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

Career Development at Its Best

Leave a reply

Career Development at Its Best

GUEST POST from Geoffrey A. Moore

A colleague recently forwarded me an article about upskilling one’s team. I am on board with the first part—innovating from within—but I am not comfortable with the concept of “upskilling.” Here’s why.

Upskilling implies that the challenges you face lend themselves to known skilled responses. Combined with the idea of training, it also implies that you have that skills knowledge already in-house and simply need to transfer it to a new cohort. I can see both of these ideas being applicable to technical work, but I don’t think they reflect the realities of knowledge work. There, instead, I think we need to substitute learning for training and experience for upskilling.

Whereas training puts the responsibility for a successful outcome on the trainer, learning puts it on the learner. In the world of knowledge work, that’s where it has to sit. We need to develop ourselves—no one else can do it for us. But we need experience to do so, and this is where managers can have a big impact. It is not the training we give our teams but rather the assignments we entrust to them that let them build new muscles.

Assigning an inexperienced person to a new challenge is always a risk—for them, for their manager, and for the customer of the work to be done. Unfortunately, without risk, there is no learning. There is no risk-free way to learn. So the manager’s goal is to create opportunity while mitigating risk.

One of the best means for so doing is assigning people the role of the Single Accountable Leader (SAL). The need for a SAL arises in any cross-functional initiative where hierarchy of authority is replaced by team collaboration. Just as a football team needs a quarterback to run a play that involves 11 people collaborating toward one outcome, so does a cross-functional initiative need a single accountable leader to be the focus of decision-making as the team adapts to unfolding events. This person need not be an expert. They need to be vigilant. They need to stay on top of things. They need to inquire and inspect, to detect when the effort is going off course, to focus the team on redirecting it, to get counsel from their mentors, and to escalate issues that are beyond their ability to address. Most of all, they need to care.

When people care, they learn. They go the extra mile. They bring out the best in others. And in so doing, they build the new muscle that will qualify them for a larger role in the enterprise. This to me is career development at its best. The SAL assignment is the most precious gift that managers and mentors can bestow upon their charges. I hope you can take advantage of it.

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

Image Credit: Pexels

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Exploring Performance Management

Leave a reply

Exploring Performance Management

GUEST POST from Geoffrey A. Moore

Performance management is a tool for managing Performance Zone commitments. These are the outcomes and deliverables that your organization, or for that matter you yourself, are being funded to deliver. In the Vision, Value, Methods, Obstacles, and Measures (V2MOM) framework, they will be represented by one or more of your Methods and will be tied directly to a corresponding set of Measures.

The primary goal of performance management is to ensure success in meeting such commitments. This includes early detection of things going off track—hence the need for frequent check-ins. It includes coaching and mentoring to help team members succeed—something we all need at one time or another. It asks us all to balance empathy for times when people don’t succeed with accountability for the need to succeed. People need help when they are down, but it is not fair to continue to accept funding for outcomes that do not get delivered.

When people under-deliver against their commitments, nobody wins. Most importantly, and this is something a lot of people miss, the person who is under-delivering is not winning. When coaching and mentoring are not getting them to success, the likelihood is that they are in the wrong role. Keeping them in that role, which we sometimes think of as protecting them, just prolongs the agony. A far better response is to step back and assess what would be the right role for this person, whether it be another one on the same team, or one on a different team, or one in another organization, or one in another company. The point is, rather than obsessing about what they are doing badly, we need to focus instead on what they could be really good at and get them into that role as swiftly as possible.

Let me be even more clear. It is obvious that when under-performing folks are kept in a role, everyone else on the team has to work harder. What is not so obvious is that when under-performing folks move on, even if their roles are not back-filled, the team discovers it has less work to do! The reason is that under-performing people absorb everyone else’s time. After all, they are trying to help, they just aren’t succeeding. And since helping teammates is baked into collaborative cultures, we give them extra time even though it is not productive to do so.

Again, nobody is winning here. We need an intervention. In this context, policies that call for managing out the bottom five percent are simply a heuristic that says, in any organization at any time, there are bound to be some number of round pegs in square holes, and leaving them in place doesn’t help anyone.

So, why then do we still bristle at the notion of performance management? There’s a ton of psychology behind this question, more than I am competent to address, but the net effect is that performance management puts enormous pressure on a set of social skills many of us lack. That’s not going to change anytime soon, so we should not be surprised at our reluctance to engage. But it is not OK to dodge our responsibilities either. Our best bet, in my view, is to bake into our protocol a discussion of positive next steps that includes concrete recommendations, and cope with our emotional challenges as best we can.

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

Image Credit: Unsplash

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Time is Not Fundamental

1 Reply

Time is Not Fundamental

GUEST POST from Geoffrey A. Moore

For all my life I have been taught that time is the fourth dimension in a space-time continuum. I mean, for goodness sake, Einstein said this was so, and all of physics has followed his lead. Nonetheless, I want to argue that, while the universe may indeed have four dimensions, time is not one of them, nor is it a fundamental element of reality.

Before you think I have really jumped off the deep end, let me just say that my claim is that motion is a fundamental element of reality, and it is the one that time is substituting for. This is based simply on observation. That is, we can observe and measure mass. We can observe and measure space. We can observe and measure energy. We can observe and measure motion. Time, on the other hand, is simply a tool we have developed to measure motion. That is, motion is fundamental, and time is derived.

Consider where our concept of time came from. It started with three distinct units—the day, the month, and the year. Each is based on a cyclical motion—the earth turning around its axis, the moon encircling the earth, the earth and moon encircling the sun. All three of these cyclical motions have the property of returning to their starting point. They repeat, over and over and over. That’s how they came to our attention in the first place.

If we call this phenomenon cyclical time, we can contrast it with linear time. The latter is time we experience as passing, the one to which we apply the terms past, present, and future. But in fact, what is passing is not time but motion, motion we are calibrating by time. That is, we use the cyclical units of time to measure the linear distance between any given motion and a reference location.

As I discuss in The Infinite Staircase, by virtue of the Big Bang, the Second Law of Thermodynamics, and the ongoing rush to greater and greater entropy, the universe is inherently in motion. Some of that motion gets redirected to do work, and some of that work has resulted life emerging on our planet. Motion is intrinsic to our experience of life, much more so than time. As babies we have no sense of time, but we immediately experience mass, space, energy, and motion.

Because mass, space, energy, and motion are core to our experience, we have developed tools to help us engage with them strategically. We can weigh mass and reshape it in myriad ways to serve our ends. We can measure space using anything as a standard length and create structures of whatever size and shape we need. We can measure energy in terms of temperature and pressure and manipulate it to move all kinds of masses through all kinds of spaces. And we can measure motion through space by using standard units of time.

The equation for so doing is typically written as v = d/t. This equation makes us believe that velocity is a concept derived from the primitives of distance and time. But a more accurate way of looking at reality is to say t = d/v. That is, we can observe distance and motion, from which we derive time. If you have a wristwatch with a second hand, this is easily confirmed. A minute consists of a wand traveling through a fixed angular distance, 360°, at a constant velocity set by convention, in this case the International System of Units, these days atomically calibrated by specified number of oscillations of cesium. Time is derived by dividing a given distance by a given velocity.

OK, so what? Here the paths of philosophy and physics diverge, with me being able to pursue the former but not the latter. Before parting, however, I would like to ask the physicists in the room, should there be any, a question: If one accepted the premise that motion was the fourth dimension, not time, such that we described the universe as a continuum of spacemotion instead of spacetime, would that make any difference? Specifically, with respect to Einstein’s theories of special and general relativity, are we just substituting terms here, or are there material consequences? I would love to learn what you think.

At my end, I am interested in the philosophical implications of this question, specifically in relation to phenomenology, the way we experience time. To begin, I want to take issue with the following definition of time served up by Google:

a nonspatial continuum that is measured in terms of events which succeed one another from past through present to future.

From my perspective, this is just wrong. It calls for using events to measure time. The correct approach would focus on using time to measure motion, describing the situation as follows:

an intra-spatial continuum that can be measured in terms of time as one event succeeds another from a position of higher energy to one of lower energy.

The motive for this redefinition is to underscore that the universe is inherently in motion, following the Second Law of thermodynamics, perpetually seeking to cool itself down by spreading itself out. We here on Earth are born into the midst of that action, boats set afloat upon a river, moving with the current on the way to a sea of ultimate cool. We can go with the flow, we can paddle upstream, we can even divert the river of entropy to siphon off energy to do work. The key point to register is that motion abides, inexorably following the arrow of entropy, moving from hot to cold until heat death is achieved.

If motion is a primary dimension of the universe, there can be no standing still. Phenomenologically, this is quite different from the traditional time-based perspective. In a universe of space and time, events have to be initiated, and one can readily imagine a time with no events, a time when nothing happens, maybe something along the lines of Beckett’s Waiting for Godot. In a universe of space and motion, however, that is impossible. There are always events, and we are always in the midst of doing. A couch potato is as immersed in events as a race car driver. Or, to paraphrase Milton, they also move who only stand and wait.

A second consequence of the spacemotion continuum is that there is no such thing as eternity and no such thing as infinity. Nothing can exist outside the realm of change, and the universe is limited to whatever amount of energy was released at the Big Bang. Now, to be fair, from a phenomenological perspective, the dimensions of the universe are so gigantic that, experientially, they might as well be infinite and eternal. But from a philosophical perspective, the categories of eternity and infinity are not ontologically valid. They are asymptotes not entities.

Needless to say, all this flies in the face of virtually every religion that has ever taken root in human history. As someone deeply committed to traditional ethics, I am grateful to all religions for supporting ethical action and an ethical mindset. If there were no other way to secure ethics, then I would opt for religion for sure. But we know a lot more about the universe today than we did several thousand years ago, and so there is at least an opportunity to forge a modern narrative, one that can find in secular metaphysics a foundation for traditional values. That’s what The Infinite Staircase is seeking to do.

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

Image Credit: Pixabay

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Fighting for Innovation in the Trenches

Leave a reply

Fighting for Innovation in the Trenches

GUEST POST from Geoffrey A. Moore

The first principle of managing innovation is that there are three distinct returns on innovation one can invest to achieve.

They are:

  1. “Unmatchable” differentiation, which confers enormous bargaining power as customers who want what you have “must” select you and “must” pay a premium for your offer. We call this DIFF for short.
  2. “Speedy” neutralization, which catches you up to some new market norm set by a competitor, thereby enabling you to stay in the game rather than be eliminated for lacking this feature. This is NEUT for short.
  3. “Rigorous” optimization, which extracts high-value talent and other scarce resources from non-differentiating work in order to free up investment in highly differentiating work or high-speed neutralization efforts. This is OPT for short.

The second principle is that these three outcomes are mutually exclusive, meaning you do not want to combine any two of them into the same work stream. Most innovation programs bind DIFF objectives with NEUT objectives, tying both to the same release cadence. This either slows down NEUT or dumbs down DIFF, both of which outcomes are painfully counterproductive.

The third principle is that most innovation investment is wasted (which is actually good news, because it means you can get a much bigger bang for your innovation buck once you learn how to avoid the waste). The three great sources of waste are:

  1. DIFF initiatives that do not result in “unmatchable” offers that create unequivocal customer preference. You end up being different but not different enough to gain real bargaining power.
  2. NEUT initiatives that take too long or go too far (or, more typically, both). Here the team has become obsessed with its competitor and is doing extra work that the customer will not value, meanwhile delaying the “good enough” state that the customer would value.
  3. OPT initiatives that do not address “sacred cow” resources. You end up moving around a lot of junior resources, meanwhile leaving the senior ones trapped in context instead of being deployed against core.

A corollary that can help teams avoid waste is to pay attention to their reference points.

  • If your goal is DIFF, then your reference point should be a prospective customer’s use case, one where purchase preference will be determined by you achieving “unmatchable” performance in your key area of innovation.
  • If your goal is NEUT, then your reference point is a competitor, then your innovation focus should be to get “good enough” fast enough.
  • A behavior you must avoid is to use a competitor as a reference point for DIFF. The all too likely outcome here is that you will create a difference that the customer either will not notice, will not acknowledge, or will not value. Meanwhile, the competitor will debate the fact that you even achieved it or that it is relevant if you did.

Finally, in light of these principles, the role of the leader is to deconstruct the overall workload of the team to tease out the DIFF from the NEUT from the OPT, and to charter specific work-streams accordingly. This rarely results in a perfectly pure outcome, but the more pure it is, the more productive your team’s efforts will be.

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

Image Credit: Dall-E via Bing

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

What Have We Learned About Digital Transformation?

Leave a reply

What Have We Learned About Digital Transformation?

GUEST POST from Geoffrey A. Moore

We are well into our first decade of digital transformation, with both the successes and the scars to show for it, and we can see there is a long way to go. Realistically, there is probably never a finish line, so I think it is time for us to pause and take stock of what we have learned, and how best we can proceed from here. Here are three lessons to take to heart.

Lesson 1: There are three distinct levels of transformation, and operating model transformation is the one that deserves the most attention.

Geoffrey Moore Three Models

The least disruptive transformation is to the infrastructure model. This should be managed within the Productivity Zone, where to be fair, the disruption will be considerable, but it should not require much in the way of behavior change from the rest of the enterprise. Moving from data centers to cloud computing is a good example, as are enabling mobile applications and remote work centers. The goal here is to make employees more efficient while lowering total cost of IT ownership. These transformations are well underway, and there is little confusion about what next steps to take.

By contrast, the most disruptive transformation is to the business model. Here a company may be monetizing information derived from its operating model, as the SABRE system did for American Airlines, or overlaying a digital service on top of its core offering, as the automotive makers are seeking to do with in-car entertainment. The challenge here is that the economics of the new model have little in common with the core model, which creates repercussions both with internal systems and external ecosystem relationships. Few of these transformations to date can be said to be truly successful, and my view is they are more the exception than the rule.

The place where digital transformation is having its biggest impact is on the operating model. Virtually every sector of the economy is re-engineering its customer-facing processes to take advantage of ubiquitous mobile devices interacting with applications hosted in the cloud. These are making material changes to everyday interactions with customers and partners in the Performance Zone, where the priority is to improve effectiveness first, efficiency second. The challenge is to secure rapid, consistent, widespread adoption of the new systems from every employee who touches them. More than any other factor, this is the one that separates the winners from the losers in the digital transformation game.

Lesson 2: Re-engineer operating models from the outside in, not the inside out.

A major challenge that digital transformation at the operating model level must overcome is the inertial resistance of the existing operating model, especially where it is embedded in human behaviors. Simply put, people don’t like change. (Well, actually, they all want other people to change, just not themselves.) When we take the approach of internal improvement, things go way too slowly and eventually lose momentum altogether.

The winning approach is to focus on an external forcing function. For competition cultures, the battle cry should be, this new operating model poses an existential threat to our future. Our competitors are eating our lunch. We need to change, and we need to do it now! For collaboration cultures, the call to action should be, we are letting our customers down because we are too hard to do business with. They love our offers, but if we don’t modernize our operating model, they are going to take their business elsewhere. Besides, with this new digital model, we can make our offers even more effective. Let’s get going!

This is where design thinking comes in. Forget the sticky notes and lose the digital whiteboards. This is not about process. It is about walking a mile in the other person’s shoes, be that an end user, a technical buyer, a project sponsor, or an implementation partner, spending time seeing what hoops they have to go through to implement or use your products or simply to do business with you. No matter how good you were in the pre-digital era, there will be a ton of room for improvement, but it has to be focused on their friction issues, not yours. Work backward from their needs and problems, in other words, not forward from your intentions or desires.

Lesson 3: Digital transformations cannot be pushed. They must be pulled.

This is the hardest lesson to learn. Most executive teams have assumed that if they got the right digital transformation leader, gave them the title of Chief Transformation Officer, funded them properly, and insured that the project was on time, on spec, and on budget, that would do the trick. It makes total sense. It just doesn’t work.

The problem is one endemic to all business process re-engineering. The people whose behavior needs to change—and change radically—are the ones least comfortable with the program. When some outsider shows up with a new system, they can find any number of things wrong with it and use these objections to slow down deployment, redirect it into more familiar ways, and in general, diminish its impact. Mandating adoption can lead to reluctant engagement or even malicious compliance, and the larger the population of people involved, the more likely this is to occur.

So what does work? Transformations that are driven by the organization that has to transform. These start with the executive in charge who must galvanize the team to take up the challenge, to demand the digital transformation, and to insert it into every phase of its deployment. In other words, the transformation has to be pulled, not pushed.

Now, don’t get me wrong. There is still plenty of work on the push side involved, and that will require a strong leader. But at the end of the day, success will depend more on the leader of the consuming organization than that of the delivery team.

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

Image Credit: Pexels, Geoffrey Moore

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Humans Are Not as Different from AI as We Think

2 Replies

Humans Are Not as Different from AI as We Think

GUEST POST from Geoffrey A. Moore

By now you have heard that GenAI’s natural language conversational abilities are anchored in what one wag has termed “auto-correct on steroids.” That is, by ingesting as much text as it can possibly hoover up, and by calculating the probability that any given sequence of words will be followed by a specific next word, it mimics human speech in a truly remarkable way. But, do you know why that is so?

The answer is, because that is exactly what we humans do as well.

Think about how you converse. Where do your words come from? Oh, when you are being deliberate, you can indeed choose your words, but most of the time that is not what you are doing. Instead, you are riding a conversational impulse and just going with the flow. If you had to inspect every word before you said it, you could not possibly converse. Indeed, you spout entire paragraphs that are largely pre-constructed, something like the shticks that comedians perform.

Of course, sometimes you really are being more deliberate, especially when you are working out an idea and choosing your words carefully. But have you ever wondered where those candidate words you are choosing come from? They come from your very own LLM (Large Language Model) even though, compared to ChatGPT’s, it probably should be called a TWLM (Teeny Weeny Language Model).

The point is, for most of our conversational time, we are in the realm of rhetoric, not logic. We are using words to express our feelings and to influence our listeners. We’re not arguing before the Supreme Court (although even there we would be drawing on many of the same skills). Rhetoric is more like an athletic performance than a logical analysis would be. You stay in the moment, read and react, and rely heavily on instinct—there just isn’t time for anything else.

So, if all this is the case, then how are we not like GenAI? The answer here is pretty straightforward as well. We use concepts. It doesn’t.

Concepts are a, well, a pretty abstract concept, so what are we really talking about here? Concepts start with nouns. Every noun we use represents a body of forces that in some way is relevant to life in this world. Water makes us wet. It helps us clean things. It relieves thirst. It will drown a mammal but keep a fish alive. We know a lot about water. Same thing with rock, paper, and scissors. Same thing with cars, clothes, and cash. Same thing with love, languor, and loneliness.

All of our knowledge of the world aggregates around nouns and noun-like phrases. To these, we attach verbs and verb-like phrases that show how these forces act out in the world and what changes they create. And we add modifiers to tease out the nuances and differences among similar forces acting in similar ways. Altogether, we are creating ideas—concepts—which we can link up in increasingly complex structures through the fourth and final word type, conjunctions.

Now, from the time you were an infant, your brain has been working out all the permutations you could imagine that arise from combining two or more forces. It might have begun with you discovering what happens when you put your finger in your eye, or when you burp, or when your mother smiles at you. Anyway, over the years you have developed a remarkable inventory of what is usually called common sense, as in be careful not to touch a hot stove, or chew with your mouth closed, or don’t accept rides from strangers.

The point is you have the ability to take any two nouns at random and imagine how they might interact with one another, and from that effort, you can draw practical conclusions about experiences you have never actually undergone. You can imagine exception conditions—you can touch a hot stove if you are wearing an oven mitt, you can chew bubble gum at a baseball game with your mouth open, and you can use Uber.

You may not think this is amazing, but I assure you that every AI scientist does. That’s because none of them have come close (as yet) to duplicating what you do automatically. GenAI doesn’t even try. Indeed, its crowning success is due directly to the fact that it doesn’t even try. By contrast, all the work that has gone into GOFAI (Good Old-Fashioned AI) has been devoted precisely to the task of conceptualizing, typically as a prelude to planning and then acting, and to date, it has come up painfully short.

So, yes GenAI is amazing. But so are you.

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

Image Credit: Pixabay

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

How to Re-engineer the Incubation Zone

Leave a reply

How to Re-engineer the Incubation Zone

GUEST POST from Geoffrey A. Moore

Having spent the last several years working with public companies in the tech sector who want to apply zone management principles to catching their next wave, I finally had an epiphany.

Every one of my clients had an Incubation Zone of one sort or another, and all of them had put concerted efforts into running it in an efficient and orderly way. This included crowd-sourcing a large funnel of potential ideas from the workforce, taking those ideas through a well-structured qualification process with clear benchmarks for progressing to the next stage, and funding a handful of the best ideas to get through to an MVP and market validation.

My epiphany was, this is a Production Zone operating model, not an Incubation Zone model. That is, these enterprises are treating the Incubation Zone as if it were another cost center. No venture capitalist operates in this manner. They are not process oriented—they are coin operated. But they do have a method, one that has proven itself countless times, and that’s what I want to describe here.

Anchor Tenets

In my view, there are five key principles that successful VCs keep close to their hearts. They are:

  1. Trapped value. If you are going to be coin operated, the first thing to do is find the coins. In B2B markets, this typically equates to identifying where there is trapped value in the current way of doing business. The value may be trapped in the infrastructure model (think cloud computing over data centers), the operating model (think self-organizing ride dispatching from Uber over the standard call center dispatcher), or the business model (think software subscription over license and maintenance). The point is, if you can release the trapped value, customers will enjoy dramatic returns, enough to warrant taking on the challenge of a Technology Adoption Life Cycle.
  2. 10X technology. VCs are fully aware that there are very good reasons why trapped value stays trapped. Normally, it is because the current paradigm has substantial inertial momentum, meaning it delivers value reliably, even though not optimally. To break through this barrier requires what Andy Grove used to call a 10X effect. Something has to be an order of magnitude better than the status quo to kick off a new Technology Adoption Life Cycle. Incremental improvements are great for reinforcing the status quo, as well as for defending it against the threat of disruption, but they do not have the horsepower to change the game.
  3. Technology genius. 10X innovations do not fall out of trees. Nor are they normally achieved through sheer persistence. Brilliance is what we are looking for here, and here public enterprises face a recruiting challenge. They simply cannot offer the clean slate, venture funding, and equity reward possibilities that private capital can. What they can do, however, is pick up talent on the rebound and integrate them into their own playbook (see more on this below). The point is, top technology talent is a must have. This puts pressure both on the general manager of any Incubation Zone operating unit and on the Incubation Zone board to do whatever it takes to put an A Team together.
  4. New design rules. The path for breakthrough technology to release trapped value involves capitalizing on next-generation design rules. The key principle here is that something that used to be expensive, complex, and scarce, has by virtue of the ever-shifting technology landscape, now become cheap, simple, and plentiful. Think of DRAM in the 1990s, Wi-Fi in the first decade of this century, compute cycles in the current decade, with data storage perhaps the next in line. Prior to these inflection points, solution designers had to work around these factors as constraints, be that in constricting code to run in 64KB, limiting streaming to run over dial-up modems, or operating their own data center when all they wanted to do was to run a program. Inertia holds these constraints in place because they are embedded in so many interoperating systems, they are hard to change. Technology Adoption Life Cycles blow them apart—but only when led by entrepreneurs who have the insight to reconceive these assets as essentially free.
  5. Entrepreneurial general manager. And that brings us to the fifth and final key ingredient in the VC formula: entrepreneurial GMs. They are the ones with a nose for trapped value, able to sell the next new thing on its potential to create massive returns. They are the ones who can evangelize the new technology, celebrate its game-changing possibilities, and close their first visionary customers. They must recruit and stay close to their top technology genius. They must intuit the new design rules and use them as a competitive wedge to break into a market that is stacked against them. Finally, they must stay focused on their mission, vision, and values while course-correcting repeatedly, and occasionally pivoting, along the way. It is not a job description for the faint of heart.

Now, these are what I claim to be the anchor tenets of the VC playbook. For the purposes of the rest of this blog, let’s take them as a given. Now the question becomes, how could a public enterprise, which does not have the freedom or flexibility of a venture capital firm, construct an Incubation Zone operating model that incorporates these principles in a way that plays to its strengths and protects itself against its weaknesses?

An Enterprise Playbook for the Incubation Zone

We should acknowledge at the outset that every enterprise has its own culture, its own crown jewels, its own claim to fame. So, any generic playbook has to adapt to local circumstances. That said, it is always good to start with a framework, and here in outline form is the action plan I propose:

  • Create an Incubation Board first, and charter it appropriately. Its number one responsibility is not to become the next disrupter—the enterprise already has a franchise, it doesn’t need to create one. Instead, it needs to protect the existing franchise against the next technology disruption by getting in position to ride the next wave as opposed to getting swamped by it.
  • In this role, the board’s mission is to identify any intersections between trapped value and disruptive technologies that would impact, positively or negatively, the enterprise’s current book of business. We are in the realm of SWOT threats and opportunities, where the threats take precedence because addressing them is not optional.
  • The first piece of business is to identify potential use cases that could emerge at the intersection of trapped value and breakthrough technology, to prioritize the list in terms of import and impact, and to recruit a small team to build a BEFORE/AFTER demo that highlights the game-changing possibilities of the highest priority case. This team is built around a technology leader and an entrepreneur. The technology leader ideally would come from the outside, thereby being less prone to fall back on obsolete design rules. The entrepreneur should come from the inside, perhaps an executive from a prior acquisition who has been down this path before, thereby better able to negotiate the dynamics of the culture.
  • The next step is to socialize the demo, first with technology experts to pressure test the assumptions and make improvements to the design, and then with domain experts in the target use case, whether from the customer base or the enterprise’s own go-to-market team, who have a clear view of the trapped value and a good sense of what it would take to release it.
  • The next step is to pitch the Incubation Zone board for funding.

> This is not an exercise in TAM or SAM or anything else of the sort. Those are tools for determining ROI in established sectors, where category boundaries are more or less in place. Disruptive innovation creates whole new boundaries, or fails altogether in the process, neither of which outcomes are properly modeled in the normal market opportunity analysis frameworks.

> Instead, focus on beachhead market potential. Could this use case gain sufficient market adoption within a single target segment to become a viable franchise? If so, it will give the enterprise a real option on a possible future. That is the primary goal of the Incubation Zone.

Whether the effort succeeds or fails, the enterprise can gain something of real value. That is, success gives it a viable path forward, and failure suggests that it need not spend a lot of resources protecting against this flank. The job of the board is to determine if the proposal being pitched is worth prioritizing on this basis.

  • Once funded, the focus should be on building a Minimum Viable Product and using it as the basis for selling a bespoke project to a visionary executive working at a marquee brand. The intent is to build a whole product for this customer on a project basis, doing whatever it takes to release the trapped value, thereby showing the world what good could look like. This project will require a ton of custom engineering, so it is key to price this on a time and materials basis, giving away the license while protecting the IP rights. Success consists of creating a marquee reference that garners the attention of the tech sector analysts and media.
  • The next funding milestone focuses on productizing the MVP for initial distribution. Ideally, this would be done internally with the enterprise IT department serving as Customer Zero. That allows for deeper dives into what’s working and what’s not as well as data collection to verify that trapped value is not only being released but recovered. It also positions the CIO as a highly credible reference to support New Product Introduction.
  • With productized offering in hand, the final step is to introduce the new product into restricted distribution, not general availability. Your goal is to target a beachhead market with a single use case—just the opposite of what general distribution is designed to accomplish. Thus, the entire go-to-market effort, from product launch, to pipeline generation, to sales, post-sales implementation, and customer success needs to be under the direct management of the GM of the Incubation Zone operating unit. Success here is measured by classic chasm-crossing metrics, focused on winning a dominant share of the top 30 accounts in the target market segment.

Crossing the chasm represents the fulfillment of the Incubation Zone’s real option mandate. This sets up a second set of funding milestones depending on what exit path is to be targeted. We can dig into those dynamics at another time.

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

Image Credit: Pixabay

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Customer Journeys and the Technology Adoption Lifecycle

Leave a reply

Customer Journeys and 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?

Image Credit: Pixabay

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Customer Success is Everyone’s Job

1 Reply

Customer Success is Everyone's Job

GUEST POST from Geoffrey A. Moore

There was a time when CEOs liked to say that everyone is in sales, but nowadays, given the XaaS business model, lifetime value has become the focal point for both the customer and the vendor. This commonality of interest is good news indeed, as long as the customer is actually having success. And there is the rub.

Success is in the eye of the beholder, and with enterprise customers in particular, there are quite a few beholders to please. Here is the model we use to draw attention to the key constituencies:

In this model, the technical buyers are responsible for delivering a working system, the end users for improving their productivity by using the system, and the economic buyers for securing the intended ROI. All six constituencies have their role to play, and each needs attention. But no one person, indeed no one function, can connect with all six. That’s why to achieve customer success enterprises must reach out well beyond their Customer Success function.

Here are the best match-ups for securing long-term success:

Now, no one can afford to activate all these relationships all the time. The point is, when things start to get wobbly, these are the people who need to lean in to right the ship.

And then there is the rest of the company. Engineering has to make the product a platform for success, both in terms of function and user experience. Marketing has to frame the value proposition that sets the table for success. Sales has to win the opportunity for success. HR has to support a culture of customer success. Legal has to shape contracts that set both the customer and the vendor up for success. IT has to provide the systems that monitor, measure, and proactively engage to keep success up and running. It really does take a village.

Most importantly, it allows CEOs and other leaders to replace the shopworn mantra of managing for shareholder value with a more fit-for-purpose managing for customer success. At the end of the day, that is the engine that drives shareholder value. More importantly, it is a call to action that can get people motivated. We all want to make an impact. Customer success is what shows we have.

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

Image Credit: Pexels, Geoffrey A. Moore

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.

Re-engineering the Incubation Zone for a Downturn

Leave a reply

Re-engineering the Incubation Zone for a Downturn

GUEST POST from Geoffrey A. Moore

In a prior post, written during the tech boom, I outlined how established enterprises could re-engineer their approach to managing innovation in order to catch the next wave before it caught them. Now we are in a different time, where capital is more expensive, and near-term profitability more necessary. We still need to innovate our way through the challenges ahead, and the management playbook is fundamentally the same, but there are enough nuances to attend to that it is worth revisiting the topic end to end.

The guiding principle is unchanged. Publicly-held enterprises routinely mismanage incubation to such an extent that, when they are successful, the market is actually surprised. Their approach is based on a process model, typically involving crowd-sourcing a large funnel of potential ideas from the workforce, taking those ideas through a well-structured qualification process with clear benchmarks for progressing to the next stage, and funding a handful of the best ideas to get through to a minimum viable product (MVP) and market validation. The problem is that this is a Productivity Zone operating model, not an Incubation Zone model. That is, these enterprises are treating the Incubation Zone as if it were another cost center. Needless to say, no venture capitalist operates in this manner.

Meanwhile, the venture capital industry is routinely successful at managing incubations, be they to successful exits or timely shut-downs. Their operating model has over forty years of established success—and yet it is a rare public enterprise indeed that even tries to implement it. Some of this is due to confusing the venture industry’s business model, which is not appropriate for a publicly held firm, with its operating model, which is perfectly suitable to emulate. It is that model that I want to describe here.

Anchor Tenets

There are at least five key principles that successful Venture Capitalists (VC’s) keep close to their hearts. They are:

  1. Trapped value. VC’s are nothing if not coin-operated, and in that context, the first thing to do is find the coins. In B2B markets, this typically equates to identifying where there is trapped value in the current way of doing business. The value may be trapped in the infrastructure model (think cloud computing over data centers), the operating model (think self-organizing ride dispatching from Uber over the standard call center dispatcher), or the business model (think software subscription over license and maintenance). The point is, if you can release the trapped value, customers will enjoy dramatic returns, enough to warrant taking on the challenge of a Technology Adoption Life Cycle, even in a downturn. This is key because in a downturn, absent a compelling reason to act immediately, pragmatic customers will defer their buying decisions as long as possible. So, innovation for innovation’s sake is not the play for today’s market. You should be looking for disease-preventing vaccines, not life-extending vitamins.
  2. 10X technology. VCs are fully aware that there are very good reasons why trapped value stays trapped. Normally, it is because the current paradigm has substantial inertial momentum, meaning it delivers value reliably, even though far from optimally. To break through this barrier requires what Andy Grove taught us to call a 10X effect. Something has to be an order of magnitude better than the status quo to kick off a new Technology Adoption Life Cycle. Incremental improvements are great for reinforcing the status quo, as well as for defending it against the threat of disruption, but they do not have the horsepower to change the game. So, do not let your Incubation Zone “major in minors.” If there is not something truly disruptive on your plate, wait for it, and keep your powder dry.
  3. Technology genius. 10X innovations do not fall out of trees. Nor are they normally achieved through sheer persistence. Brilliance is what we are looking for here, and here publicly held enterprises face a recruiting challenge. They simply cannot offer the clean slate, venture funding, and equity reward possibilities that private capital can. What they can do, however, is pick up talent on the rebound and integrate it into their own playbook (see more on this below). The point is, top technology talent is a must-have. This puts pressure both on the general manager of any Incubation Zone operating unit and on the Incubation Zone board to do whatever it takes to put an A Team together. That said, there is a loophole here one can exploit in a downturn. If your enterprise needs to catch up to a disruptive innovation, that is, if it needs to neutralize a competitive threat as opposed to instigating a new adoption life cycle, then a “fast follower” leader is just the ticket. This person does not think outside the box. This person catches the box and jumps on it. Microsoft has been the premier example of this playbook from its very inception, so there is definitely money to be made here!
  4. New design rules. The path for breakthrough technology to release trapped value involves capitalizing on next-generation design rules. The key principle here is that something that used to be expensive, complex, and scarce, has by virtue of the ever-shifting technology landscape, now become cheap, simple, and plentiful. Think of DRAM in the 1990s, Wi-Fi in the first decade of this century, and compute cycles in the current decade. Prior to these inflection points, solution designers had to work around these factors as constraints, be that in constricting code to run in 64KB, limiting streaming to run over dial-up modems, or operating their own data center when all they wanted to do was to run a program. Inertia holds these constraints in place because they are embedded in so many interoperating systems, they are hard to change. Technology Adoption Life Cycles blow them apart—but only when led by entrepreneurs who have the insight to reconceive these assets as essentially free.
  5. Entrepreneurial general manager. And that brings us to the fifth and final key ingredient in the VC formula: entrepreneurial GMs. They are the ones with a nose for trapped value, able to sell the next new thing on its potential to create massive returns. They are the ones who can evangelize the new technology, celebrate its game-changing possibilities, and close their first visionary customers. They must recruit and stay close to their top technology genius. They must intuit the new design rules and use them as a competitive wedge to break into a market that is stacked against them. Finally, they must stay focused on their mission, vision, and values while course-correcting repeatedly, and occasionally pivoting, along the way. It is not a job description for the faint of heart. One last thing—in a downturn, instead of starting with visionaries in the Early Market, a far better play is to focus on a beachhead, chasm-crossing market segment from Day One. The TAM is smaller, but the time to close is much shorter, and this gets you traction early, a critical success factor when capital is costly and funders are impatient.

Now, assuming we can embrace these anchor tenets from the VC playbook, the key question becomes, How can a public enterprise, which does not have the freedom or flexibility of a venture capital firm, construct an Incubation Zone operating model that incorporates these principles in a way that plays to its strengths and protects itself against its weaknesses?

An Enterprise Playbook for the Incubation Zone

We should acknowledge at the outset that every enterprise has its own culture, its own crown jewels, its own claim to fame. So, any generic playbook has to adapt to local circumstances. That said, it is always good to start with a framework, and here in outline form is the action plan I propose:

  • Create an Incubation Board first, and charter it appropriately. Its number one responsibility is not to become the next disruptor — the enterprise already has a franchise, it doesn’t need to create one. Instead, it needs to protect the existing franchise against the next technology disruption by getting in position to ride the next wave as opposed to getting swamped by it.
  • In this role, the board’s mission is to identify any intersections between trapped value and disruptive technologies that would impact, positively or negatively, the enterprise’s current book of business. We are in the realm of SWOT threats and opportunities, where the threats take precedence because addressing them is not optional. Another way to phrase this is that we are playing defense first, offense second. This is particularly critical in a downturn because that is a time when visionaries lose power and pragmatists in pain gain power.
  • Given a chasm-crossing mentality, the first piece of business is to identify potential use cases that emerge at the intersection of trapped value and breakthrough technology, to prioritize the list in terms of import and impact, and to recruit a small team to build a BEFORE/AFTER demo that highlights the game-changing possibilities of the highest priority case. This team is built around a technology leader and an entrepreneur. The technology leader ideally would come from the outside, thereby being less prone to fall back on obsolete design rules. The entrepreneur should come from the inside, perhaps an executive from a prior acquisition who has been down this path before, thereby better able to negotiate the dynamics of the culture.
  • The next step is to socialize the demo, first with technology experts to pressure test the assumptions and make improvements to the design, and then with domain experts in the target use case, whether from the customer base or the enterprise’s own go-to-market team, who have a clear view of the trapped value and a good sense of what it would take to release it.
  • The next step is to pitch the Incubation Zone board for funding.

a) This is not an exercise in TAM or SAM or anything else of the sort. Those are tools for determining ROI in established sectors, where category boundaries are more or less in place. Disruptive innovation creates whole new boundaries, or fails altogether in the process, neither of which outcomes are properly modeled in the normal market opportunity analysis frameworks.

b) Instead, focus on beachhead market potential. Could this use case gain sufficient market adoption within a single target segment to become a viable franchise? If so, it will give the enterprise a real option on an array of possible value-creating futures. That is the primary goal of the Incubation Zone.

Whether the effort succeeds or fails, the enterprise will gain something of real value. That is, success will give it a viable path forward, and failure will suggest it need not spend a lot of resources protecting against this flank. The job of the board is to determine if the proposal being pitched is worth prioritizing on this basis.

  • To pursue the opportunity, you want to create an independent operating unit that looks like a seed-stage start-up. Once funded, it should target a specific, value-trapping process in a single industry, ideally managed by a single department, and apply breakthrough technology and laser focus to re-engineering the process to a much better outcome. This will require developing a whole product, defined as the complete solution to the customer’s problem, organized around a core product plus ancillary supporting products and services. The latter can be supplied by third parties, but the effort has to be orchestrated by you.
  • With this problem-specific solution in hand, the final step is to bring it to market via restricted distribution, not general availability. Your goal is to target a beachhead market with a single use case—just the opposite of what general distribution is designed to accomplish. Thus, the entire go-to-market effort, from product launch to pipeline generation, to sales, post-sales implementation, and customer success needs to be under the direct management of the GM of the Incubation Zone operating unit. Success here is measured by classic chasm-crossing metrics, focused on winning a dominant share of the top 30 accounts in the target market segment.

In a downturn, crossing the chasm—not winning inside the tornado—represents the fulfillment of the Incubation Zone’s real option mandate. You want to create a cash-flow-positive entity that protects your franchise from disruption by coopting an emerging technology while at the same time solving a mission-critical problem for a customer who needs immediate help. That is value, in and of itself, over and above the optionality it creates for future category creation.

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

Image Credit: Pixabay

Subscribe to Human-Centered Change & Innovation WeeklySign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.