Geoffrey A. Moore: Second interview, by Bob Morris

Geoffrey Moore

Geoffrey Moore is chairman emeritus of three Silicon-Valley-based consulting firms he helped found: The Chasm Group, the Chasm Institute, and TCG Advisors, all of which provide market development and business strategy services to many leading high-technology companies. He is also a Venture Partner with Mohr Davidow Ventures, a California-based venture capital firm investing in IT, bioinformatics, and clean tech, where he provides market strategy advice to their portfolio companies. Geoffrey is a frequent speaker and lecturer at industry conferences and his books are required reading at Stanford, Harvard, MIT and other leading business schools.

Escape Velocity is Geoffrey’s sixth book.  His first two, Crossing the Chasm and Inside the Tornado, focus on the challenges of market development for disruptive innovation, with his third book, The Gorilla Game, co-authored by Tom Kippola and Paul Johnson, address the investor implications of these models.  In the past decade Moore shifted his focus to the challenges established enterprises face in keeping up with technology disruptions, resulting in a second trilogy, made up of Living on the Fault Line, Dealing with Darwin, as well as his latest book, Escape Velocity: Free Your Company’s Future from the Pull of the Past.

Here is an excerpt from the interview. To read all of it, please click here.

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Morris: Before discussing Velocity Escape, a few general questions. First, who has had the greatest influence on your personal growth? How so?

Moore: I’d have to say my wife Marie, and my three children, Margaret, Michael, and Anna.  Each one of them exemplifies character traits I aspire to (and regrettably fall short of all too often!).  Some of these traits include the ability to be silent (hardly my strong suit), to produce art both as performers and creators, and to empathize in situations where it would be far easier to criticize.

Morris: The greatest impact on your professional development? How so?

Moore: My very first boss in business, Don Parr, hired me as a training director into a software company. completely on the basis of all potential, as I had no direct experience in business and certainly none in technology.  I remember telling him after a few weeks on the job that the only person who did not have a training program was me.  He said, “Oh no, you do have a program.  It’s called the pretend method of training.”  I asked, “How so?”  His reply: “Well, when you applied for this job you pretended that you knew how to do it, and I pretended that I believed you, and now you have to make it so or you will make us both look foolish.”

Morris: Was there a turning point (if not an epiphany) in your life that set you on the career course that you continue to follow? Please explain.

Moore:  I was teaching literature at Olivet, a small college in Michigan, and Marie and I realized we wanted to raise our family closer to our families on the West Coast.  There was no chance that we would be able to do that and have me stay in my chosen profession.  So we sort of just jumped and trusted that something good we be there at the other end.  It certainly has worked out that way, which I think is a testimony in part to a good liberal arts education preparing one, really, for anything.

Morris: To what extent has your formal education proven invaluable to what you have accomplished in your life thus far?

Moore: Literary criticism is all about inference, analysis, and synthesis—and so is marketing.  Both are all about understanding and creating stories, testing them for appeal, credibility, consistency, and so forth.  Particularly in venture capital, the story is the most credible part of the pitch—the spreadsheets by far the most fictitious.

Morris: In your opinion, who should be centrally involved in formulating an organization’s strategy?

Moore: Strategy has to be owned and sponsored by the CEO—period.  How much the CEO engages the rest of the team is a matter of culture, style and preference.  There is no right answer.  That said, in our practice we have found that when people are involved in creating strategy, they are much more likely to commit deeply to implementing it.

Morris: By what specific process should it be formulated?

Moore: As outlined in the book, we propose taking three passes at it, the first focused on vision¸ to set the context, the second on strategy per se, and the third on execution, to ensure its implementation.  We believe that these dialogs are typically best conducted on an annual basis, and scheduled the quarter before next year’s annual planning and budgeting process begins.

Morris: What are the most common misconceptions about what strategy is…and isn’t. What in fact is true?

Moore: Strategy is all about aligning with forces in the world so that you can accomplish your mission or goals.  It must start with an act of description¸ therefore, in preparation for an act of prescription, that specifies how you are going to act in order to achieve the alignments and outcomes you desire.  The most common mistake with strategy is to start with a focus on what you want, and even worse, what metrics you want to achieve, and then to go out and try to impose that on the world without other considerations.

Morris: Here are two of my favorite quotations. Please respond to each. First, from Peter Drucker: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”

Moore: Possibly redoing it might trump this, but not much else.  So yes, doing the right things has to take priority over doing things right.  But strategy should not denigrate staying the course or steady as she goes.  There are times and places where that is by far the most effective path forward.

Morris: And next, from Michael Porter: “The essence of strategy is choosing what not to do.”

Moore: I disagree.  I do think this is a good litmus test for testing an organization’s level of commitment to strategic action—if you won’t give up anything, then you are not making much of a commitment.  My nominee for essence is the asymmetrical bet, doing something that your direct competitors simply will not copy because it goes beyond what is reasonable and prudent.  The only justification is that it defines your core so directly that it is worth the risk to you—but not to anyone else.

Morris:  In your opinion, what is the single greatest challenge that CEOs will face during (let’s say) the next 3-5 years? Any advice for them?

Moore: Two challenges in tandem—globalization, which will reward them for taking the long view, and financial markets, which will drive them to take the short view.  Like Odysseus, they have to sail the right path between cave of Scylla and the whirlpool of Charbydis.

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To read all of my second interview of Geoff, please click here.

To read my first interview of him, please click here.

He cordially invites you to check out the resources at these websites:

http://www.geoffreyamoore.com/

http://www.facebook.com/escapevelocitybymoore

http://www.youtube.com/geoffreyamoore

 

Dealing with Darwin: A Book Review by Bob Morris

Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution
Geoffrey A. Moore
Portfolio/Penguin Group (2005)

Those who have read one or more of Moore’s previous books (notably Inside the Tornado, Crossing the Chasm, and Living on the Fault Line) already know what a clear thinker and eloquent writer he is on the subject of high-tech markets, especially in terms of formulating appropriate strategies and tactics at a time when ever-accelerating change is the only constant within those dynamic markets. In Dealing with Darwin, he develops in much greater depth his response to this question: “How do great companies innovate at every phase of their evolution?” He is convinced (as am I) that there is a process of natural selection that determines why some companies prosper and most others do not.

Moore cites the concept of value disciplines which Michael Treacy and Fred Wiersema first introduced in their brilliant book, The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market. He then identifies four clusters of innovation zones: Product Leadership, Customer Intimacy, Operational Excellence, and Category Renewal. The challenge for decision-makers in any organization (regardless of its size or nature) is to select innovation zone in which to establish and sustain “break away” separation from its competitive set. Moore suggests that this decision be made in terms of three factors:

• Core competence: different organizations have different assets to exploit

• Competitive analysis: different sets of competitors leave different openings to exploit

• Category maturity: Different stages of the category-maturity life cycle reward different forms of innovation

Moore acknowledges an “odd pairing” of innovation leadership at the top with innovation “bubbling up from the bottom.” Initiatives from both must be in proper alignment. Obviously, it is not easy to establish such an alignment and even more difficult to sustain it. Of course, Moore is well aware of that. “Managing innovation requires executives to foster a bottoms-up stream of innovation opportunities…Managing innovation also implies maintaining a portfolio of strategies because different categories will respond to different types of innovation. This creates a level of complexity that can create confusion in the broader organization, with teams being asked to pursue one form of innovation here and another there. “Of special interest to me is what Moore has to say about managing inertia in Part Three (Chapters Nine, Ten, and Eleven).

In my opinion, Dealing with Darwin has much wider relevance and greater value than Moore’s earlier works because it addresses issues by no means limited to the dynamics of high technology. Hence the importance of Chapter Eleven. In it, Moore recommends what he characterizes as “essential steps” to setting an agenda:

1. Conduct a core/context analysis of your current business.
2. Conduct a resource-allocation analysis to complement your core/context analysis.
3. Set a more ambitious (i.e. more “aggressive”) agenda.
4. Plan out your moves as a team.
5. Focus on time to market.
6. Get the gears moving.
7. Keep the gears moving.

Moore also provides with these seven steps practical suggestions as well as a few appropriate caveats. Darwin’s influence remains evident in his concluding remarks. “That’s what evolution is all about, a continual raising of the bar. It’s how countries raise their standard of living. It’s why new companies get formed every year. It’s why each of us must learn new skills throughout our careers. We may get tired, but we are not likely to get bored. Mostly we just have to perform. Welcome to the race.”

Steve Tobak shares his “Priceless Business Lessons”

Here is an article written by Steve Tobak for BNET, The CBS Interactive Business Network. To obtain a free subscription to one or more of the BNET newsletters, please click here.

Steve Tobak

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You learn how to learn in school. You learn how to do a job at work. And if you work hard and groom yourself well, you may eventually learn how a business operates in an industry. But once in a blue moon, through experience, you pick up one of those lessons that nobody can teach you. Those hard to come by lessons are truly priceless.

Last week, in 5 Business Books That Made a Difference [click here], I mentioned Mark McCormack’s What They Don’t Teach You at Harvard Business School. That inspired me to share a few big lessons I’ve learned over the years. Each one figured prominently in my success:

If you want to gain management cred, tell folks what you’re going to do and then do it. Having the guts to stick your neck out and take a big risk, then executing and delivering on the promise, has management written all over it. It works both internally and externally. Broadcasting an aggressive goal and then achieving it is far more effective than just doing it. Just make sure you pull it off. Sure, it’s a risk, but no risk, no reward, right?

If you’re way behind on a hot deadline, take some time to relax and chill out. First, you’ll think more clearly and be more productive going down the stretch. Second, there’s a reason why you’re behind to begin with and that pause may provide just the right inspiration or perspective you needed all along. Third, in case you need anyone to help you, nobody likes working with a stress monster.

If you want something badly, consider what would happen if you don’t get it. The earth will continue to turn and your life won’t end. In fact, nothing will happen, except that you’ll lighten your load, reduce your expectations, and in so doing, actually increase your chances of getting what you want. It’s the whole “if you want something let it go” thing. It really works.

If you want to be calm during an important presentation, stress-out beforehand. When you stress yourself it raises your blood pressure and your arteries widen to account for the change. Afterwards, when your body returns to normal, you feel a physical sense of calm that lasts a pretty long time. It’s the same reason you feel relaxed after getting out of a hot tub or a sauna. I noticed this empirically; a doctor I know added the explanation.

If you want to get support for a groundbreaking product or program, lose the big pitch. Grassroots efforts sell new ideas far more effectively than mass-market approaches. It works internally or externally. Get support from key stakeholders one-on-one rather than attempt to take on the world and sway everyone all at once. Pretty sure that was inspired by Geoffrey Moore’s Crossing the Chasm.

If you want someone to talk, shut up. Whether it’s a customer, an employee, your boss, whoever, set the stage by stating your purpose and then shut up. In general, people like to talk and that’s exactly what they’ll do, probably telling you far more than if you’d tried to drag it out of them bit by bit. If the person is unusually guarded, then give a little to get a little. Ask leading questions and listen actively, of course.

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Steve Tobak is a consultant, writer, and former senior executive with more than 20 years of experience in the technology industry. He’s the managing partner of Invisor Consulting, a Silicon Valley-based firm that provides strategic consulting, executive coaching, and speaking services to CEOs and management teams of small-to-mid-sized companies. Find out more at www.invisor.net.

Crossing the Chasm: A Book Review by Bob Morris

Crossing the Chasm
Geoffrey A. Moore
Harper Business (1991)

In my opinion, Crossing the Chasm (1991) and Inside the Tornado (1995) are most valuable when read in combination. In fact, I strongly recommend that they be read at least once a year, in combination, because Moore’s insights in both will become even more relevant as a global marketplace that both exands in terms of scope and depth and contracts in its of terms of engagement, especially focus on localities, niches, and analytics. Moreover, the relevance includes but is not limited to the high tech community.

Chasm “is unabashedly about and for marketing within high-tech enterprises.” It was written initialky for  he entire high tech community “to open up the marketing decision making during this [crossing] period so that everyone on the management team can participate in the marketing process.” In Chasm, Moore isolates and then corrects what he describes as a “fundamental flaw in the prevailing high-tech marketing model”: the notion that rapid mainstream growth could follow continuously on the heels of early market success.

Moore defines a market as a set of actual or potential customers for a given set of products or services who have a common set of needs or wants, and who reference each other when making a buying decision. The final point may be the least intuitive, but Moore says, “the notion that part of what defines a high-tech market is the tendency of its members to reference each other when making buying decisions– is absolutely key to successful high-tech marketing.”

Many business plans are based on a traditional Technology Adoption Life Cycle, a smooth bell curve of high tech customers, progressing from Innovators, Early Adopters, Early Majority, Late Majority, and finally Laggards. In turn, this model becomes the foundation for a high-tech marketing model which says the way to develop a market is to work the curve from left to right, progressively winning each group of users, using each “captured” group as a reference for the next. Moore demonstrates that in fact, there are cracks in the curve, between each phase of the cycle, representing a disassociation between any two groups; that is, “the difficulty any group will have in accepting a new product if it is presented the same way as it was to the group to its immediate left.” The largest crack, so large it can be considered a chasm, is between the Early Adopters and the Early Majority. Many (most) high tech ventures fail trying to make it across this chasm.

Early Adopters are the rare breed of visionaries “who have the insight to match an emerging technology to a strategic opportunity driven by a ‘dream’. The core dream is a business goal, not a technology goal, and it involves taking a quantum leap forward in how business is conducted in their industry or by their customers…Visionaries drive the high-tech industry because they see the potential for an ‘order-of-magnitude’ return on investment and willingly take high risks to pursue that goal. They will work with vendors who have little or not funding… As a buying group, visionaries are easy to sell but very hard to please… because they are buying a dream…They want to start out with a pilot project, which makes sense because they are ‘going where no man has gone before’ and you are going with them. This is followed by more project work, conducted in phases with milestones, and the like.”

According to Moore, “You can succeed with the visionaries, and you can thereby get a reputation for being a high flyer with a hot product, but that is not ultimately where the dollars are. Instead, those funds are in the hands of more prudent souls who do not want to be pioneers”

The Early Majority are pragmatists who “care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get… Pragmatists tend to be ‘vertically’ oriented, meaning that they communicate more with others like themselves within their own industry than do technology enthusiasts and early adopters… It is very difficult to break into a new industry selling to pragmatists. References and relationships are very important…Pragmatists won’t buy from you until you are established, yet you can’t get established until they buy from you….”

Moore notes that, “On the other hand, once a startup has earned its spurs with the pragmatist buyers within a given vertical market, they tend to be very loyal to it, and even go out of their way to help it succeed. When this happens, the cost of sales goes way down, and the leverage on incremental R&D to support any given customer goes way up. That’s one of the reasons pragmatists make such a great market: “They like to see competition… Pragmatists want to buy from proven market leaders because they know third parties will design supporting products around a market- leading products… aftermarket…

“Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in magazines they read. You need to be installed in other companies in their industry. You need to have developed applications that are specific to their industry. You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service.

In my opinion, the best sources for those with a special interest in disruptive technologies are the books that Clayton Christensen has authored or co-authored, notably The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, The Innovator’s Solution: Creating and Sustaining Successful Growth, and Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.

Bob Morris on Mastering the Dynamics of Innovation: A Book Review

Mastering the Dynamics of Innovation
James M. Utterback
Harvard Business Press, Second Edition (1996)

Utterback explains “how companies can seize opportunities in the face of technological change.” There are dozens (hundreds?) of other books on the same subject, notably those written by Geoffrey A. Moore, notably Inside the Tornado (1997), Crossing the Chasm (2000), and Dealing with Darwin (2008). I think so highly of this book because it is exceptionally well-organized and well-written as it examines several offbeat subjects (e.g. the development of the typewriter and the evolution of the typewriter industry, the development of the incandescent electric light), and also because Utterback focuses so intensely — and so effectively — on real-world situations in which the “dynamics of innovation” are manifest. This book is very informative but also great fun to read. (Those who enjoy it as much as I did are urged to read Peter Watson’s Ideas: A History of Thought and Invention, from Fire to Freud, Joel Mokyr’s The Lever of Riches, and William Rosen’s The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention.) Chapter 4 revisits the dynamics of the innovation model (Figure 1-1) and then in Chapter 5, Utterback shifts his attention to developments within the plate glass manufacturing industry. In Chapter 6, he examines the innovation differences between assembled and non-assembled products.

Subsequent chapters sustain the discussion of “the power of innovation in the creation of an industry” and then, in Chapter 9, Utterback “draws together some of the lessons of earlier chapters and academic research to consider the relationship between the behaviors and strategies of firms with respect to technological innovation and long-term survival.” He concludes his book (in Chapter 10) by addressing “the perennial management issue of how corporations can renew their technology, products, and processes as a basis for continued competitive vitality.” It is obvious to all of us that even the strongest product and business strategy will eventually be overturned by technological change. Ours is an age in which change is the only constant. Therefore, as Utterbach explains so carefully and so eloquently, the challenge is to accept the inevitability of change which results from technological innovation (“discontinuities”) and to sustain a commitment to cope effectively with such change. Only such a commitment “will win the day.”

What to do when a business is in danger?

Business Network Transformation

Philip Lay and Geoffrey Moore are managing directors in TCG Advisors, a prominent strategy consulting firm that seeks to shape and act on the CEO’s agenda within leading technology-based companies. Moore is also the author of several bestselling business books that include Inside the Tornado, Crossing the Chasm, and Dealing with Darwin. They have identified “Seven Early Warning Signs” that an organization and/or its business network is under attack, encountering serious disruption, and in imminent danger:

(1) Someone’s eating your lunch, but you’re not sure who, (2) New players are entering your marketplace and capturing business with your customers, (3) Even your established trading partners are becoming competitors, (4) You have lost touch with your supply chain and do not become aware of some developments until it is too late, (5) You cannot see what’s happening in your demand chain, (6) Others’ business model innovations have become a serious threat, and (7) Power is migrating to new roles in your business network.

What to do?

Lay and Moore acknowledge two different types of business networks: the collaborative network (i.e. has a peer-to-peer structure in which each member of the network has direct access to every other member) and the coordinated network (i.e. has a back-to-front structure that it inherits from an earlier instantiation of this model as a value chain). Each type has different “sweet spots.”

Collaborative Network: Target next-generation green field market opportunities to develop new markets and exploit high-value umbrellas; drive standards and interfaces to enable modular development in parallel with downstream systems integration; pursue market-specific solutions to increase customer value, reduce market risk, and decrease complexity to reduce integration risk; and meanwhile struggle to accept commoditization and move on, entrusting to partners non-core processes that are mission-critical.

Coordinated Network: Target low end of mature complex systems market to enter new markets and exploit high-price umbrellas; drive commoditization to lower base prices to drive down overall cost of offer and grow volume operations to scale; pursue mass customization to recapture margin and retain low-cost efficiencies; and struggle to collaborate to enter new markets and get downstream visibility in existing networks.

Those who wish to learn more about these and other issues are urged to check out Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage, edited by Jeffrey Word. Lay and Moore contributed one of the eleven articles.

Seven symptoms that a business is in danger

Philip Lay

As globalization initiatives continue to increase in both scope and number, there is a corresponding increase of importance of business networks of relationships with suppliers, customers, strategic allies, government officials and their agencies, etc.

Philip Lay and Geoffrey Moore are managing directors in TCG Advisors, a prominent strategy consulting firm that seeks to shape and act on the CEO’s agenda within leading technology-based companies. Moore is also the author of several bestselling business books that include Inside the Tornado, Crossing the Chasm, and Dealing with Darwin.

Geoffrey Moore

Lay and Moore have identified “Seven Early Warning Signs” that an organization and/or its business network is under attack, encountering serious disruption, and in imminent danger:

1. Someone’s eating your lunch, but you’re not sure who.

2. New players are entering your marketplace and capturing business with your customers.

3. Even your established trading partners are becoming competitors.

4. You have lost touch with your supply chain and do not become aware of some developments until it is too late.

5. You cannot see what’s happening in your demand chain.

6. Others’ business model innovations have become a serious threat.

7. Power is migrating to new roles in your business network.

What to do?

In another post, I will provide some valuable advice provided by Philip Lay and Geoffrey Moore.

Interview: Geoffrey A. Moore

Moore is the author of five best-selling, highly influential business books: Crossing the Chasm, Inside the Tornado, The Gorilla Game (with co-authors Tom Kippola and Paul Johnson), Living on the Fault Line, and most recently Dealing with Darwin, each of which deals with a set of management or investor challenges posed by fast-changing, technology-enabled markets. He had made the understanding and effective exploitation of disruptive technologies the core of his life’s work. He has also is a frequent contributor to business periodicals and a speaker at industry conferences. Moore is a managing director with TCG Advisors, a consulting firm specializing in strategy and business transformation services, and is a venture partner with Mohr Davidow Ventures.

Here is a brief excerpt from my interview of Moore.

Morris: In the revised edition of Living on the Fault Line, you seem to place much greater emphasis on core versus context when allocating resources to improve shareholder value. Why?

Moore: Core versus context is a distinction that has become increasingly important in our consulting work and has an even more prominent role in the latest book, Dealing with Darwin. The distinction is simple: something is core when it contributes to your competitive differentiation, your claim to fame, the reason that customers pick your offer and not your competitor’s. The more resources you can pour into core, the more differentiated your offer is, the more likely you win the sale, the more likely you earn an attractive price margin. Context, by contrast, is everything you do that your competitors do as well — it is critical to the success of your company, your customers demand it, or the government does, but it does not differentiate you.

Context is expensive because you cannot get a premium return for resources invested in it. The challenge of mature markets is that more and more of the total offer is context, not core. Moreover, often what used to be core has now become context, but resources are still being allocated as if it were core. This leads to companies having less and less impact in the marketplace, meaning their offers become more and more commoditized, leading to less attractive margins, leading to disaffected investors. Extracting resources from context to repurpose for core becomes the imperative, and that is the focus of Dealing with Darwin.

Morris: A related question. When you survey the dynamics of the high-tech markets today, do you believe that the emphasis on core should be even greater, about the same, or less than you suggested in 2002 when Fault Line was first published?

Moore: More and more. As competition becomes more global, the impact of commoditization increases, and it hits the higher-wage developed economies the hardest. If companies in these economies do not find compelling ways to differentiate their offers, they will not produce the earnings necessary to sustain the standard of living their workers are accustomed to. This is already painfully evident in Western Europe, and is showing up more and more in the U.S. The only way to counter this trend is to invest more resources in next-generation core.

If you wish to read the entire Moore interview, please contact me at interllect@mindspring.com.