An established enterprise must re-engineer its operation when new technology makes a process that used to be expensive and hard to deploy easy to deploy and virtually free.
The decision is whether to catch the first wave, or play catch-up. Be the disruptor or the disrupted.
The capabilities of established companies (supply chain, distribution, a customer base) are all things that a start-up would kill for. The challenge is to aligned those things to support a re-engineered operation.
There are three zones of investment that exist in most companies already: Performance (core business that’s making the money today), Productivity (non-revenue making areas such as finance, IT, legal), Incubation (start-up zone to create options on future business or future business methods).
A fourth zone needs to be created. A transformation zone which takes on the challenge of going against the inertial momentum of the organisation. It’s a very painful change because there is a period where you go backwards before you go forwards.
Transformation zones can create a whole new earnings engine, and make companies a lot more valuable. Apple created three transformations in a decade, and went from being almost bankrupt to being the most valuable company in the world at one point.
When you add a new earnings engine, the financial community adds another row to their valuation spreadsheet. When it gets to 10% of revenue it is no longer a footnote, it has to be added to their valuation model. Company valuations soar as a result.
Innovations in the incubation zone can be used to modernise the existing business or improve productivity. Only one innovation can be moved to the transformation zone at any time.
The transformation zone only lasts for the length of the transformation, around 3 years, before it is scaled enough to move to the performance zone.
Being disrupted? Most companies are in the category of being disrupted. There is a three step programme to set into motion in this case: Neutralise, Optimise and Differentiate. You can’t drift.
The fastest way to get out of disruption is to first incubate the new technology yourself by using it internally in the productivity zone. You’re not exposing it to customers, but using it to save money in-house while learning about the capabilities. You are your own first customer.
You no longer have to apologise for not being on the new technology. Apple iPhone is the gold standard but Google Android is good enough. Be good enough. Don’t try to leapfrog.
Your customers do not want to leave. Once customers make a vendor decision, their strong preference is to stay with that vendor. You don’t have to be better at everything, but you do have to be good enough. The mantra is getting good enough, fast enough. It’s not inspiring but you want to stay alive.
Geoffrey’s GREAT EIGHT, answers to eight getting to know you questions we ask all our authors:
Recommended book: The Big Picture: What It’s All About by Sean Carroll, The Lean Startup by Eric Ries.
If you could co-author a book with anybody who would that be, what would the book title be? Clayton Christensen, author of The Innovators Dilemma.
Great piece of advice you could share: In a changing world, it’s important to design your business back from the customer. The customer is your first signal that your old values need to get redirected. Rather than trying to invent the future, staple yourself to a customer undergoing painful changes.
What’s been your lowest moment, and how did you recover? I was working at a start-up and the founder didn’t keep agreements with investors. On the Saturday we were told there would be no payroll on a Monday. To survive, I checked in with people I knew in the industry, and said “So, I have a little free time, is there anything I can take off your plate for a couple of thousand dollars?” I made more money in six weeks than I’d ever made, and that’s how I became a consultant.
How do you relax? Family and golf.
What’s a fun fact about you that’s not widely known? I have a Ph.D. in medieval literature. Both literature and business are interested in strategies for being successful, so I’ve built a bridge between both parts of my life.
What’s your secret of success? I try to staple myself to a customer’s problem and I don’t let go. Wherever it drags me, I don’t let go, and sooner or later, (with others’ buy-in), it’s wrestled to the ground.
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What’s your prediction for 2025? We’re heading towards a darker world. I think it’s going to be a tough decade. I’m hoping we can weave something responsive out of that. Right now it’s not an optimistic time. We all need challenges, this will be a challenge.
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