This article is Part 2 of an 8 part series. Read Part 1 to get caught up.
Geoffrey Moore's work is required reading at top business schools. Not only are his books well-written (he does have his doctorate in English Literature), but his business models have been the source of success for his current and past clients, including Cisco Systems, Oracle, and Hewlett-Packard. Get a sneak peek at his next book below.
Curt-Tell me about your new book coming out this Fall.
Geoffrey-It's called Escape Velocity and is about how an established institution's initial business eventually dissolves, reducing their growth to less than 10%, creating a need to bring on the next generation business. It's a known problem. In fact, it's the problem addressed in The Innovator's Dilemma. The subtitle of the new book is 'Free your Company's Future from the Pull of the Past.' I've been trying to pinpoint this problem in the last two books, and I think I finally have it dead in my sights.
Living on the Fault Line and Dealing with Darwin both addressed the question of: 'What is it about large companies that cause them to get to a certain point and then under-perform their opportunities after that point?' Originally, I thought the answer to this question was a lack of innovation. That's why Dealing with Darwin has such a strong emphasis on innovation. Dealing with Darwin really taught me that there is more than enough innovation in large companies to power their future. They don't lack for innovation: they can acquire it, they can get it organically and so on. So the question is, 'If they don't lack innovation, why isn't there better performance? Why do they get stuck in these kinds of doldrums?'
Most business analysts think it's either antibodies, corporate culture or inertia. But my new book encourages companies to step back and look at what's really going on. Large corporations are getting caught in what we call 'The Performance Trap', which is when their numbers get bigger every quarter, and they still spend more and more time trying to meet the next quarter's numbers. They don't get a chance to get the next-generation business online. This problem was originally blamed on a lack of research and development, but this is simply not the answer. The problem in each case is getting the new business to market. The company often discovers that the scarce but necessary resource turns out to be the person who can generate revenue to meet this year's numbers as well as the person needed to invest in the selling and marketing to get the next business going.
Curt-It's that 'Horizon 2' problem.
Geoffrey-Exactly: it's the Horizon 2 gap [as Mehrdad Baghai would phrase it]. I discussed this in an HBR article. You could argue that the whole book essentially takes that idea and exposes it. The book addresses the problem at the board of director level, the CEO level, and all the way down to the program manager and mid-level employee level. And the sub-title really does say it all: 'Free Your Company's Future from the Pull of the Past'. The more senior a person is in a corporation, the more it drives them crazy: they see it, know it's there, everybody talks about it, and yet no one can figure out how to do anything about it. The problem is this: a company's field-facing organizations of sales, marketing, and services are not aligned to support an adolescent business because there's so much pressure on those three departments to make the current fiscal year's numbers. And the existing business is so much easier to make money out of than an adolescent business that they just can't imagine spending time on the adolescent business.
If companies don't organize and plan in a way that commits a certain portion of field-facing resources to an adolescent business, they'll get stuck in the same old trap. Executives say they will invest resources and support but in reality, they give them second-class support, and they wither and die on the vine. The next business never makes it up to scale. This happens over and over again in large companies. There's a set of practices in the next book that forces businesses to address this problem and agree on the solution as a company. So that's where the next book is headed.
Curt-And small companies don't have this problem?
Geoffrey-Small companies have this problem if they've had a franchise that's gotten to the point where that's their economic engine and they are trying to onboard a new business. Like in high tech, NetApp is still in a high growth stage in storage but EMC is not, right? Cisco has been under performing recently. This is because their core franchises have leveled out. At that point, that's when this absence of the next generation business becomes increasingly noticeable. People ask, 'Where is your next big thing?' That can happen in a 50 million dollar or a 100 million dollar company if their core category has flattened out.
Stay tuned next week for two more installments of this informative interview and learn how you can improve your business practices sooner rather than later. Read part 3 here.