Mendix on May 10, 2016
Geoffrey Moore, best-selling author, consultant, disruptive technologist and this year’s Mendix World keynote speaker, spoke with computerworld.nl about his theories on disruptive technologies and innovation. The interview was so thought provoking and inspirational that we translated it below.
Your theories work with disruptive technologies. Let’s start at the beginning. What is disruption exactly, in your view?
Disruptive innovations should be understood in contrast to sustaining innovations. The latter are backward-compatible improvements to existing offers that can be enjoyed without changing current behavior. Think new car, new recipe, new app, new clothes. By contrast, disruptive innovations are incompatible with current practices and require new infrastructure and a new ecosystem to deliver their value. Think virtual reality devices, electric cars, software as a service, 3-D printers. My life’s work has been about the evolution of markets under the influence of disruptive innovations.
Is it really necessary to be disruptive in this age? What’s at stake for companies that cling to the past?
You don’t have to be a disrupter to succeed in this age. What you cannot afford to be is a disruptee. What this means, in effect, is you do not have to be the first mover, but you do have to keep up. Or as we like to say, you need to catch the next wave before it catches you.
When disruptive innovation is mentioned, people usually refer to Netflix, Uber, Airbnb and such. These are the great examples of disruption. But how can an existing company, for example in retail, logistics or finance, be disruptive as well?
Again, the goal is not to be disruptive. It is too leverage the amazing boost in performance that comes from swapping out the old infrastructure and cutting over to the new. The five big waves that will touch every company in some way or another over the next decade or so are cloud computing, mobile computing, social networks, data science with big data, and the Internet of things. Not every disruption will impact every sector, but no sector will go undisrupted. So figuring out your company’s relationship to these five, prioritizing the bets you want to make, and putting yourself in position to make them asap is an immediate imperative.
With every company essentially becoming a software company, what does digital innovation look like for established companies? In other words, are there particular areas where they should be focusing their innovation efforts?
Established enterprises have enormous advantages over next-generation disrupters, and they need to find ways to leverage them. First and foremost, they have a large installed base of customers that, all things being even close to equal, would prefer not to switch vendors. They have global footprints, reasonable balance sheets, knowledgeable investors, seasoned employees—these are all the very things that the disrupter covets. The challenge is to be able to mobilize these assets in a time of change. That’s what the new book is all about.
Your latest book, ZONE TO WIN, offers a practical framework to help large enterprises face add a new line of business to their established portfolio. In your view, what’s the best way to effectively balance “keeping the lights on” with bringing new digital innovations to market?
The crux of the new book is a framework called zone management which segments established enterprises into four zones based on whether the work is generating material revenue or not and whether it is sustaining or disruptive. Three of the four zones will be very familiar to all—the Performance Zone (generates virtually all the revenue and more than 100% of the profit, from sustaining innovations), the Productivity Zone (all the cost centers that do the work behind the scenes to make the Performance Zone successful, again by leveraging sustaining innovations), and the Incubation Zone (the skunk works areas that are small, agile investments in highly disruptive innovations, which are not yet operating at any scale to be material to revenue). Each of these three zones has a different set of deliverables, a different playbook, a different set of metrics, and most established enterprises get this and can operate them reasonably well. It is the fourth zone where they all struggle. That is the Transformation Zone, and it is where a company either a) takes its own disruptive innovation to scale (as in getting it to 10% or more of total enterprise revenue), or b) renovates an existing line of business that has suffered a direct attack from a disruptive innovation and has to dramatically reinvent itself (think Kodak film, Blockbuster video, San Francisco Cab Company). Under conditions of disruption, all four zones need to up their game considerably, while making the business in the Transformation Zone the number one priority for every employee for the duration of the transformation.
If the very life of the company depends on innovation, what steps should management take? What should they do now, to put themselves on the path to success?
See the paragraphs above. From a self-serving author’s point of view, read the book, and determine if the framework seems right for you, and if so, then use it as a baseline for reorganizing the team under conditions of disruption
You’re perhaps most well-known for your book Crossing the Chasm. While the book focuses on how tech start-ups should market and sell their products, are there lessons for established companies looking to capture an early majority with new digital products?
Whenever your innovations are disruptive, whenever they require new infrastructure, new behaviors, and a new ecosystem, you will have a chasm to cross. The big challenge for an established enterprise is that you have to cross the chasm while still maintaining your commitments to your existing businesses, customers, and partners. That’s why you need to organize around zones. A start-up has no such internal conflicts. They are all in the Incubation Zone, and the goal of crossing the chasm simply requires that they all go into the Transformation Zone. They may not succeed, but they are not conflicted.
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