the board of directors representing the investing firms share a common approach to risk-adjusted returns. This is why when publicly held companies like Dell reach a crossroads that requires a patch of difficult sledding, they choose to take themselves private in order to accelerate their course corrections. The price to pay for this option is committing to operating principles, performance milestones, and a management discipline that meets the PE investors’ approval.

  4. Leveraging M&A: Incubate before you commit. Pundits like to claim that most M&A transactions fail to deliver on their promise (although recent research puts the odds at closer to fifty-fifty). Some of the failures, however, are self-inflicted wounds that can be avoided by taking a multi-step approach. If your enterprise has a venture investment capability, taking positions in disruptive start-ups with observer rights is a good way to test the waters. In parallel, the goal is to incubate comparable initiatives internally and get them into the market as trial balloons. The difference between this and the early-stage venture model is that you cannot wait for these organic efforts to scale—it will simply take too long. So, you are not trying to win the game with your new offers, just learn it. Sooner or later, you will turn to M&A to acquire something of meaningful mass, the difference being, because you have spent the intervening time in the market competing, you will be a much more knowledgeable acquirer than you otherwise would be.

  5. Synergy management: Year One is the one that matters most. Value-oriented M&A is intended to consolidate mature categories with cyclical growth. It is based on an inside-out approach to cost reduction focusing on eliminating duplicated functions, typically in the back office and the supply chain. Growth-oriented M&A, by contrast, takes an outside-in approach focusing on accelerating bookings and revenues through a series of go-to-market and customer success initiatives. When a smaller high-growth enterprise gets acquired by a larger, slower-growing one, the opportunity is to galvanize the latter’s existing customer base and ecosystem relationships, as well as its global sales and service footprint, to capture market share under highly favorable selling conditions. The trick is to do this quickly, while the iron is still hot, and that requires special incentives and strong management support to build trust between the old and new guards and to overcome the initial inertial resistance that accompanies any acquisition. In sum, what looks good on paper could very well be good in actual fact, but only after you execute Captain Picard’s famous dictum: Make it so!

  6. M&A integration: Year Two is the one that matters most. If the first year is all about getting the go-to-market right as fast as possible, the second is about creating lasting relationships that will enable the two enterprises to operate as one. There are four areas of interest here—the product team, the sales team, the management team, and the culture overall—and each one calls for a slightly different approach. The single most important outcome is to keep the product talent in place—they have the keys to the new kingdom. The sales team can and normally should continue to function as an overlay during the second year, but in parallel a transition to an integrated organization must begin so that in Year Three the overlay is eliminated. The management team is a wild card. Despite all the best intentions on both sides of the table, including vesting incentives of various kinds, entrepreneurial CEOs rarely stay, nor should they. The skillset for disrupting does not translate well into the skillset for scaling and optimizing. This suggests that from the outset a leadership transition should be on the table, typically enlisting an up-and-coming executive from the acquiring enterprise to personally throw themselves into the gap and pull the two organizations together leveraging every talent and tool they have. Finally, large enterprises necessarily entail an enormous amount of process management, something that goes against the grain of entrepreneurial culture, so one needs to tread carefully here, with the understanding that long term there can only be one enterprise, and by virtue of its scale, it will be process-driven for much of its day-to-day work. To promise the acquired company anything else will only create disillusion and disintegration down the line.

  7. Decision Time: To play or not to play. There is no formula for making transformational decisions, but there are some guidelines to keep in mind. The first is few, and far between. Transformations are disruptive to the core business that is funding your overall operation, and it takes time for everything to stabilize around a new portfolio. A second principle is existential threat. If the emerging category obsoletes a pillar of your core business, the way digital photography obsoleted film, the way that streaming is obsoleting conventional TV, then you must take action. Absent such a forcing function, a third principle to consider is value to the existing customer base, with the corollary of opportunity for our existing ecosystem. In other words, does the world want you to do this? Transformation takes a village, and it matters a great deal how much your constituencies will lean in to help you through it. Finally, when your competitors hear about this, will they smile and laugh, or will they say Oh sh*t! If the latter, it just puts icing on the cake.

  8. Plan B: Leverage the updraft. The stars have to align to make any transformational portfolio play work, and sometimes they simply won’t. Plan B is to incorporate a portion of the tornado category into your existing portfolio as a supplement. Take Gen AI, for example. You don’t have to be in the category like Open AI or Anthropic to participate in the new spending. Virtually any enterprise application can benefit from a Gen AI bolt-on to improve the user experience or simplify the administrative one. Prior experiences with adding mobile applications and digital commerce to legacy systems have delivered similarly positive returns. You don’t have to be in the lead, but customers do want to see you are still in the game, and assuming you show up with a working product, they are more than happy to consume it.

That’s what I think. What do you think?

Image Credit: Pexels, Geoffrey Moore

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Re-Framing Your Strategy for the Chaos of 2025

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Re-Framing Your Strategy for the Chaos of 2025

GUEST POST from Geoffrey A. Moore

Spring is in the air, which brings to mind the season’s favorite sport — no, not baseball, strategic planning! Let’s face it, 2025 has been a tough year for most of us (and it’s still early days), with few annual plans surviving first contact with an economy that was not so much sluggish as simply hesitant. With the exception of generative AI’s growing impact, most technology sectors have been more or less trudging along, and that begs the question, what do we think we can do with the rest of 2025? Time to bring out the strategy frameworks, polish up those crystal balls that have been a bit murky of late, and chart our course forward.

This post will kick off a series of blogs about framing strategy, all organized around a meta-model we call the Hierarchy of Powers:

The inspiration for this model came from looking at how investors prioritize their portfolios. The first thing they do is allocate by sector, based primarily on category power, referring both to the growth rate of the category as well as its potential size. Rising tides float all boats, and one of the toughest challenges in business is how to manage a premier franchise when category growth is negative. In conjunction with assessing our current portfolio’s category power, this is also a time to look at adjacent categories, whether as threats or as opportunities, to see if there are any transformative acquisitions that deserve our immediate attention.

Returning to our current set of assets, within each category the next question to answer is, what is our company power within that category? This is largely a factor of market share. The more share a company has of a given category, the more likely the ecosystem of partners that supports the category will focus first on that company’s installed base, adding more value to its offers, as well as to recommend that company’s products first, again because of the added leverage from partner engagement. Marketplaces, in other words, self-organize around category leaders, accelerating the sales and offloading the support costs of the market share leaders.

But what do you do when you don’t have company power? That’s when you turn your attention to market power. Marketplaces destabilize around problematic use cases that the incumbent vendors do not handle well. This creates openings for new entrants, provided they can authentically address the customer’s problems. The key is to focus product management on the whole product (not just what your enterprise supplies, but rather, everything the customer needs to be successful) and to focus your go-to-market engine on the target market segment. This is the playbook that has kept Crossing the Chasm on entrepreneur’s book lists some thirty years in, but it is a different matter to execute it in a large enterprise where sales and marketing are organized for global coverage, not rifle-shot initiatives. Nonetheless, when properly executed, it is the most reliable play in all of high-tech market development.

If market power is key to taking market share, offer power is key to maintaining it, both in high-growth categories as well as mature ones. Offer power is a function of three disciplines—differentiation to create customer preference, neutralization to catch up to and reduce a competitor’s differentiation, and optimization to eliminate non-value-adding costs. Anything that does not contribute materially to one of these three outcomes is waste.

Finally, execution power is the ability to take advantage of one’s inertial momentum rather than having it take advantage of you. Here the discipline of zone management has proved particularly valuable to enterprises who are seeking to balance investment in their existing lines of business, typically in mature categories, with forays into new categories that promise higher growth.

In upcoming blog posts I am going to dive deeper into each of the five powers outlined above to share specific frameworks that clarify what decisions need to be made during the strategic planning process and what principles can best guide them. In the meantime, there are still three more quarters in 2025 to make, and we all must do our best to make the most of it.

That’s what I think. What do you think?

Image Credit: Pexels, Geoffrey Moore

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Contemporary Science versus Natural Language

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Contemporary Science versus Natural Language

GUEST POST from Geoffrey A. Moore

Item 1. The fastest human-created spacecraft goes 165,000 mph. Pretty amazing. But for it to travel one light year would take roughly 3000 years—basically, the length of recorded human history. The closest star system that hosts an earth-like planet (Alpha Centauri) is 4.4 light years away. Thus, it would take today’s fastest vehicle 14,000 years to make a one-way trip. On our earth, 14,000 years ago humanity’s most sophisticated technology was a stone axe. Thus, while we love to talk about space travel outside the solar system, as well as aliens in UFOs coming to Earth, neither is remotely possible, not now, not ever.

Item 2. There are 30 trillion cells in the average human body. There are 100 trillion atoms in a typical human cell. That means there are three thousand trillion trillion atoms, give or take, in you or me. Atoms are so small that it is not clear any words we have would apply to how they actually operate. Particle and wave are two of the ones we end up using the most. Neither of them, however, can coherently explain something as simple as the double-slit experiment.

Item 3. The metabolic reactions that support all life are mind-bogglingly fast. Take mitochondria for example. They are the organelles that produce the bulk of our ATP, the energy molecule that drives virtually all life’s chemical reactions. Of the 30 trillion cells in your body, on average each one uses around 10 million molecules of ATP per second and can recycle all its ATP in less than a minute. There is simply no way to imagine something happening a million times per second simultaneously in thirty million different places inside your own body.

Item 4. Craig Venter has been quoted as saying, “If you don’t like bacteria, you’re on the wrong planet. This is the planet of the bacteria.” In one-fifth of a teaspoon of seawater, there are a million bacteria (and perhaps 10 million viruses). The human microbiome, which has staked out territory all over our body, in our gut, mouth, skin, and elsewhere, harbors upwards of three thousand kinds of bacteria, comprising some 3 million distinct genes, which they swap with each other wherever they congregate. How in the world are we supposed to keep track of that?

Okay, okay. So what’s your point?

The point is that contemporary science engages with reality across a myriad of orders of magnitude, from the extremely small to the extremely large, somewhere between sixty and one hundred all told. Math can manage this brilliantly. Natural languages cannot. All of which means: philosophers beware!

Philosophers love analogies, and well they should. They make the abstract concrete. They enable us to transport a strategy from a domain where it has been proven effective and test its applicability in a completely different one. Such acts of imagination are the foundation of discovery, the springboard to disruptive innovation. But to work properly they have to be credible. That means they must stand up to the kind of pressure testing that determines the limits to which they can be applied, the boundaries beyond which they must not stretch. This is where the orders of magnitude principle comes in.

It is not credible that there could be a cause that is a million million times smaller than its effect. Yes, it is theoretically conceivable that via a cascading set of emergent relationships, one could build a chain from such an A to such a B, but the amount of coordination that would be required to lever something up a million million times is just ridiculously improbable. So, when philosophers refer to the uncertainty principles embedded in quantum mechanics, and then infer or imply that such uncertainty permeates human affairs, or when they trace consciousness down to quantum fluctuations in messenger RNA, when, in short, they are correlating things that are more than a trillion, trillion times different in size and scope, then they are misusing both the mathematics of science and the resources of natural language. We simply have to stay closer to home.

That’s what I think. What do you think?

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