A Playbook for Digital Disruption: Is Your Company Ready?

Catching the next wave

playbook for digital disruptionGeoffrey Moore starts his latest book entitled “Zone to Win” by urging companies not to sit still because today this makes them a sitting duck. But he at the very same time, he suggests that leaders at “incumbent enterprises” are not stupid. These companies are making investments in their future. What these incumbent enterprises face, Geoffrey says is a “crisis of prioritization”. They experience a battle for resources especially in their go to market functions. Geoffrey says the problem is they typically try to make sure every credible disruptive innovation get its fair share of support. This leads incumbent enterprises to peanut butter their resource allocations rather than play to win. In response to this very thing, several years ago, Brad Garlinghouse then a Yahoo senior vice president wrote what he labeled “The Peanut Butter Manifesto”.

It is for this reason that Geoffrey says that startups typically beat existing companies. Startups are not conflicted. All the enemies are outside for a startup. Meanwhile, incumbent enterprises are pulled in too many directions at the same time. Given this, Geoffrey suggests when it comes to making a big bet on the next big thing an existing enterprise can pick only one.

Is anyone exempt from disruption?

playbook for digital disruptionGeoffrey asks his readers what industry can be exempt from massive re-engineering? Or what legacy business process can possibly remain intact the way it is? In today’s business environment, Geoffrey says that all business will face disruption to one or more of the following:

  • Their infrastructure model
  • Their operating model
  • Their business model

Disruption at the infrastructure model means a business has to respond by adding a new way of doing things to what they already do. Think of creating an online channel for an existing storefront. Operating model means that an enterprise has to respond by changing the way that things are done. Business model disruptions according to Geoffrey are “where all the train wrecks happen”. They are in Geoffrey’s words, “Kodak moments”. According to Geoffrey, “no established enterprise can reasonably expect to change its core business model, ever”. For this reason, existing enterprises have to respond to a business model change by modernizing their existing operating model and incorporating enough next generation technology to at least blunt the impact of the disruptor short term.

A Disruption Playbook

playbook for digital disruptionGeoffrey claims that building an organization that last requires that leadership divide enterprise management into four distinct zones.

  1. Performance Zone: Current year revenue performance
  2. Productivity Zone: Productivity initiatives to foster and fuel performance
  3. Incubation Zone: Incubation of future innovations
  4. Transformation Zone: Taking innovations to scale

To many respects, Geoffrey zone approach fills in how do of what Derek Abell described in “Managing Dual Strategies”. In this book, Derek suggested that “running the business and changing it are not sequential but parallel pursuits” (Managing with Dual Strategies, Derek Abell, pg 3). The zone approach fills in how to do this by telling management that they need to focus upon two things—sustaining innovation or disruptive innovation. Sustaining Innovation addresses items 1 and 2. Disruptive innovation addresses items 3 and 4. Geoffrey suggests once again that only one innovation can be taken to scale at a time in the transformation zone.

As Geoffrey sees things, Zone 1 is the engine room for operating established franchises on proven business models. It is focuses on all forms of delivery. The productivity zone is about shared service investments to take enterprise costs out. Its core deliverables are seen as three things: compliance, efficiency, and effectiveness. The incubation zone is about positioning the enterprise to “catch a next wave”. Finally, the transformation zone is the place an established enterprise where disruptive business models get scaled to material size. Geoffrey interesting looks at each of these from defensive and offensive perspectives. Clearly, advantage is provided to those that can play for an offensive win.

What causes companies to have a “Kodak moment”?

Kodak Geoffrey claims that there are several things lead to disruption and then end of life. To be clear, there were always positive strategic options for Kodak. These mistakes include the following:

  • Over rotating to the performance zone (HP under Mark Hurd)
  • Coasting in the productivity zone
  • Mistaking incubation for the transformation zone
  • Failing to implement a transformation zone
  • Failing prey to denial when faced with a disruptive attack (Ian Mitroff used to say that the roots of failure are found in every success) To avoid these issues, Geoffrey suggests that organizations zone their organizations avoid crisis of prioritization. I remember in companies that I have worked for where there was a temptation to kill anything unless it was wildly successful in year or so after launch. This means fencing incubation zone investment. But at the same time, Gefforey says organizations at the top need to actively manage the transformation zone. He suggests for example putting startup CEOs into running the incubation to transformation phases.

Parting thoughts

Edward Deming famously said that “it is not necessary to change. Survival is not mandatory”. Clearly as Derek Abell suggests it is essential that organizations manage for today and the future in parallel. What Geoffrey provides in the age of disruption is a map for how to do this.

Further Reading

Preview Jeanne Ross of MIT/CISR talk at Data Disruption Summit: Sign up: ow.ly/4ndFCC

Should the CDO drive corporate Digital Disruption?

The Importance of data in Digital Disruption Via @ComputerWorld

What is the role of government in Digital Disruption?

Are you acting like a software company? Your business may depend upon it

Using data and IT to gain Competitive Advantage

Leadership in an age of digital disruption

Business model change: how does digital disruption drive the need for it?

Twitter: @MylesSuer