Tag Archives: power

How Do You Measure Power?

How Do You Measure Power?

GUEST POST from Geoffrey A. Moore

In a recent blog, I argued that management needs to be accountable not only for delivering current performance but also for investing in power initiatives that will fuel future performance. Compensation systems that focus solely on the former too often result in a hollowing out of the enterprise, as we have seen with any number of iconic companies that have “performed” their way to the sidelines.

But this begs a key question—how do you measure power? Specifically, what kind of metrics could supply a stable foundation for management accountability and executive compensation?

In my book Escape Velocity, when discussing managing for shareholder value, we introduced a framework called the Hierarchy of Powers. The idea is that investors, who are buying a share of your enterprise’s future performance, value your company based on how much power they think it has relative to other investments they could be making. In this context, we claimed there were five classes of power that got evaluated in the following order of priority:

  1. Category Power. Is your core business in a category that is growing, stable, or declining? This, we claimed, is the single biggest predictor of future performance.
  2. Company Power. Within that category, where is your company in the pecking order of companies? If you are number one, that is a huge advantage. If you are number two, it also provides tailwinds. After that, there are no more tailwinds to be had.
  3. Market Power. For companies that focus on one or more vertical markets, is your company the default choice for major prospects and customers in that segment? Wherever this is the case, it gives a material boost to your sales momentum and thus your company’s valuation.
  4. Offer Power. Do you get preference and/or premium pricing due to the differentiation of your offer? Do you win the lion’s share of any competitive bake-offs?
  5. Execution Power. Do you have a history of meeting or beating guidance on a consistent basis?

The model has stood up well over the years, but there is still the question of how to ensure accountability for investing in power when so much of our attention (and compensation) is focused on creating the next quarter’s performance. To that end, my colleague Philip Lay and I have been sorting through objective measures that signal material gains in power, ones that executive teams could readily track, and compensation programs could use to calibrate bonuses.

Here’s what we propose should be the top two metrics for each class of power:

Category Power. The focus here is on portfolio valuation—how many categories does the enterprise participate in, and how is each category faring. Meaningful changes in category power typically come through M&A, often supplementing organic innovation that is looking to scale quickly. Top two metrics for each category assessed:

  1. Category Maturity Life Cycle status. The key stages are secular growth, cyclical growth, stagnant, and declining.
  2. Technology Adoption Life Cycle status. This model focuses specifically on the period of secular growth, breaking it up into the following stages: Early Market, Chasm, Beachhead, Bowling Alley, Tornado, and Main Street. The two big valuation changers are winning a beachhead market segment in the Bowling Alley and participating with meaningful share in the Tornado.

Company Power. In high-growth categories, the focus is on bookings growth and competitive win rates. In mature categories, it is on the stability of the installed base as well as bargaining power both with suppliers and with customers. The top two metrics are:

  1. Market share within each category. By far the most important metric, as market ecosystems organize around and give preference to the category leader.
  2. Balanced mix of power and performance categories. For global enterprises, in particular, portfolio balance creates optionality to deal with both bull and bear markets.

Market Power. In emerging categories, dominating a target market segment, as opposed to merely participating in it, is critical to crossing the chasm and creating a sustainable franchise. In mature categories, target market segment focus is key to creating above-market growth. The top two metrics are:

  1. Segment share. The most important metric because ecosystems that serve market segments organize around a segment leader only when it has dominant segment share.
  2. Growth rates within target market segments. This is particularly important in any economic downturn that impacts different market segments to highly varying extents.

Offer Power. This metric and the next are closely aligned with delivering performance in the current fiscal year. That said, they still signal successful investments in power. The top two power metrics are:

  1. Magic quadrant status. This is the most widely circulated third-party measure of offer power.
  2. Win/loss record in head-to-head competitions. This is the most credible measure of offer power.

Execution Power. This really is the land of performance, but there is still power in reputation. Top two metrics are:

  1. History of “meeting or beating” commits, be they forecast or, release dates. This is what gives confidence to customers and partners to give your team the nod.
  2. Customer success metrics. These include Net Expansion Rate, Net Retention Rate, and Promoter Score, all of which validate that you are keeping your sales promises.

Guidelines for Using the Metrics

Metrics are a device to ensure visibility and accountability, and nowhere is this more important than when dealing with something as abstract as power. The key is to associate the right metrics with the right people, the ones who can have the most impact on the level of power in question. This works out as follows:

  • Top Executives: Category Power, Company Power. The two key levers here are using M&A to strategic advantage and using the annual budgeting process to allocate resources asymmetrically to achieve strategic objectives.
  • Middle Management: Market Power, Offer Power. The two key levers here are using market segmentation to strategic advantage and allocating the resources under your control asymmetrically to achieve dominant shares in target market segments.
  • Front Line: Execution Power. The key lever here is to align and focus the resources under your control or influence them in order to deliver the performance you have committed to.

For purposes of compensation, promotion, and overall alignment, these metrics align well with OKR objectives and can be used wherever OKRs are focused on increasing power. Again, the goal is not to replace performance metrics but rather to complement them.

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

Image Credit: Unsplash

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Rethinking Electric Vehicles and the Power Grid

Ford F150 Lightning Electric Truck

Ford just announced an electric truck for the masses, the Ford F-150 Lightning, with up to 300 miles of range starting at just under $40,000.

That is about as much detail as I’m going to go into about this new electric truck from Ford, and you won’t find me comparing it to Tesla’s Cybertruck or GM’s electric Hummer. I’ll leave that that to the gearheads.

The purpose for today’s article on Human-Centered Change™ and Innovation is not to compare electric truck specifications, but instead to highlight a somewhat buried feature of the new Ford F-150 Lightning Electric Truck:

Ford is providing an 80-amp home charging station that completely charges the truck in eight hours, or allows buyers to easily use the truck to power their entire home for around three days in the event of an electricity outage.

Sometimes what seems like a minor benefit outside the typical product feature set actually has the potential to shift mindsets and customer expectations. AND, it leads to a series of questions:

Have you spent $10,000-20,000 on a Tesla Powerwall battery backup system for your house?

Or thousands of dollars on a more traditional partial home generator?

Have you ever thought about using your car or truck to power your house?

What if this were to become a common expectation of consumers of electric vehicles?

If this became a key differentiator between internal combustion and electric vehicles, might this help to accelerate the transition to electric vehicles in the United States and elsewhere?

And what might the implications be for utilities and the power grid?

Stay tuned! It will be interesting to monitor how this situation develops and whether other electric vehicle manufacturers modify their marketing strategies, leading to one final question:

Innovation or not?

Image credit: yahoo

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Using Gravity to Save and Improve Lives

Using Gravity to Save and Improve Lives

I came across an IndieGogo project that is focused on building and trialing a gravity-powered power station that can serve either as a lantern or as a flexible power source that can be used to power a task light, recharge batteries, or potentially other things that users might dream up that the designers can’t yet imagine.

Check out their video from IndieGogo:

They have already raised FIVE TIMES the money they set out to raise on IndieGogo.

I found it interesting in their promotional video that initially they started with a design challenge of designing a system that would charge a light for indoor use using a solar panel, but that they decided to abandon the approach specified from the outset and pursue alternate power sources.

Also interesting from the IndieGogo project page are the following facts:

The World Bank estimates that, as a result, 780 million women and children inhale smoke which is equivalent to smoking 2 packets of cigarettes every day. 60% of adult, female lung-cancer victims in developing nations are non-smokers. The fumes also cause eye infections and cataracts, but burning kerosene is also more immediately dangerous: 2.5 million people a year, in India alone, suffer severe burns from overturned kerosene lamps. Burning Kerosene also comes with a financial burden: kerosene for lighting ALONE can consume 10 to 20% of a household’s income. This burden traps people in a permanent state of subsistence living, buying cupfuls of fuel for their daily needs, as and when they can.

The burning of Kerosene for lighting also produces 244 million tonnes of Carbon Dioxide annually.

So, what do you think, a meaningful innovation or an interesting but impractical invention?

More information available on their web site here.

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