Are you ready to get in the zone? In Geoffrey A. Moore’s Zone to Win, you’ll learn the techniques and the mind-sets you need to know if you want to take an established enterprise and turn it into a super-profitable international business by diversifying your offering and adding new product lines.
Geoffrey A. Moore is the bestselling author of Crossing the Chasm and Inside the Tornado, and this latest book is blurbed by Salesforce’s Marc Benioff, who called it “the playbook for succeeding in today’s disruptive, connected, fast-paced business world.” Microsoft’s Satya Nadella also gave the book his blessing, in part because Moore has acted as a consultant for Microsoft, Salesforce, Intel and more.
Moore certainly has the pedigree and the expertise that you need to write a book like this. He’s been in the business for over 25 years and has already established himself as one of the most acclaimed and experienced tech advisors in the world. The story goes that Conan O’Brien once said, “Who is Geoffrey Moore and why is he more famous than me?”
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The answer becomes self-evident when you read Moore’s book, and that’s one of the reasons why it’s so easy to recommend it. But we’re getting ahead of ourselves, and so without further ado let’s jump on in and see what Geoffrey A. Moore has to teach us.
Zone to Win – Organising to Compete in an Age of Disruption
One thing to note before we get started is that Zone to Win is designed to be a companion to Moore’s Escape Velocity, and while you don’t need to read it to get the most out of this book, it’ll certainly be a nice little bonus. Here, he’s focussing much more on offering the advice that people need when they’re adding a new line of business to an existing portfolio. Moore says it’s “focussed on spurring next-generation growth, guiding mergers and acquisitions, and embracing disruption and innovation” and explains, “Zone to Win is a high-powered tool for driving your company above and beyond its limitations, its definitions of success, and ultimately, its competitors.”
Right at the beginning of the book, Moore says that modern business is different because of a simple equation: speed plus disruption. “Wave after wave of next-generation technology is continually transforming the landscape of business,” Moore says, “both inside the tech sector, where the new offers are germinated, and everywhere else outside it, where they are largely consumed.”
This leads to a crisis of prioritisation, which Moore suggests companies can combat in one of two ways: by catching the next wave and by preventing the next wave from catching you. You’ve heard examples of companies that missed the next wave before: Blockbuster Video, MySpace and AOL spring to mind. He sums this chapter up by explaining, “Whether you’ve been playing offence and trying to catch the next wave or playing defence and trying to defend yourself against a current wave, when it comes to strategic portfolio management, you’re likely to need some help.”
A New Horizon
The good news is that this book might just provide the help you need. Moore suggests focussing specifically on allocating resources across three different investment horizons, which are defined below:
Horizon #1: In the coming fiscal year, making it accretive to the operating plan.
Horizon #2: In two to three years, following significant negative cash flow in the intervening period, making it dilutive to the operating plan.
Horizon #3: In three to five years, consisting primarily of research and development that’s funded so as not to be dilutive to the operating plan.
The idea here is that it’s only the activities on horizon #1 that provide an instantly recognisable return on investment, and many companies focus so heavily there that they forget the other horizons. This might seem as though it’s saving money in the short-term, but in the long-term it will hold your company back and can even cost you your competitive advantage.
The Four Zones
Focussing on these three horizons also requires you to focus on four specific zones, and it’s these zones that the bulk of the book is dedicated to. “These four zones of management activity,” Moore explains, “[are each] aligned with one, and only one, investment horizon, [and each demands] a different style of leadership to achieve those ends.”
The four main zones that Moore identifies each get a chapter of their own in the book, and indeed we’ll look at them in closer detail later on. In the meantime, here’s a brief overview of each of the four zones and how they might impact your business.
Zone #1: The Performance Zone
Moore says, “The performance zone generates virtually all the revenue and more than 100% of the profits of the enterprise.” This usually consists of a diverse portfolio of product lines, and while it’s fine for those product lines and their technologies to face disruption, this should be characterised by evolution and not revolution.
Product offerings from the performance zone are what you might call “safe bets” – in other words, you can count on them to keep bringing money in. Moore suggests that when your products are within the performance zone, we should play offense and push home that advantage, but that at the same time there’s a part to play for defence when it comes to R&D.
“Focus your R&D innovation on neutralisation,” Moore says, “not differentiation. This is the opposite of the disruptors’ strategy. They have to differentiate – it’s the only way they can win your customers away from you. You, on the other hand, do not. You’re the incumbent, the default choice, with inertia on your side. What you do have to do, however, is respond to the disruption in a timely manner. You cannot go into denial and bury your head in the sand.”
Zone #2: The Productivity Zone
“The productivity zone is home to all enterprise resources that don’t have direct accountability for revenue in any of the three horizons,” Moore explains. This includes departments like finance, accounting, legal, marketing, communications, manufacturing, purchasing and technical support, and Moore categorises them as either core corporate, market facing or supply chain facing teams.
Without revenue, businesses are dead in the water, but at the same time they need the productivity zone if they’re to function at their best. “Put another way,” Moore says, “if it’s the performance zone’s job to win the war of the top line, it’s the productivity zone’s job to win the peace at the bottom line.”
He says that there are six main levers for success in the productivity zone:
1. Centralise
2. Standardise
3. Modularise
4. Optimise
5. Instrument
6. Outsource
Zone #3: The Incubation Zone
The incubation zone is the area in which you make investments in horizon #3, which we talked about earlier on. As a general rule, Moore says that a potential investment in the incubation zone should meet the following criteria before you give it the go-ahead:
- – It embodies a disruptive innovation that can drive a 10x improvement in a performance metric of great importance to the target market.
- – It represents a business opportunity that has the potential to scale to material size, the minimum threshold being 10% of total enterprise revenue at the time when it reaches scale.
- – When successful at scale, it should represent a net new line of business for the enterprise, as opposed to an adjacency to an existing line of business.
“In short,” Moore explains, “the incubation zone is a staging area for substantial businesses, a base camp within which one can scale to $100m or more in revenues (the 1% threshold for a $10b enterprise) without leaving the zone. Even at this stage, businesses are still too small to manage as rows in the performance matrix, their granularity acting like grit in the gears of that bigger machine. At the same time, however, they’re also way too large to manage as programs or projects. They need to have specialised sales, marketing and professional services to compete against other startups on their market-facing side, and they need customised supply chain services to design, build and operate their next-generation disruptive offers. In sum, in the incubation zone you’re not just funding R&D engineering – you’re funding entire companies.”
Zone #4: The Transformation Zone
This chapter starts with an oddly poetic moment in which Moore says the transformation zone “is the mechanism by which an enterprise can free its future from the pull of the past”. He explains, “Initiatives here focus on responding to an emerging wave of secular growth arising out of category disruption. When the disrupted category is adjacent to the core business, established corporations can play offence. When it’s their own category that’s getting disrupted, they must play defence. Either way, the goal is to undertake a transformational initiative to put the enterprise on a new trajectory, one significantly different from the current one.”
To play offensive in the transformation zone, Moore suggests taking an independent business unit from the incubation zone and repositioning it as a line of business in the performance zone. Playing defence is even harder, and Moore suggests that there can often be a clash in which your investors’ immediate interests aren’t aligned with your customers’ best interests, which isn’t a sustainable situation. And while all of this is happening, you might find yourself facing disruption from elsewhere in the market.
Moore says the winning response to disruption is as follows:
- Neutralise first: Your first main objective should be to blunt the disruptor’s attack.
- Optimise second: Given the new value proposition in the market and your ability in the short term to match it, you have little choice but to reduce your prices.
- Differentiate third: This takes longer, often a lot longer.
One final warning comes at the end of this chapter, in which Moore writes, “The transformation zone is the CEO zone. On offence, there’s the opportunity to springboard the enterprise into a whole new dimension, the way cloud computing has reset the trajectory for Amazon, the way that music and smartphones reset it for Apple, the way that Pixar reset it for Disney, the way The Sopranos reset it for HBO, the way the Prius did for Toyota. On defence, there’s the opportunity to reposition the franchise to give it a new lease on life.”
Conclusion
After this, there’s some further information on how to implement what you’ve learned into your day-to-day work, but it largely focusses on understanding the four zones and the way that they relate back to your business. It’s as though by focussing on the four zones, you’re diversifying the range of cards that are in your hand so that when the play changes, you have a choice of which card to put down on the table.
We’ve only scratched the surface of what Moore has to teach us here, and the chances are that you’ll want to pick up a copy of this yourself so that you can refer back to it. There are even some templates and diagrams in here that can help you to wrap your head around some of the ideas that Moore has to offer, and remember that this is the seventh of seven books in which the author shares some of the expertise that he’s learned from his years at the top flight of business.
In the meantime, we hope that the lessons we’ve shared today have helped you to get the most out of your business by rethinking your approaches to the four different zones. Remember that there’s no such thing as a one-size-fits-all approach: instead, you’ll need to use the insights that Moore shares to identify strategies that make sense to your business.
The good news is that while there’s a lot to take in here and while it’s really designed with enterprises and large, multinational businesses in mind, the idea of zones and the different approaches we take towards them is something that transcends company size and applies to everyone. Good luck.
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