Geoffrey Moore is an author, speaker, and advisor who splits his consulting time between start-up companies in the Mohr Davidow portfolio and established high-tech enterprises, including Salesforce, Microsoft, Intel, Box, Aruba, Cognizant, and Rackspace most recently. His life’s work has focused on the market dynamics surrounding disruptive innovations. His first book, Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers, focuses on the challenges start-up companies face transitioning from early adopting to mainstream customers. It has sold more than a million copies, and its third edition has been revised. A majority of its examples and case studies reference companies come to prominence from the past decade. In Escape Velocity: Free Your Company’s Future from the Pull of the Past, he addresses the challenge large enterprises face when they seek to add a new line of business to their established portfolio. It has been the basis of much of his recent consulting. His latest book, Zone to Win: Organizing to Compete in an Age of Disruption, was published by Diversion Books (November 2015).
Geoff has a BA in American literature from Stanford University and a PhD in English literature from the University of Washington.
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Morris: Before discussing Zone to Win, a few general questions about developments since our last conversation. First, of all that has – and hasn’t in the global marketplace in recent years, which development do you consider most significant? Why?
Moore: The increasing presence of cloud computing and mobile smart phones is driving the digitization of everything across both consumer and enterprise domains. It is hard to imagine any area of human activity which is not being reengineered under this influence, either at present or in the very near future.
Morris: Briefly, please explain the process by which the Age of Disruption developed.
Moore: The Age of Disruption is unfolding even as we speak. Cloud and mobile initiated the current wave of change, and they are being amplified by social networks, data science, and the coming Internet of Things. All five of these trends are converging to drive the digitization of everything mentioned above.
Morris: What are its defining characteristics?
Moore: A technology becomes truly disruptive when it drives the marginal cost of something that used to be scarce and expensive to approach zero. Thus, it used to be to deploy software at scale, you had to fund a data center, buy a set of servers, storage, and networking gear, build an in-house IT management capability, and buy an expensive stack of enabling software before you could even get started. Now you can get all that from Amazon or Microsoft on a pay-as-you-grow model.
Compared to the recent past, this makes deploying software virtually free. Smart mobile phones connect you with 1 billion users worldwide, basically for free—you don’t pay for the phone, you don’t pay for the Internet, you don’t pay for the wireless connectivity. Social networks let you add a new customer or a new agent, again for free.
Data science lets you apply algorithms in real time to optimize computerized responses—again, virtually for free. The Internet of Things enables dynamic system optimization, not to mention environmental data collection, on the same basis. None of these are literally free, of course, but by comparison they might as well be. So, if computing is free, if accessing each and every constituent in your business network is free, wouldn’t you reengineer the processes that are currently in place? If Uber can add a new car and a new driver to its network for free, if Airbnb can do the same for a new property and new property manager for free, wouldn’t that pose a challenge for their conventional competition?
Morris: What are the most common misconceptions about disruptive innovation?
Moore: The most common misunderstanding of disruptive innovations is to overestimate their impact in the short term and underestimate it in the long term. Another common misunderstanding is to associate disruptive with good. Joseph Schumpeter’s phrase “creative destruction” deserves equal emphasis on both words. The third most common misunderstanding is to miss the point about driving the marginal cost of a previously scarce and expensive good to near zero—that is the economic force that drives the disruption at the end of the day.
Morris: What are the major benefits and limitations of sustaining innovation?
Moore: Sustaining innovation is the lifeblood of any enterprise. It is the time when we capitalize upon, and recover from, all the disruptive change prior. Most of the operating profits in the world come from sustaining innovation. Much of the market capitalization gains, on the other hand, come from disruptive innovations. Another way to make this point is that sustaining innovations are the key to consistent performance, whereas disruptive innovations are the key to dramatic changes in power.
Morris: In your opinion, what is the single greatest business opportunity that is now emerging in the global marketplace?
Moore: The ability to analyze digital log data to trace digital actions and from those traces to develop algorithms that can predict future outcomes with greater accuracy. This is the domain of machine learning fed by Big Data. Everywhere it has shown up to date it has caught the competition flat-footed and sent them packing.
Morris: What are the most important dos and don’ts that business leaders should keep when pursuing this opportunity?
Moore: Don’t think you have to be the disrupter to win. A fast-following disruptee will do very well if you can bring your existing customers and ecosystem along with you. Try to learn as fast as you can from the wizards and then steal what you can appropriate from them and use it to modernize your existing business model (without disrupting it). For example, in San Francisco the cab companies are embracing a mobile app called Flywheel that lets passengers hail a cab, see it en route, and pay by phone—all key elements of the Uber success formula. But the cab companies still buy their own cars and employ their own drivers, so they are not Uber, and they are not disrupting their prior business model. What they are doing instead is stealing a page from Uber’s playbook to modernize their operating model. That is the key to staying relevant.
Morris: In your opinion, why are so many senior-level executives still committed to what Jim O’Toole so aptly characterizes as “the ideology of comfort and the tyranny of custom”?
Moore: Well, it is hardly just senior-level executives—the human race as a whole has a tendency to seek comfort and rely on custom, and it hasn’t done too badly doing so. The danger is to cling to comfort and custom at a time when events demand breaking away from both. But it is also foolish to jump at every startling moment. Darwin selects primarily for prudent fast-following.
Morris: What is your opinion of the counsel that advises business leaders, “Don’t put all your eggs in one basket”?
Moore: When you are incubating new ideas, this is very good advice. But when you are seeking to transform your enterprise’s portfolio by scaling a fledgling business to material size—say ten percent of total enterprise revenue—then it is imperative that you make that the singular focus of everyone in the enterprise for the two to three year period it is likely to require to reach its tipping point. Expecting to do two such scaling efforts in parallel is simply folly, yet that is what the “eggs/basket” idea is often used to justify.
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Here is direct link to the complete interview.
Geoff cordially invites you to check out the resources at these websites: