Propulsion 2020 Keynote - Zone to Win: Organizing to Compete in an Age of Disruption

Transcript

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Introduction: Be’Anka Ashaolu, Director of Marketing, Propel

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Be’Anka Ashaolu: Our first speaker in advisor Geoffrey Moore is up next, with an in depth analysis and have to switch from the industrial product era to the digital services era is impacting companies.

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BA: More splinters consulting time between startup companies in the wild type Venture Partners portfolios.

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BA: And establish high tech enterprises. Most recently, including Salesforce Microsoft Autodesk f5 networks gain site Google and spunk.

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BA: Is like work is focused on the market dynamics surrounding disruptive innovations. His first book Crossing the Chasm focuses on the challenges startup companies face transitioning from early adopting to mainstream customers.

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BA: It has sold more than a million copies and in its third edition has been revised such that the majority of examples and case studies reference companies that came to prominence from the past decade.

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BA: Moore's most recent work zone to win, which will be available to you. Following the conference addresses the challenges large enterprises face when embracing disruptive innovations.

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BA: Even when it's in their best interest to do so it's time to start explaining why they don't and start explaining how they can. This has been the basis and much of his recent consulting

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BA: And it's propulsion 2020 keynote presentation will also explore our product manufacturers can be more successful in the age of the customer and provide practical advice on how to catch the next disruption wave and build a winning business here is Jeffrey morn

Keynote Speaker: Geoffrey Moore

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Geoffrey Moore: Well. Hello, I'm Geoffrey Moore. It's a pleasure to be addressing you. Today I want to talk to you today about

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GM: A big changes that are happening in our world today and it's just the framework, I will use case, coming from a book called zoom the wind. But the book was driven by the fact that

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GM: Our whole society. In fact, your whole world is undergoing a digital transformation only being accelerated by the current pandemic and other factors.

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GM: And so everyone involved in the economy is having this challenge of catching the next wave

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GM: So whether it's your company or your customers company. I think the frameworks and that I share with you around certain management are going to prove really valuable.

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GM: Before we get into any solutions will talk a little bit about the problem. What's going on, it's forcing people to change their behavior so dramatically in the last few years.

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GM: And I think that the code word for that other phrase, we've all been using for this digital transformation. What do we really mean by that.

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GM: So, so I think the transition has he has a century that it's clean, clean for the 20th century 21st century.

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GM: Is a change from industrial product model organizing the economy around saturated industrial model to one more oriented around digital and digital services.

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GM: So if you look at that industrial model. We had an enormous impact because the IT industry on this model.

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GM: It was an era when product was king. Basically, there was probably more demand than there was supply people would wait in line to get the right product and you'd go to the store. You go to the dealer and get whatever you had to do.

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GM: So as a result, we focus a lot of attention on making the product supply chain better

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GM: And the way you did there was you built the earpiece systems advanced planning manufacturing systems and quality systems and all these things.

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GM: Which you built them from the product forward toward the consumer, you started with a supplier and you work from the back of the supply chain toward the front

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GM: And what you were doing was trying to improve efficiency and effectiveness as you went along the whole Toyota Production System method.

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GM: You know better, better, better never best the Six Sigma quality movement all designed to say, can't we make these things bigger, faster and cheaper as we go forward and we did. I mean, we did particularly once we brought the internet and

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GM: What the internet allows us to do in the 90s was bring China into the global economy. Bring India into the global economy.

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GM: actually bring many, many developing nations into the global economy, which had the effect of driving down prices, a challenge for for the developed economies, but wonderful for the developing economies.

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GM: But, but in general just created a much better have access to very find products that lower lower prices and during this period from an IT perspective.

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GM: The B2B computing was the driver and b2c business to consumer computing was was very secondary it came. It came second after after the fact, not before.

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GM: And so what we really were focused on is what we ended up calling the systems of record.

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GM: The systems of record started with just the financial systems, but then they grew out into the order processing systems, the inventory management systems, the customer database.

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GM: Pricing etc etc but they were all designed around keeping a historical record of the transactions that you were in the midst of processing or the past so you could do your financials, etc.

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GM: And when it came to our products, what we, the way we interact with customers and partners with something called customer support or tech support.

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GM: The main idea was you wanted people that really strong product knowledge to be in those functions so they can help with what happened with the product.

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GM: And it was an arrow from the it point of view, where the great companies included asap and Oracle, both for the database. The other applications Cisco to build out the Internet.

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GM: Microsoft and intel on the client side of client server, it was a it was a huge, huge effort in the 90s, which is a dramatic increase in expense with it to do in order to make this happen.

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GM: Okay transition now to the 21st century and and the whole lot has changed. Here we are 20 years into the 21st century.

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GM: And now it's the product is no longer king but customers King, the customer has become the scarce ingredient is enough supply of product that now we have to actually coordinate

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GM: compete for the customer, we always did, but now in a much, much stronger sense of the customer is much better informed and much more powerful than they ever were before.

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GM: So it requires us to do. It's a sort of plan backward from the end user, as opposed to forward from the supplier.

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GM: So now what we're talking about, how would the customer using. How do we engage the customer and then we work backwards, figuring out. Okay. Then what kind of a service. Do they need

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GM: And therefore, what kind of a supply chain. Do we need to provide that service. And do we provide it through a product or do we provided through a service. So we have products as a service software as a service being a classic example.

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GM: So we're Six Sigma was kind of the key discipline of the product user experience design is now the key experience of the digital services area.

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GM: And whereas it was the internet to change everything in the pack pastor now it's cloud and mobile this changed everything. Because with cloud and mobile did

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GM: Was it brought the consumer directly into our lives and brought us directly into the consumers lives.

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GM: So now the end users in the, in the end, purchasers have enormous amounts of information and expect very fluid contact

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GM: With us as vendors, which they got largely to consumer experiences that we didn't help build. We didn't build up the cloud. We didn't build up mobile. That's what the consumer computing people did.

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GM: But now the B2C is enabling B2B meaning, every one of us in the B2B world has become a B to B to C company.

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GM: And we have to bring this new infrastructure into and have an interface with our old systems. Boy, is that a challenge.

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GM: Because the systems of record would never really designed to interface with the systems of engagement, those two systems platform for built entirely. Separately from each other.

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GM: And now we're all you know meeting the challenge of trying to take advantage of both legacies, because each one of them has enormous, enormous value to add, but they were never designed together. And so we're all kind of working with the

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GM: Effort out and it's going to take probably another decade ago where we really wanted

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GM: It done that decade instead of customer support, which is the key word products. The king we've not had to redefine that entire function has a customer success, which means

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GM: The customer success is not when the product works customer success is when the business outcome has been achieved.

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GM: So again, designing backward from the business outcome as opposed to forward from the product capability.

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GM: Holding discipline and so we have this whole new group of people, whether it's Salesforce or Amazon or Apple or Alibaba Tencent we're coming out and it's a new world.

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GM: And from the point of view of those of us who care a lot about a product lifecycle management.

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GM: It's been flipped on its head. It's been turned around. We used to run to take a product lifecycle management is going from left to right on the spot.

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GM: Now we have to think about is going from right to left those and as soon as the customers application, the world changes that ripple has the ripple back across to the left hand side so that we can modify our

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GM: As soon as that changes, we have the ripples back to the other side that we need to be able to modify our products and services accordingly.

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GM: So that's the goal. We have this kind of the digital challenge that we're all facing as we look at that and we say, okay,

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GM: So what does that do to product success when you digitally transformed product says what's different in the age of the customer. And the answer is a whole lot

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GM: So let's just ask ourselves, like what's happening to our products.

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GM: Well, we have this new discipline code user experience design, by the way, we have something called developer experience design.

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GM: If we have products where we expect developers to augment them, particularly the software industry that's become important.

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GM: And then this whole notion that we need to add telemetry to our products so that we can be continuously connected to their performance.

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GM: Once they're installed in the customers environment that creates a whole new capability. Very exciting because we could intervene and do preventative maintenance all this wonderful stuff.

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GM: But, but it's a whole new set of technical challenges and then because telemetry always creates log files.

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GM: We now have this next generation opportunity of saying if we expose all the log files to machine learning machine learning can detect anomalies in the log files that human beings would never detect

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GM: And begin to come up with a better performance in the ears and again preventative maintenance indicators and these can be turned into algorithms. And we actually can have eventually

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GM: Autonomously self correcting or what I've used to call autonomic systems which just get better but but just by listening to the telemetry data and making themselves better

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GM: So we can have impact on our products in terms of what we're asking.

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GM: In addition, our services. So as I said, you know, used to be customer support if our product work brother work. What do you want

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GM: But now it's like, no. Did the business outcome get achieve and then implies a very different person in that function, whereas the product customer support person was a Product Expert

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GM: The customer success person is going to be a customer expert have to sort of work backward again for the customers buying outcomes.

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GM: That, that, that's a whole new art that we're just, we're still frankly coming up to speed with

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GM: Incident Response becomes incredibly important because now we're being perceived as a service, and we're a mission critical service of the service goes down for offering it like say in the cloud or over the Internet.

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GM: That it's incredibly important that we get back up as quickly as possible.

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GM: And then if we have products which which can actually make more of their money on upsell and cross sell we're increasingly say well why can't the product make that early suggestion. Why do we always have to have a salesperson.

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GM: Contact the customer. If the product can see that the customer is at the point where they can use the next feature the next module, why not let the product suggested. So again, think about the

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GM: The ask that we're making from our product teams, it's much, much more customer centric than it's ever been before.

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GM: And then I go to market our sales and marketing teams. And basically, you know, in the 20th century.

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GM: It was much more like landing whales and we particularly for B2B, you would you would go out, you'd sell big contract and you

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GM: Make a big implementation and it would be a big commitment from both sides. But basically, once you close the deal.

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GM: And the customer accepted the product a monkey shifted from your back to the other guys back to the customers monkey, not yours.

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GM: In this new world, you get the monkey for threats to your wife, your the monkey owner

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GM: So basically you land. You want to expand. You want to extend that you want to retain and all of these things require you to keep in touch with how the customer is doing.

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GM: So the go to market with the 20th century was much more like kind of a Glengarry Glen Ross, you know, coffee is for closers. Go get it, get the deal and go get the next deal

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GM: Now it's increasingly about enter into a relationship with a customer that you can sustain and nourish go for overtime. So again, just a whole different problem that we're operating

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GM: And so if you say, okay, well, so what is that humble due to the discipline of product lifecycle management. What are we asking product lifecycle management.

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GM: To adapt to. Because again in the 20th century wanted to adapt to the life cycle of the product. But now increasingly we're saying, well, no, we want you to adapt to the life cycle of a situation which is a much more

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GM: abstract idea. So if you still start at the beginning of the life cycle. It's not just that we're trying to design a product that works or that's effective or efficient.

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GM: We're trying to design a product which brings the customer into the product so attract engage convert list. A lot of the products now have free trials and free downloads that you can upgrade to

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GM: And so, again, it's much more of a of a courtship and it is just like a fulfillment of a contract.

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GM: So design is change when we build the product increasingly we're using these agile methods which say look,

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GM: We don't necessarily know what the customer wants. We think we do. We have some great ideas about it.

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GM: But we need to create this minimum viable product and we need to go and test it with customers and sell it to customers. We work toward product market fit, which we work cooperatively with our early customers to do that.

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GM: And in this new world mobile first cloud first that these these consumer capabilities are so critical to staying in touch with the customer and we can't, we can't ignore them. So we've had to design

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GM: Mobile capability and cloud capability into product lines that never ever anticipated having that involved.

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GM: But, but, but now I take the john deere tractor is a classic, classic example that

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GM: In order to operate in a mobile first club first world, you really have to take advantage of a lot of technology that other people have created

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GM: Which means you have to participate in a system of API's of application programming interfaces, so that you you talk you play nicely with them. They play nicely with you.

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GM: You can pull these things together, increasingly assembling capabilities as opposed to create everything from scratch.

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GM: But you still have your legacy systems of record, and you have to maintain those interfaces, as I said, they're not, they do not naturally integrate

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GM: With the modern the modern infrastructure. So that's another challenge we're asking our product teams to a grits.

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GM: And then when it comes to marketing and selling again, as I said, we used to say will send out an account team will will do the classic

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GM: You know enterprise sale. Well now, increasing the customer symbol. Wait a minute.

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GM: I maybe I would like to buy this direct from the, from the factory or maybe I'd like to buy it through a distributor.

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GM: Or maybe as much as five online. I mean, omni channel is becoming increasingly important.

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GM: Particularly for marketing. I want to learn about it on the web. But I want you to be able to contact me mobile. And by the way, when I actually do call you up. I want you to know what I know. I don't want to

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GM: repeat myself over and over again. And this whole notion of products as a service, which is this notion that the monkey stays on your back. That's part. Now the marketing and sales application.

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GM: And just engaging the customer and in keeping the customer engaging sustaining that commitment going forward in the products. Got to be able to support that the sense that it's got to maintain open channels of communication throughout its life cycle.

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GM: And then maintaining the relationship. So that has the capability of persistently monitoring without added costs without adding latency without adding

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GM: additional challenges, but being able to consistently stay on top of how these things are working

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GM: How big is your experiences going continually analyzing that being able to provide instant updates as opposed to having to take down the entire system, you know,

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GM: Bring it back up again. And then this whole notion of things like digital twins, where we're saying, look, we want to keep

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GM: It as is a picture of our factory which increasingly may diverged from the as was or has plan. Thanks. So this notion of digital twin is enable you to as a group, maintenance going downstream very, very important.

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GM: So you look at all that you say, Look, it's a huge, huge change in them. And by the way, this was going to be a decade's worth of change when nobody was going to try to do this overnight.

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GM: But interestingly what covert is done in the whole work from home movement is done. And frankly, all this pressure that's been put on all the various systems of our society.

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GM: It's made catching this digital transformation wave more urgent that effort.

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GM: So there's huge pressure on your organization's put an addition on your customers organizations and potentially with their customers. If you have it that long chain.

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GM: Every one of us has had to say, look, we need to we need to bring this forward and moving forward faster.

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GM: And that's going to create a bunch of changes or challenges around what we call catching the next wave

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GM: These challenges are very familiar. But the truth of the matter is, it used to be that these this next wave was something you had a decade or more to

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GM: Sort of get ready for the coming and whenever know increasingly these waves are coming very, very fast. As I said, with the covert even more accelerated.

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GM: Because there's a very good framework for talking about catching the next one. If it's called the technology adoption lifecycle. And basically, it makes it just says that makes the claim.

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GM: That in any disruptive innovation. When people adopt any disruptive technology.

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GM: They go through a pattern of abduction, where each where the personas on the right hand side lead the adoption at different stages of the of the life cycle.

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GM: That technology adoption lifecycle. This is not necessarily the product lifecycle. This is the technology as a whole and so

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GM: So it begins with the technology enthusiasts and that we have our, you know, our friend from Big Bang Theory of their Sheldon, but basically technology enthusiast get excited about the news. How does the new thing work.

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GM: What's the technology involved. So they always want to be with the latest and greatest. That's why the very front of the curve.

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GM: So they typically don't have much budget to spend so they're not necessarily a customer. They're really a gatekeeper and they're often an incredibly important ally and then in the beginning of the very beginning of a technology lifecycle.

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GM: The visionaries are the ones who buy in. First, they do have budget to to throw off the plane.

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GM: And they want to be first movers. They want to go ahead of the hurt that one. They want to get ahead of the problems.

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GM: So they're willing to buy in very early and make big commitments for it. But what they want you to do is to work with their vision and not just give them whatever is off the shelf so

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GM: That's their, their value proposition. Most of the curve is dominated by this sort of group called the practice our that's where most of the budget of the world exists in any given time and pragmatists aren't sure

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GM: pragmatist what stuff that works, but they don't want to get encumbered with stuff that doesn't work. So what they do is they talk to each other incessantly.

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GM: And they continually asking each other. Have you tried it, does it work. Do you like it.

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GM: Hmm, I don't. Are you waiting. Okay. Oh wait to you're doing. Maybe I'll do it too. So it's very much the wheel and sometimes called like a junior high.

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GM: Dance problem. I mean, are you gonna quite there yet. I don't know that. Yeah. Are you. Oh, now we will, and she'll see on the next slide. It creates a big impact.

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GM: Believe in us at all. They just, they just don't buy it at all. So that's kind of a classic the profiles of Dominic this life cycle.

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GM: If you see how it plays out in time. It's kind of interesting because it ends up being four key inflection points during this life cycle that in each inflection point the vendor and

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GM: everyone on this call potentially even your customers as well have to change their strategy in order to secure success.

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GM: So it starts with what we call the early market and that's those technology enthusiast and visionaries Sheldon and Steve Jobs.

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GM: And the key to the early market is these people believe what you believe and they tell you that they said, we believe what you believe that the buyer vision. It's really a very reaffirming

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GM: Moment of the market. And so, but there's not, but they don't scale. These are one off projects, if you will.

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GM: And so the object at this point in the market is you want to secure one or more marquee account references but marquis I mean a top five fortune 500 company.

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GM: Who do who will take your technology and show it's possible. Put, put you in the technology on the map.

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GM: And so as a result what you do at that point is you do whatever it takes to make them successful

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GM: Because more than anything else would you need to have the rest of the world understand is, there's a new game in town. The rest of the world has adopted a new game.

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GM: But there's a new game in town and boys is a great game. I mean, if you can make it work. It is fabulous.

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GM: That said, You next run into the chasm is the prime minister going wow that was really impressive I were Steve Jobs that might be thinking of doing it, but I'm not Steve Jobs.

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GM: I'm a pragmatist. You know, I have a day job, but I'm not. I don't. I certainly don't believe what you believe.

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GM: But that could be a cohort of pragmatists, who saved, but I have a slightly different problem. We call this cohort.

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GM: Of these are very small records. Typically, the very left hand side of the product, which is just at the edge of the chasm. And what puts them at the edge of the chasm is they have a urgent problem, but they can't solve

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GM: So they say, Look, it's not that we believe what you believe, because we don't. But we might need what you have, because I tell you we don't whenever we will move tried everything we

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GM: Could think of it, we haven't solved this problem and we're in trouble. And we need to solve this

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GM: So what you're looking to do at that point. If you're a visitor trying to cross the chasm.

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GM: Is you want to develop a loyal customer base in these very relatively small cohorts I focusing on an urgent high value use case that's underserved.

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GM: And basically, by taking that problem off the table. You win a cohort of private to start saying these are the these are the

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GM: Guys are the real deal. This is real, this technology really works in a real world situation, not just in a visionary project situation.

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GM: And so although these market segments are typically rather small, so they don't you can't talk about a big target you know available market or big service available market.

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GM: Their crew crucial in starting the pragmatist adoption process. Think of them as like kindling started the bonfire.

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GM: You can think of them as like a presidential primary in New Hampshire starting a presidential campaign.

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GM: They're not many delegates, New Hampshire, but winning the New Hampshire primary can get things started for you. Same idea behind the bowling alley. So focusing on your urgent use cases and showing people that

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GM: You bring solutions. Next Generation solutions to really break the back of problems that have lingered with them for decades and are now urgent. So that creates it will be called the bowling alley. Because once you get the first use case.

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GM: So you can go to the next use case and you go to related use cases that use maybe some of the same partners or maybe a second or third use case in the same industry.

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GM: But either way, the pragmatist community. It's more and more aware of what you're really capable of

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GM: And at some point that the market transitions from thinking you as kind of a very vertical specific situation specific use case specific solution to something more general and more horizontal

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GM: This is what creates the tornado tornado and the tornado is when the pragmatist. Her eyes in on mass kind of the way in the chasm. They were holding back on mass. Now they buy hit on that.

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GM: And they don't say we believe what you believe and they don't necessarily even see we need what you have, what they say is we want what they have.

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GM: We want that stuff. That's the new infrastructure. We want why fired or conference rooms. We want to mobile enable our entire workforce and we want to move or as much computing as we can to the cloud.

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GM: You know, that's what we want to do. And so what happens is, for the first time in the history of the life cycle of this technology.

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GM: Massive amounts of budgets are moving into the system. And so, whereas prior to the tornado, frankly, you had to script and scrap for budget because it wasn't

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GM: It wasn't teed up with a tornado. Everybody says, Okay, we're going to create budget to deploy this globally.

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GM: And we're going to pick our vendors. We're going to put out our RFP. We're going to go. So this is a time when you really want to catch the next wave and capture as much market share, as you can.

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GM: Because this the these tornadoes last for 2-3-4 years they don't last for a decade, much less than a decade. And during that period.

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GM: Custom companies pick their first they pick their vendor, they make their first big purchase in the category and they pick a vendor to do that with well whatever vendor they pick the probably go stay with is one of the

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GM: sooner the better. Even reasonably well. And so as a result, market share gets set during the tornado.

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GM: And in the market share advantage of being number one is huge in the Medicare Advantage of being number two is models.

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GM: And three to three to head it's de minimis. So there's incredible about steak that winning market share in the tornado and then during that period customers to focus very much on just getting as

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GM: Many customers into the, into their sole basis, they can, which means you have to kind of standardized the offers, not a lot of customization just, you know, get as many folks in

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GM: Once that happens, and that may take as I said 345 years the category is soon it's nice to see we're still in the infancy of the category. We're just going through the adoption lifecycle.

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GM: But even the adoption lifecycle is one more phase, which we call Main Street Main Street when the conservatives come in.

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GM: And the conservatives. Do not say we believe what you believe, because they certainly do not. And they don't really say we need what you have, because they think they're doing fine with the old stuff.

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GM: They don't even say we want what they have, because they really don't know what they end up saying is, okay.

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GM: But we need what they have, because this has become the new normal. This has become the new standard. We can no longer facts are orders in we have to send them through

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GM: Internet enabled web enabled capability, etc, etc. So this coin, we in the old model no product model. We didn't like conservatives because they were very hard to sell to other very cheap, but in the new generation of digital services.

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GM: Conservatives actually have an interesting property, which they like to be taken care of. They like this service as an outcome thing they want to maintain relationships.

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GM: And so what you can do it mainstream with the Kingdom ministry is having landed and potentially expanded or the tornado now increase wallet share the aftermarket products anything services.

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GM: In your install base, it becomes increasingly profitable because you're taking because you've amortized all your customer acquisition costs, all your attack.

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GM: And now the lifetime value of the customer is a function of how long will the conservative continue to participate in your in your service of the longer it is, the better the economic model.

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GM: So, which you can see from this model is there's a lot to win at every stage, but look how different it is look at how different the strategy is at each of the four inflection points.

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GM: So the key lesson behind this model has always been what as a team, make the call. Which of these four icons is the one that should dominate.

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GM: Our product lifecycle management strategy for this year and our go to market strategy for this year and they should be coordinated and let's play that game.

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GM: And then then. Let's have a discussion at the end of the year is a time to transition to the next one, or not.

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GM: And this is driven by the technology adoption lifecycle. Remember, not the product lifecycle your product. Maybe later earlier than this month. And this model says, but the marketplace as a whole, where the customers are coming from. It is shaped by by this model.

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GM: So having said that, once you get a significant technology to scale and your company has been successful as many of the people on this call.

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GM: Are in companies like that you have what we call it core business you have a business where your core product line has either been in the tornado or is on Main Street.

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GM: And it's feeding the beast. It's the thing that creates the operating income is running the company.

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GM: In you, it's the thing that your investors see and get a value. If you're a public company is the sort of stuff you report out on

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GM: In your annual or quarterly earnings reports, your annual report having said that the waves have not stopped. So if that was wave one, here comes wave to

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GM: Next Generation businesses and know that we're back to the early market. We're back to the bowling alley. But now, think about the pressure. This is now putting on your organization.

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GM: Because in the yellow part of this mark of this diagram, we're asking people to take established budgets compete for them and then convert them into increasingly profitable business.

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GM: We're operating at scale, both the tornado and Main Street are all about operating at scale.

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GM: The early market and the bowling alley or both about operating it's subscale

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GM: Where there are no budgets are the budgets have to be created or they have to be at least redirect the bowling alley. There's usually money, but it's usually not for you. It's usually for the old stuff. So you got to get redirected

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GM: And the point about that is it's hard for sales forces who were compensated with traditional sales incentives even want to deal with the stuff of the blue zone because it's so hard to get a sale, it takes so much work. And yet, if you don't operate effectively the blues.

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GM: Then you're going to get this disintermediation disrupted by when it, when the blue gets to the tornado.

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GM: So the whole challenge that we will be trying to embrace with zone to win and all this work that we're doing the 21st century is how do you organize inside an established enterprise.

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GM: A meant a your entire capability to both run your core business and catch the wave of Next Generation businesses and that was the challenge that led to this thing called Zonda when

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GM: The book was written with two companies that was written with to executive teams Marc Benioff and his team at Salesforce and Satya Nadella and his team at Microsoft.

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GM: So the written with big companies. Although, frankly, if your company is got 30 or 40 or $50 million of business and that's what's running the company, you're going to have his own money for framework.

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GM: As well, obviously, the bigger you get, the more important it is to understand the zones. The lesson formula. You can be the more formal. You have to be

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GM: Willing to show you the framework because it's just one slide. It's not that hard to get

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GM: So basically it just says, Look, your core business is on the sustaining innovation side of this diagram.

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GM: And it just dropped a new stuff is on the left. So the yellow stuff is on the right, the blue stuff at the bottom of the curve or is on the left.

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GM: And then the other distinction that makes is that if its mission critical, you're going to have to treat it differently than if it's a day one.

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GM: You know it's failure is not an option in the two quadrants above the line, but it is an option. In fact, it's a very useful option frequently below the line.

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GM: So this creates four zones of management and the claim of this framework is that each zone has a different mission. It's a mission that is critical to the success of the enterprise. So there's no

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GM: Limited each zone because there's a different mission has a different culture, the different management model. So this is what it what's critical to understand about this.

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GM: Is that each of those four management models, create success in the quadrant is designed for but it creates failure if you do it the other three quadrants.

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GM: And so the whole teen his own management understand which zone. Are we operating out of and which management model, therefore, should be applying and and which are the other three miles. Can we just say no to and not let them get

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GM: Injured model outside of its own is create, create significant disruption and confusion and no advantage whatsoever. So zone discipline is really important.

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GM: So let me just kind of start that up so the performance zone. It's this is the zone that

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GM: Generates the performance of all your financial investor. See, but it's also generates the performance of your customers see this is you acting in the world.

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GM: And will and basically you're competing with other countries to win customers and keep customers. It's very much we say it's a performance culture, we mean it's a very athletic culture because in a competitive environment. You can play in the last day. Oh.

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GM: No plan survives first contact with the enemy that is you've got to be agile. You gotta be. You gotta be, you know, very

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GM: Immediate into your responses intuitive. You have to think fast as opposed to think slow, as it were. And so both people in sales and like sales, but also the product line managers in the lines of business.

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GM: Be very

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GM: Very

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GM: Supportive to the changing customers environment. So that is the customer changes or the competitor changes, we have to make in

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GM: Real Time changing it adapt stations in the performance zone. And that's why I mean it requires an athletic culture you guys at the snap of the ball. You got to figure out what's going on. Where do we

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GM: Know when he says because the productivity. So, which is all of the cost center functions that operate behind the scenes.

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GM: Only

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GM: Cyrus.

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GM: Anything you do anything you spend money in your company on you don't literally charges.

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GM: And the goal, the productivity. So just not to compete for customers and it's not to be athletic and it's not to be agile.

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GM: Is designed to make everything work on a steady reliable, predictable basis. So it's trying to deliver predictability and reliability and efficiency to to the corporation as a whole.

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GM: So it develops much more of a process culture to do that and across all the shared services is continually applying processes could

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GM: Either sharing services, there's never enough resources is always is, how do I get more and more from less and less kind of thing.

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GM: And so this this don't actually is thinking slow because it's being very good illiterate. So this culture of analytic the performance sounds more athletic

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GM: That's what it more intuitive analytic more intellectual more, you know, measure twice, cut once. Whereas in the performance. So let's take a whack at it and we'll just as we go along.

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GM: Both cultures are incredibly important. But you can see how if you put the manager method of either one of those zones or the other zone. It's just not going to work.

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GM: And so those two zones have learned to kind of keep their operations separate but they interpret the time for cross that

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GM: Line. That's the core business is probably 90 plus percent of all the people in your organ in your enterprise or can one of these two songs and this is what people think of when they think of your company.

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GM: Like said next wave coming along with better do something on the left hand side. So what the incubation zone is designed to do.

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GM: Is to get you in position to determine whether you should catch this next way because there's a lots of ways in this world and you can't catch all of them.

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GM: So you have to find out is just a way that's going to affect our industry. Is this a way that we

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GM: If we got on early, it could write us to great success. Is this a way that if we if we get on to later could destroy us. What is this next one.

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GM: In the 20th century, the way we tried to make incubation zone work.

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GM: Is we had, we had labs. We had Bell Labs, we had IBM lips. We had Xerox PARC, you know, these wonderful research organizations.

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GM: We said, well, that's, that's how you're going to find out about disruptive innovations and it's true, the technology that discoveries that they made were incredibly impactful.

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GM: The problem was the companies who sponsored those technologies didn't actually profit from them because they were never

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GM: mature enough to go from the Blab into the performance zone, which is what they tried to do they call it.

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GM: Technology Transfer they wanted to transfer the technology for the lab into the performance zone but there weren't any customers, there wasn't an established ecosystem.

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GM: So if you're in the performance zone, trying to make the number you go I don't know about this thing, but I put it someplace else, because I've got work to do.

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GM: So what we learned in the 20th first century is the way to really keep patients owners to run it the way venture capital.

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GM: Firms run their portfolios, not the financial model. Forget about the financial we're not trying to give you the will to go public with this thing with the know shares being distributed. We're not. It's not. We're trying to do.

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GM: But the operating model of saying what you want to do is fun to organizations that have started up like mentality will take a look at this. Just a second startup type mentality. That's what we want to do want to manage them to

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GM: A venture style metrics. So in other words, you know, can you can you get to this milestone. If you get to this milestone not finally to the next milestone.

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GM: But if you didn't get to the next milestone. Then we're going to take that funding elsewhere. And so it's a very, it's a very entrepreneurial culture.

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GM: And the ideas you were looking for product market fit. So we were sending these folks out into the world trying to get find their product market fit.

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GM: And they do make mistakes and we make adjustments and sometimes we stop it. So then we go ahead. That's what this milestone level of funding is all about.

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GM: Very much of an entrepreneur so so against a certain age.

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GM: You wouldn't you like it agile fail fast make mistakes. You don't want to do that in the performance zone are you gonna do, you're gonna

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GM: Lose all your business and you don't want to do the productivity zones, you might violate laws and have to go to jail. So there's three separate models.

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GM: Those three models. I think you would find every single year of this decade and probably the decades to come before sewn is optional.

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GM: Because the fourth. So only comes into existence when you're saying, Okay, we are now pushing up level level, we now want to go from the old to the new

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GM: The old normal to the new normal. And basically, when you do that, you gotta realize your inertial momentum is still on the old normal

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GM: And when you try to push that lever your existing core businesses push back.

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GM: And so to get through that resistance and to get on to the new platform to go from an on premise model to a software.

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GM: As a service model or to go from, you know, a data center model to a cloud model or from, you know, a terminal model to a mobile model, all those things.

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GM: Require you to push through an enormous amount of initial resistance from the technologies that in the past supported you but now we're in resistance to change.

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GM: So it takes a command culture. You can't waste time during this period because when you're transforming you're vulnerable.

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GM: And every, every day, you're in the transformation zone. It's actually a bad day. So you want to get through that zone as fast as you can.

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GM: And that means everybody has to row in the same direction. Everybody has to prioritize the transformation first

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GM: And the performance zone has to make sacrifices, including potentially missing the number if they have to because it's more important.

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GM: To get the transformation done now. Does it make the number of this quarter. We could be forgiven. We missed the number of this quarter we get through the transformation. There's forgiveness downstream.

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GM: But if we don't, if we don't get through the transformation. There's no forgiveness. Because we spent all this energy all this money all this marketing all this promising and then we didn't get there.

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GM: And so it's very, very important that if you push hard. That's why we say co lead command culture because once you're on one of these journeys. It literally this failure is not an option. There's only one way to go forward.

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GM: So that's the framework we're talking about the point about this framework is it generates different success metrics for each zone.

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GM: And none of these success metrics. Let me show you what they are for all four sides, they're not going to be a surprise. What I do want you to notice is how different they are from the other three

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GM: So if you look at the performance zone. The if you look at anybody's any executives Performance, Comp. This is what it's based on

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GM: You know, if you're in sales. How was your bookings versus your, your quota of your plan if you're in products. Well, how was your revenue versus your plan. And by the way,

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GM: Both of you guys. What was the contribution margins. If you sell the product for an unprofitable price. I don't want to compensate you

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GM: If you build a product that you know you can't. You have to discount the heck out of that want to come. So you read it, but it's all about financial success. It's really about

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GM: Material success in the world, which is ultimately the customers outcomes. But the easiest way to measure this is for these financial mechanisms that we use it everywhere. And we report out them all the time.

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GM: And the productivity zone. We don't report out or sometimes will say it's an overlay in the in the earnings call, but this is not about financial metrics.

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GM: These metrics are ratios. I'm like, they had their absolute numbers in the in the upper quadrant. Their ratios in the lower corner because when you sit in process success process quoted

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GM: So what is the percent yield on our, you know, on our marketing budget or what is the percent yield in our factory or. What's the percent yield of returned merchandise is or what is our church number

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GM: You know, they're all they're all ratios of how are we doing net promoter score. How we doing with that with

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GM: Compared to other other customers pipeline conversion rate in our as we go through the pipeline. You know how the leads convert when they go from marketing to sales accepted leads and when they go from sales accepted leads to forecast etc etc.

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GM: And so in the productivity zone, you're continually trying to improve the ratios of the process. Again, very different set of metrics that you would use of the performance zone and vice versa.

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GM: And then he conditions on us a completely third game. There is no processes of the incubation zone.

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GM: Even know what you're doing it, you're still trying to find product market fit, and there's no performance metrics in the sense of not trying to make money and incubation zone.

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GM: That you do care about sales, what you care about sales for very different reasons that the performance on does performance on cares about sales, because it's trying to make money.

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GM: You're not trying to make money in the incubation. So you're trying to gain power.

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GM: Now, when you get a sale with with a big customer and you want that in competition with another company that shows you're gaining power. So it's incredibly important that you get sales.

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GM: But it, but it's not because it's not because you're going to return a profit of the company because those sales will not be profitable.

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GM: But if you advertise all your costs against them, but you still want to get those paid customers. That said, there are other, there are other things. This 10 X performance advantage.

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GM: Nobody expects any product and the performance on to be 10 times better than the competition, but the incubation zone you do

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GM: Because this is the next generation. You have the advantage of this whole new technology way.

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GM: You can do think you have machine learning and AI and they didn't know you should be able to create a 10 X performance manage

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GM: At some vector of innovation. So where is it and what is it, how can you deliver it. That's the sort of thing. And this is the kind of stuff that venture capitalists focus on all the time.

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GM: And it's, there's a perfectly stable management model using these kinds of metrics, but it's very different than the ones in the other to

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GM: The productivity zone listed incubation zone, since they don't obey our processes and the entrepreneurs say of course we don't have a your processes, get out of my hair.

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GM: But again, each each zone has a legitimate set of metrics models, but they're not applicable across, across the boundaries.

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GM: And then do the transformation zone. You've got to get to the tipping point, you've got to get because until you're at the tipping point.

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GM: The world's giving you the data. The benefit and what you want them to do is give you the benefit of the doubt.

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GM: And that's going to mean you have to get enough market share and enough revenue under your belt that people go, wow, it's a real market here and then the partners come into the partners reinforce that.

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GM: And now the world's goes, Oh wow, there's a whole lot of business apple. Who knew, you're in the music business apple. Who knew, you're in the phone business.

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GM: Amazon. Who knew, you're in retail who Amazon. Who knew you were in web computing services, that sort of thing. But until you reach the tipping point.

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GM: You're continually being second guessed. And if you stop halfway, because the expensive and the challenge of investing in the transformation zone is that you do underperform in the

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GM: Performance on a productivity zone because you're taking resources out of those zones to accelerate the transformation.

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GM: It's a challenge. And it's your investors get nervous your partner's get nervous boys good verbs, your board of directors get nervous. It's a real challenge.

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GM: But the key to this thing is, each one of these quadrants can succeed.

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GM: In real in real in the real world, in real time, if they stay focused on their metrics and do not get distracted or disoriented by people applying metrics from another zone to them.

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GM: So the key takeaway from this one is do not use the metrics of one's own to measure the performance of another zone. It happens all the time. It's just really, really important that you not to do that.

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GM: So just to close. I want to close with this notion of like things to watch out for.

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GM: So things we've learned the classic what I just said. Applying the metrics of one zone to the performance of a different zone.

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GM: Happens all the time, particularly during annual budgeting, or the performance on the same, why are you giving money to the incubation zone when I could be

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GM: Making more money if you just give those resources to me that kind of problem.

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GM: Of the fix is each song gets measured by metrics appropriate to its own methods. So you zone, your enterprise, you figure out your zone, your funding allocations. I'm going to fund each zone.

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GM: And then you compete for budget, but only within the other entities inside your zone. You should never ask an entity in one zone to be competing for budget with an entity and another song because the ROI is different. The management models are different. A second

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GM: The second thing is is large enterprises, we want to have one management system, but for all four zones. It just doesn't work.

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GM: You've got to have different zones responding to you because different zones respond to different incentives.

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GM: You have to have different management systems, including, for example, performance compensation. So we know how performance compensation is so important and the performance of

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GM: It actually doesn't really inset the right behavior and the productivity zone and for the incubation zone.

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GM: Just the wrong metrics. So again, making sure you build management systems that relate to the zone for each so correct. This is support and find the word of the leaders come from.

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GM: And I think there's an expectation. Sometimes that a leader should be a good leader, a good executive should be able to leave in any of the zones. It's just not true.

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GM: We're all better at one zone and worse than another zone. And so the key is that different methods and different zones call for different leadership styles.

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GM: And so again we need to honor that when you do this is where this is a another dimension of diversity is really important that we have diverse capabilities and we have that we let those

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GM: Diverse capabilities flourish in the zones there in where they are most useful and not get not get criticized for not behaving in a way that

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GM: That is not relevant to their zone, which is kind of the key idea.

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GM: So with that, just want to close based the last message on the kind of the key takeaway here is

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GM: That leaders and management and a product lifecycle. Will this whole digital transforming world, we need to be zone conscious and use this method to be successful.

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GM: So with that, I want to say thank you very much and I'm going to stop sharing my slides and we'll have a little q&a and I'll turn it back over to you.

Q&A with Dario Ambrosini, CMO, Propel

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Dario Ambrosini: Alright, thank you. Geoffrey. That was fantastic. As always, so we've got about 10 minutes left here and a few questions that have come in. So I'll do my best to just parse them out and get them to use so

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DA: Why don't we start with this one, you talked a little bit about best in breed companies needing to create a system of engagement. You mentioned you know Apple, Amazon, when I think of the real engagement companies, the fangs. The Facebook's the apples, the Googles

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DA: If you're looking for B2B software. And you mentioned, there is this blurring line where it's really now B to B to C.

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DA: Who are you going to gravitate towards on the B2B side, if that's the cell for you're looking for, who can help you create this system of engagement.

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GM: In that space. I think what we've we've seen is that history because you know historically product lifecycle management came from the

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GM: The product industrial model. And it was the industrial companies you were looking to support you. But now I think we realize. Look, you have to be cloud for at least, have you have to have a SAS platform.

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GM: So I think Salesforce has become particularly interesting to people because it has a SAS platform but anybody who has a SAS platform.

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GM: It has enough sort of applications on that platform that you can then build on top of that. But so, because otherwise, then the engagement problem is so hard to solve if you have to start with a client server converted. I think it's very, very hard to do that.

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DA: Okay, okay.

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DA: So when you're looking at them going back to you mentioned a little bit about the

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DA: system of record moving to the system of engagement. You also recently published a little bit about the system of business and talking about how the system of engagement helps compete against that.

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DA: Or you didn't really cover that today, but I'm going to steal from one of your recent blog posts. If you were kind of thinking

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GM: Yeah, I think there's a developed sort of so systems of record systems of engagement. We talked a ton about that today.

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GM: But those systems of engagement all create log files. Those log files can be analyzed by machine learning and

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GM: Artificial intelligence to create what we're calling systems of intelligence and these systems of intelligence. I think are going to come in two phases. The first phase is where they augment

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GM: The human decision maker basically you'll say, look, I'm getting a bunch of tasks, take off my plate so I can focus on the big things.

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GM: They will focus on on public supporting context for me. Make me a much more effective intelligent advisor decision maker, whatever it is.

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GM: And then I think systems of intelligence, eventually we get enough under their belt, they become systems of autonomy, we're sort of seamless was dramatically the right card.

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GM: I would never affect their best self driving car because that's a great example of a company is coming from a system of intelligence to a system of

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GM: It's a journey, it's probably take another 10 years to get there but but that you can see that happening. So every, every product arise to think about

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DA: Okay, so a system of record, just by product actually do the core historic functions. Now does engage with my end user systems of engagement.

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DA: Now is it becoming more intelligent systems of intelligence and is it on a path to become more on Tom's I think it's important for everybody in the room.

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DA: So that when you're thinking about that progression. And you mentioned a little bit about a covert accelerating. Some of these technology trans Canada accelerate that moves through the path. You just described, or is that going to be completely driven by technology.

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GM: I think coven is accelerating the systems of engagement.

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GM: Because what the quick carpet. Is it just forces all into this work from home state children place kind of world, which put a huge premium on digital engagement.

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GM: So I think people were trundling along going you know this digital thing is pretty good. You know, maybe we're agile Mordor conference rooms, blah, blah, blah.

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GM: And now in six months. It's like, holy smoke. Do we need office buildings and really, I mean, but it doesn't say anything about systems of intelligence or systems over time. Okay.

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GM: So then going back a little bit earlier in your chat you talking about the age of the customer and just how that changed coming back from the product era.

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GM: Is that age here to stay. And I mean, is there a next wave or I should say next wave. Is there a next age that's going to be cooking on that we should just skip this one and go to the next one.

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GM: I if so I don't see it. Yeah, I think, I think actually the profound thing. So I think the age of the customer is sort of one vector one dimension of this change.

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GM: The other mentioned is is going from product to service and this whole leveraging the whole digital infrastructure. And I think there's so much

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GM: Trapped values still in our old systems with the way we got things done. That just simply going to a more user focused digitally service enabled capability. I think most industries have an enormous amount of

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GM: Productivity, they can get out of the system. If they just find a way to convert to that. I think it was all of this decade probably over the next decade. If I had to guess, and then after that I have some of the planet, hopefully.

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GM: You were if you were a legacy manufacturer legacy companies every would focus on please out the audit activity over the next 10 to 20 I think every legacy company right now has to say, look,

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GM: I have to redesign the foot my product lifecycle model. I could no longer afford to design from the product out to the customer and try to impose my limitations on them.

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GM: After work the other way around, have to figure out what do they need and want and then I have to figure out how to adapt to those changes in my, in my world and think about because demand has become much more volatile and much more much more flex

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GM: Our supply chains were designed to have kind of relatively steady demand that we could recommend. So it's a big, it's a very different problem to solve. And I think legacy companies are at a disadvantage. Now, I think there were a huge advantage at one point there is proof, but now they're

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DA: Okay, great, great. Um, so then the last couple ones we have here. So looking back at the Crossing the Chasm and looking at the bowling alley versus the tornado, and I'm going to try to use the right language here.

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DA: So as you get, you know, just the the move to the customer, they want things faster they want more diversification is there more incentive

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DA: Or are there more opportunities for the bowling alley. In other words, does the customer create more problems that requires

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DA: More solutions or march dances in order to be successful because somebody's going to go after it.

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GM: Yeah, I have to say right now in terms of if you want to take a digital service across the chasm. It's never time actually never been better because

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GM: What you're always looking for the other side of the chasm with the next generation offer is somebody desperate enough to take it first.

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GM: Well, think about how much desperation has been created across so many and it by the way the desperation is coming in two flavors. Some people their business is going in the tank and they desperately need to re engineer.

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GM: But other businesses to go because he's gonna business going through the roof and they need to re engineer.

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GM: But in both cases. What they need is the remember they don't believe what you believe whatever your technologists, that's not that's not what they care about what they care about is, can you take this monkey off my back.

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GM: And if you can. There's lots of monkeys, and so it a monkey rich environment. Yes, the bowling alley is a great place to go bowling alleys and monkey rich environment.

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DA: So on that note, our last question. Hopefully it's not about monkeys, but on zone management. Can you give us some examples of customers are so sorry companies.

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DA: That you would hold up as good examples of zone management, but the ones on to the other and adjusting as a reality changes. Yeah. So, by the way, because it kind of a word of warning. The book begins with 56 iconic tech companies that never did.

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GM: It is heartbreaking. And because because the tension between the core business and the new business because I'm so great, the waffle back and forth.

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GM: And they don't. They do not command and control. So the first examples are

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GM: Anybody with a powerful founder who just kind of sit my way out of it. When Steve Jobs might be an iconic example that the Bill Gates or their emails from people like this.

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GM: Reed Hastings at Netflix had to do it when they went from DVDs to

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GM: To streaming and then again when they went from streaming the content. So it was kind of just saying, so I think Netflix is example the Netflix, a fairly new company and the company. I am most

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GM: Proud of in terms of this is Microsoft. So Microsoft was a complete legacy conference committee was designed for the industrial era.

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GM: And that their ability to transition to the cloud, both with with Azure and as well as office 365 and Azure. It's kind of like the thing of like

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GM: Wow. And what they did was they did it by essentially catching up quickly so you don't have to be the first mover. In fact, arguably, Microsoft was never the first mover.

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GM: But it's been incredibly good at, say, Okay, but now we're going to catch up quickly. And if I were to legacy company I would look I would try to take inspiration and best practices from Microsoft has helped

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GM: Accelerate getting back into the game because legacy companies have incredibly valuable services those customers want your company to be part of the next way.

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DA: They don't want to switch vendors, but you've got to get there you go get there fast. Great. Great. Geoffrey, thank you so much for joining us today. As always, insightful and we really appreciate it.

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GM: It’s been great to be with you. Thank you.

Propulsion 2020 Keynote - Zone to Win: Organizing to Compete in an Age of Disruption

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