How to overcome the innovator's dilemma: Geoffrey Moore's Zone to Win.

00:03: Dom Hawes 

Welcome to Unicorny, the antidote to post-rationalised business books.  

I'm your host, Dom Hawes.  

This is a podcast about the business of marketing, how to create value, who's doing it well, and how you can help your business win the future.  

I very much hope you enjoyed the episode just before Christmas where international marketing legend and guru Geoffrey Moore came to talk to us principally about Crossing the Chasm. Well, he's back, and this week is no different to that episode in that it will blow your mind. Geoffrey Moore is a one in a generation type of talent and we are so excited to welcome him to this show.  

This week we're moving on from Chasm to talk about Zone to Win, published in 2015. It's another of Geoffrey Moore's seminal books and one that has been extremely influential on me personally.  

Chasm schools business leaders in marketing and communicating effectively at different stages of the technology adoption lifecycle. It's, if you like, about how you take your product to market.  

Zone to Win presents a way of organizing and running your business to overcome the innovator's dilemma. How do you innovate and disrupt your own market without killing your own company?  

We start today's show with Geoffrey explaining the four zones and three-time horizons that make up the Zone to Win playbook.  

Pay particular attention to the language of Zone to Win. This is highly influential work and once you know it, I think you're going to see references to it all over the place.  

Right? Let's now go straight to the studio to meet the legend that is Geoffrey Moore.  

Geoffrey, in the book Zone to Win, you defined four zones and three horizons. Which do you normally explain first, horizons or zones?  

01:57: Geoffrey Moore 

Let's do the zones.  

Then we'll do the horizons and we'll bring them together pretty quickly. So the idea behind the zones is two of the zones are devoted to the core existing franchise and two are for the next generation. So the two for the core existing franchise are the performance zone, which is where you actually deliver your value to the world. So every product you make and sell, that's in the performance zone. Every service that you provide, that then sell, that's in the performance zone. That's what the financial analysts evaluate your company on how you did in your performance zone. It's what your customers experience from you. It's how you show up in the world. So in that sense, ultimately it's the only zone that matters. But all the other three zones are in some relationship to your performance zone.  

The biggest of those three zones is the productivity zone, which often has twice as many headcount as the performance zone. And that's everything behind the scenes that makes performance work. It's all of HR, it's all of finance, it's all of it. It's marketing, customer success, facilities, legal, you name it. If you need to be in a global enterprise and you need these functions, they're in the productivity zone. They're shared services. They're cost centers. And those two zones have very different operating models. So the performance zone's got to make the plan, make the quarter. It's very competitive. It's got to be agile. It's got to think on its feet. It's got to make quick decisions, take some risks, go. The productivity zone is saying, no, we're here for the long haul. We want to be very analytical. We want to study things.  

We want to make sure we lay down good foundations. We don't want to make big mistakes. Our job is to keep us out of jail, to make sure we're in compliance, et cetera, et cetera. And as long as there's no more disruptive innovation, you'd be done. In fact, in my father's generation, pretty much that was what a corporation looked like. But with technological revolutions, now, the problem is you have disruptive innovations, and by disruptive here, I mean in some way antithetical or antagonistic to the status quo. And you're making your money in the status quo. So this is not an easy thing to ask. Now, the question is, how do you play that game? Well, two zones here, too. The first is where you do the trial balloons. We called it the incubation zone.  

And this is where you need to get smart about the new technology on your own. You can't ask other people to be smart for you. You have to figure out, is this disruption meaningful for our category and for our strategy and our company? And the only way you can really do that is to actually get in there and find out, which means you got to create a business, run it like a startup, compete in the world, do everything you can to be as successful as you possibly can. And I would say in a corporation of one to $10 billion, you can get that business to 30, 40, 50, maybe somewhere around $50 million inside that zone, which means it has its own salesforce, it has its own marketing, it has its own processes. Because the performance zone.  

For the performance zone, it's like it's too much work, it's too little, it's too squirrely, it irritates my customers, don't make me do this. And the productivity zone is saying they don't follow any of our processes. And it's like no. And the answer is yes and yes. So. Right. That's why you need in a separate zone. By the way, the venture capitalist, the way venture capitalists manage startups, there's an operating model there. It's exactly how you manage the incubation zone. Just copy not the financial model, but the operating model. Milestone based funding, hold them accountable to market validated outcomes, et cetera. That's incubation zone. The fourth zone is the transformation zone.  

Basically, when I wrote the book, I was thinking exclusively of a zone where you actually created a net new franchise for the corporation, the way Apple did with music and then the way they did it with phones, or the way that Amazon did it with going from books to retail and then from retail to web services. And then you could argue maybe even prime is even a separate franchise, or at least maybe it's a build up. But that's what I was thinking. It's interesting, over the last ten to 15 years, what people are also using that zone for is no, we're transforming internally. We're going from analog to a digital operating model. Internally it's a massive change and we need to have transformational approach.  

The key to the transformation zone is the CEO takes the reins in his or her hands and says, for the duration of this transformation, I'm running the ship. I may have delegated lieutenants who are executing my vision, but I'm running this thing. And you will align with me or you will leave, because in a transformation you cannot afford to have people go their own way. And so it's a command and control, take no prisoners really assault, because it's such an unnatural act. And so you don't want to do very transformations very often. So the good news is there's a whole lot of incubation that doesn't really need a transformation. You can kind of just lever it into the performance zone if you take it in stages. And that's what you hope for because that's much more executable.  

06:54: Dom Hawes 

Those four zones are broadly in three horizons.  

07:01: Geoffrey Moore 

I love the fact that you keep me on schedule. My mind would obviously okay the three horizons. So the three horizons is a model that Murdad, Bagai McKinsey and his colleagues came up with. And the idea was just simply when you make an investment, obviously you want a return on investment. So the ROI. So when are you going to get your roi? And they had three horizons. Horizon one is you're going to get this year. You give me more money at the beginning of the year, I'll give you more money at the end of the year. Score sounds pretty good. The second one was, no, this year, actually, you're going to give me the money. You're not going to get it back, but in the next two years you are. And by the end of the.  

Particularly, well into the third year, it's going to be humming. And then horizon three is, you know, I'm not sure. I'm not sure. Three to infinity. This may not even be the right thing, but it's certainly exciting and we certainly need to get our feet wet. So as you can kind of see, horizon three is a great fit for the incubation zone. It's like, try it out, see what happens. If it doesn't work, shut it down. No problem. Incubation zone is weird, but it's not expensive, particularly if you isolate it from the performance zone and the productivity zone and don't let it reduce the success in those two zones. So that's horizon three, incubation zone. Horizon one, performance zone, supported by the productivity zone score. Really good. But horizon two, we call it the horizon two challenge.  

It's a very awkward place to because it's going to make a divot, a big divot in your current performance, not only this year, but probably next year. And most what we've learned about these kind of transformational divots is everybody gets a transformation will take more than a year and nobody will give you three. So basically, horizon two is basically, it's that 24 to 36. That's just it. And by the end of the second year, you better have turned the corner. So to do that. So that means that you're trying to do high risk change on the clock, which is like, whoa, we're under assault. So that's what the transformation zone was for. And so horizon two and the transformation zone, that's where that goes.  

09:08: Dom Hawes 

So in there, you've got a playbook for. I mean, I know it's aimed at enterprise and very large companies, but I think it's really useful to think of almost like it's atomic. I suppose any business of any size can think in those terms as well. And it's certainly something I've applied here. We're only 200 people.  

09:27: Geoffrey Moore 

I've applied it to myself. It's like, what's my performance zone? It's kind of fun when you do it with a very small team. Let's suppose that you and I are in a six person company. Okay? So the first question is, what's our performance zone? And that's the outcomes that the world is buying from us. And if I'm in a finance department in the middle know Amazon, I have a performance zone. Amazon's buying something from me. So what's my performance zone? And then, okay, now, am I doing any investment in my own productivity or in my team's productivity? That's my productivity zone. Or do I need help from other organizations in order to execute my performance zone? Those are my productivity zone dependencies. Am I experimenting with anything new? Should I be experimenting with anything new? That would be my incubation zone.  

10:15: Geoffrey Moore 

To do transformations in a local level, you actually need a lot of permission from above because they're buying performance from you, they're not buying transformation from you. And sometimes the transformation that's necessary is you need to leave and go to another company, which, by the way, can work well for everybody.  

10:34: Dom Hawes 

That's a perfectly viable option often.  

10:36: Geoffrey Moore 

Exactly, yes.  

10:38: Dom Hawes 

So I think it's interesting. So whether it's at large group, small group, company, operating unit, or departmental level, there's a good rigor there to go through and understand exactly how you're delivering value. In the book, you also talked about the difference between core and context, which I think is a really interesting, I tried to adopt that in our own business, and the semantic pedants got the better off me because the word context has other meanings in the communication industry.  

The word core, exactly the basic concept of understanding what absolutely it is that creates that performance.  

11:15: Geoffrey Moore 

And I think it is important. The core in context is about power. And basically the idea is if we're going to have power, particularly if we have the power to grow markets or to extend it in new areas, you need to be highly differentiated. And so core is whatever vector of innovation you are going to use to create competitive separation between yourself and the other players in your category that are playing in your target market. If they're not in your target market, you don't care. But if they're in your target market, you must have competitive separation. The failure mode of most companies is they take the money that they set aside for core, they spend it.  

They actually make something different from their competitors, but not differentiated, meaning that, yeah, you're lighter, you've got better battery life, you've got a nicer screen, you've got something. But at the end of the day, you guys are close enough to each other that best price is going to win, as opposed to the Apple iPhone, which is like, whoa, okay. So if there's anybody who got core clearer than Steve Jobs, I don't know who it was. So we used to draw this yellow. We had a diagram, we colored it yellow. So then we called it the yellow circle because, know, marketing people are good at naming. So in this yellow circle, that was where you and your competitors were.  

And the idea was, get your offer outside of the yellow circle, create distinctive differentiation, as opposed to spend your r and d money, but wander around inside the yellow circle, which I would argue the american auto industry has done for virtually my entire adult life. And now Tesla's changing the game going forward, but they'll start playing it again. Then they'll start saying, well, we'll have look alike stuff that are electric look alikes. So that's core context is everything else. So context is, look, if you don't do this, it's not. This is. These are required, but it doesn't differentiate you. So the idea behind there is then you have to distinguish between mission critical context and what we called enabling context. So enabling context is all the stuff that you got. It's not very risk bearing. It's just got to get done right.  

So you want an optimized, efficient classic. Yeah, just do this better and better. But mission critical context is stuff that doesn't differentiate you. So there's no prize for doing it well, but if you do it wrong, it penalizes you. So this is like, whoa, this is no fun. This is, like, all of it. Nobody says, hey, the email system stayed up again last night. Way to go. But God forbid that one call gets dropped. So mission critical context became what was happening over and over again was resources, which were budgeted for core, were getting siphoned off to guard against mission critical context. And what happens when you do that is you create a very expensive enterprise that's not differentiated. That is the slow death of the 54 companies in Zone to Win.  

That's what they actually did with their money, and that's what actually happens. They don't collapse, but over time, they marginalize and degrade.  

14:29: Dom Hawes 

It's really interesting, there's a lot of debate on LinkedIn at the moment where I seem to spend far too much time, where there's this debate about, is it differentiation or distinctiveness that matters? And I think a lot of the debate is happening because when people are talking about differentiation, they're not actually talking about differentiation, I-E-A completely different compelling reason to buy they're making minor modifications to something and saying it's differentiated when clearly in the mind of the buyer, it's not.  

14:57: Geoffrey Moore 

Yeah, exactly. I don't know if we can instantiate the vocabulary, but at least in our own minds, just distinguish between different and differentiated. Clearly it's different. And if you want to say it's distinctive, okay, it's distinctively different. Okay, that cologne smells different than that cologne, but guys, it's cologne. Whereas differentiation is a shower.  

15:21: Dom Hawes 

So the interesting thing also about Zone to Win is the concept of playing offense and playing defence, which is a really interesting lens then to look at what are my behaviours, what is my activity going to be, how am I going to structure my marketing team and activity based on what's happening outside.  

15:41: Geoffrey Moore 

Yeah, this is important. And by the way, the key to playing. So zone offense is you're the disruptor, and zone defence is you're the disruptee. And it turns out if you're going to be zone offense, the disruptor, the number one thing your core vector of innovation has to do is differentiate. You have to be wildly different. The stories we love to write about zone offense. So that is Elon Musk, that is Jeff Bezos, that is Reed Hastings, that is Brian Chesky, that is Travis Kalanick. By the way, after ten, I run out of names. I'm not even sure there are 20 in the whole world. But point be, they're remarkable stories, but there aren't a lot of them. So for every disruptor, there is a legion of disruptees. For every Tesla, there's every other automobile company in the world.  

So the disruptee's goal is not to differentiate. The disruptor did the differentiation. The disruptee's job is to neutralize. What neutralize means is just get whatever the vector of innovation that the disruptor is using, you have to neutralize it, which means you have to get good enough at whatever that is that a customer would say, okay, you're now in the category of consideration. And what you're going to do is you're going to differentiate on other things. You're not going to try to differentiate on the thing that the disruptor is doing, because they're better at it than you, but you're going to differentiate on some other dimensions and you'll bring your other strengths to the table. So the game with neutralization, and Microsoft has played this game better than any other company by far.  

I don't even whose second choice would because what Microsoft has done over and over again is seen the market leader and then fast followed up their tailpipe and blew them up and they did it through neutralization, which meant relentless catching up. And the way it works is eventually you get to a point where they run out of gas or they stumble and you actually pass them. You actually are better than them. Netscape Navigator 1.0 was so much better than Windows Explorer 1.0. It was a farce. But Netscape Navigator 30 was not as good as Internet Explorer three, one. So they did pass them. They passed word perfect with word. They passed one, two, three, with Excel, they passed Novell with Nt, they passed navigator with Explorer. So way to go. So that's neutralization.  

The key idea is core for the disruptor and playing zone offense. Differentiate neutralization, mission critical context for you, for the disruptee. Get to good enough as fast as you can. What Nokia didn't do, they didn't neutralize Apple. And I remember Stephen Elop left. He was at Microsoft and he left Microsoft to run Nokia. And he wrote a memo like 90 days after he was there. He said, how is it possible that Apple released the iPhone? And I think it was like he said four years ago, I'm not sure, but I think it was. And to this date, Nokia has nothing even remotely similar to it. They didn't neutralize. And BlackBerry and BlackBerry, same thing, didn't neutralize.  

18:42: Dom Hawes 

So both books are ostensibly about being disrupted or disrupting. There are periods, of course, when it feels like neither thing are happening. And it struck me that kind offensive defence and sort of the zones and horizons works equally well with some external influences, like the current downturn we're in, feels very much like everyone is playing defence. It feels very much like everyone is playing very safe. Have you got any advice or tips for listeners who find themselves in tech companies at the moment where they're playing defence and they're not being disrupted.  

19:18: Geoffrey Moore 

By the way, I don't know of many companies this year that are making our plan, let's just put that way because of this whole millez of just, and it's not a recession in any of the technical terms, perhaps, but it's this slowdown and stuff. So what do you do in that situation? Well, you got to go back to your performance zone charter. Who are you in service to? It better not be yourself or your shareholders, because nobody cares about you. And other than your shareholders, nobody cares about your shareholders either. But so you have to be in service to some customer base, some community, some cause. You could be an NGO . You don't have to be a profit, but you have to be in service too.  

And then in a doldrum what a doldrum lets you do is take extra time to get better at being at service to your core constituencies. There's a concept we've used occasionally called the strategic acts of generosity and strategic acts of generosities are things you do with discretionary resources at a time when you do not have necessarily a better profit. If you've got a growth opportunity to put those resources against, you should do it. But if you don't, then using them discretionary to reinforce and secure your relationships with your best customers and your best partners, and just strengthen the hand you're playing. And also use the third. So the third vector of innovation, besides differentiation and neutralization, there are only three vectors. The third one is optimization.  

The other thing you can do in a downturn, which people do, is to say, look, we just got to take as much cost out of the system as possible. The problem is, if people take cost out without thinking about strategic acts of generosity ever, then what you do is you just essentially kind of let the franchise down. You let your customers down, you let your partners down. That's not the right thing to do.  

21:07: Dom Hawes 

Let's take a short break. To recap, so far today, Geoffrey Moore has presented to us his model for business organization. And in it, he divides operations into four zones and three horizons. These are the zones, the performance zone, where companies deliver products and services to their customers. And that represents the core value to the world that business creates. That is what analysts like to look at. It's what sales delivers. It's the reason that we are all here now. The productivity zone that supports performance, handling, all of the behind the scenes functions like HR, IT and legal. All those things that are crucial for maintaining the long term stability and profitability of the business. Now, interestingly, this zone also includes marketing.  

So if the goal of the productivity team is long term stability and art ad success, this is where your long term brand building sits. Next, we have the incubation zone. That's where you create, test and nurture new ideas, technologies and business models. That, by the way, is very much like a startup environment. It's your labs, if you like, crucial for adapting to disruptive innovations. And finally, you have the transformation zone. Now, the transformation zone is rarely occupied. It is therefore implementing major paradigm shifts, like creating new franchises or transitioning to new digital models. And that zone is led forcefully by the CEO. Geoffrey also explained three horizons. Those are the different time frames over which you expect to achieve a return on your investment. In each of the four different zones horizon, one expects returns within one year, that's your productivity and your performance.  

Horizon two, within two to three years, that's your transformation zone, if indeed anything is in it. And horizon three? Well, that's for the long term. That's for much more uncertain investments. You know, this looks and sounds like such a simple model, but don't let its simplicity mask its power. The model is so versatile and it's applicable to businesses of any size. Implement it and it will help you understand how to deliver value. Now we've also talked about dealing with disruption. If you are a disruptor, you'll be moving a product into your transformation zone and you'll be helping your CEO drive and communicate difference to help you stand apart from the rest of your market.  

If, however, you're being disrupted, your goal is to neutralize for long enough to catch up while playing to the other strengths that answer your customers'needs, now in a moment, I'm going to be asking Geoffrey about positioning. But first, here's a very short message you might like.  

In chasm, you gave readers a really strong formula for positioning, and I've used that myself many times. We sort of talked about this a little bit earlier, and I suspect I already know the answer. But do you think it's getting harder to create distinctive positioning these days? Or do you think that if people think it is getting harder, it's a sign their market development and definition isn't being done properly?  

24:16: Geoffrey Moore 

Yeah, if you think about it as words. The problem is positioning with just words is getting harder. And particularly now, except apparently in politics, where if the position is completely and completely outrageous, it seems to be able to stick perfectly. But if you think about positioning as power as opposed to words, then I think that the classic positioning, and particularly for the bowling alley crossing, the chasm positioning statement was, look, there is a trap value broken process. Okay, so who are the legitimate contenders to help the customer with this problem? Well, they have incumbent vendors. The cummin vendors have domain expertise in the customer's business. They have trusted relationship, but they don't have the technology to beat the problem. Then there's other vendors who look more like you, their startup or whatever.  

They have technology that is good or maybe better than yours, but they have not focused on this particular use case. So the positioning problem is just we are the people who have the breakthrough technology and have focused on the use case. And so the example I used the last time I rewrote Crossing the Chasm was I used box, the file sharing company at the time. So at that point, Microsoft Sharepoint was the incumbent. It was a place where everybody put their documents, they kind of went there to die because nobody ever wanted to actually get into it. Actually that was a horrible user experience. But it was reliable, it was safe, it was secure. Then there was Dropbox, which is like, are you kidding me? This is amazing. It was like free lunches, but it wasn't enterprise ready.  

And so what box did is they said our position is we're going to give you the security of Sharepoint with the ease of use of Dropbox. I think when you do those intersections and they coincide with a trap value business process, target market, compelling reason to buy situation, then positioning is easy.  

26:16: Dom Hawes 

And so therefore, if you're currently sitting in a business that finds itself without a distinctive positioning, it's probably time to go bowling.  

26:24: Geoffrey Moore 

And the problem is when people get into trouble, their natural instinct is to think about themselves, not about their customer. And they're trying to make payroll. I'm trying to keep my board of directors or my investors off my neck, but it doesn't work. The bowling alley place says, no, work backward from the trap value and build your bridge and pay your.  

26:46: Dom Hawes 

I'm going to go sit on the naughty step myself and work out why I haven't gone straight back.  

26:51: Geoffrey Moore 

Times are tough.  

26:53: Dom Hawes 

Anyway, the other thing I loved, and I mentioned it earlier, I said I was going to come back to it in Zone to Win. You've advocating marketing for power or for profit? And you've mentioned in a podcast I listened to the VC firms really led the way in marketing for power. Markets have slightly changed now though, and vcs are asking a lot of their portfolios to scale profitably because they're worried about cash preservation. So everyone's got to have a Runway and there's that kind of default, live default, dead position that came out a couple of years ago. How do you see the current climate? Do you see that changes the power or profit dynamic?  

27:31: Geoffrey Moore 

Actually the phrase I want to use is power and performance. But the idea is because we have a lot of performance metrics and if you look at compensation, particularly in public companies, the executive compensation is very performance oriented and typically it's tied to stock price. They're trying to build a connection to the investor through total shareholder returns or the moral equivalent thereof. So performance is when you take your existing power and you harvest it, you use your existing power to create financial returns. Investments in power are saying, I'm going to take money off the table from my performance game and I'm going to spend it on building power, which I will then monetize in a future date. So the power performance thing, the venture people have a very simple. The early stage venture people have a very simple equation. We only invest in power.  

28:19: Geoffrey Moore 

What you want to do is get performance to a vector where people will give you an extraordinary multiple on a company that basically is breaking even. So, obviously, nobody's buying the performance, the historical performance of the company. They're buying 100% of the power of the company. So that's pretty straightforward. But private equity has, of course, expanded its purview dramatically. And to be fair, the landscape, the technological landscape, has now had so many layers of technology infrastructure built up that you can play a less disruptive, more broad global game sooner than you could before. So there's a reason why. But what that does now, that gives private equity the same problem that the public equity people have, which is, how much of my budget should I allocate to performance versus power?  

29:07: Geoffrey Moore 

I had a conversation with the team at Microsoft, Satya's team, and Amy Hood is the CFO there at the time. I think she still is where I said, look, guys, you're the most powerful company in my business history, in tech, but you have lost power every single year of this century. This was in 2014. So you're incredibly powerful, but you're less powerful this year than you were last year. My claim is, the reason that's true is you measure performance, and you don't hold people accountable for power. You just hold them accountable for performance. That struck a chord. And in fact, Amy said, okay, I think there's enough truth in what Geoffrey's saying that we're going to put a power component in the annual planning contract. I think everybody needs one.  

29:51: Geoffrey Moore 

And by the way, in a downturn when you know performance is going to be suboptimal, then that's a good time to invest in power, assuming that you can make payroll. But that's the time, I guess, a.  

30:04: Dom Hawes 

Shift from power to performance, if you have enough power, is a matter of choice.  

30:08: Geoffrey Moore 

Yeah. Look, you don't want power for the sake of power. You want power. Ultimately, the performance zone is what matters. That's what affects the world. So we're always investing in power to create future performance. And there are people who live in the incubation zone their whole life, which means they're always creating these incredible futures that they never actually take responsibility for. They're just kind of playing in the performance that, by the way, in a lot of the large companies, the incubation zone is really just a corporate playground. It's corporate entertainment, and it's not okay. And it's dangerous because you think you're catching up to and you're not. You're just goofing off. So I think the venture operating model is not playful. Holding that zone accountable for saying, look, you need to show me demonstrable changes in power. All the venture metrics are power metrics.  

So did you create a minimum viable product? Did you get your first customer? Do you get your first lighthouse reference? Have you crossed the chasm? And do you have a repeatable use case? Have you dominated your first target segment? Those are power metrics. The financial returns from those in a large corporation are de minimis, but the power returns are real.  

31:23: Dom Hawes 

Do you think enough weight is given to the concept of the whole product these days that I know everyone has partners and alliances, but a lot of them seem to be paper based rather than genuine, close, strategic, risk sharing alliances.  

31:38: Geoffrey Moore 

Right? For sure. Again, lifecycle. Back to you being the nail. I'll be the hammer one more time. So if you look at the partnership role through the four stages of the lifecycle that were talking, the technology adoption lifecycle, it changes pretty dramatically. So in the early market, you need really all star systems integration, white sheet of paper, brilliant design, do whatever it takes, very expensive, but it's one off. And the global sis typically have an elite sort of SWAT team kind of capability to do that. And sometimes they're boutique. It's consultancies who do that as well. When you're Crossing the Chasm, you don't need sales leverage. You need solution leverage, which means you need people to literally make sure that the whole product, that they fill out your whole product, and you cannot afford.  

Whether the whole product fails because of something you did or something they did, you lose. So you can't afford to lose. And this is why I think there you need to have a target market segment manager or target market initiative manager, who spends at least as much time with the partner community as with the engineering team inside the house to make sure that the whole product is complete and moving forward. When you go into the tornado, the partnership changes dramatically. Now it becomes a distribution coverage partnership, not a solution partnership. I mean, the solution partnerships are still there, but there's so much market there. Everybody and his mother wants to weigh in and help. You don't need people to focus on the solution. You need people to focus on grabbing market share with you.  

And so what happens to the partner and alliance's role in mature companies? It's become entirely a distribution play. It's all about partner, qualified leads and partner. And by the way, then those things become, frankly, inauthentic. People are double comping and they're dipping into the trough, and it's pretty bad. So I think what I see in large companies is people taking a pretty mean look at that partner distribution comp thing. And I think for Main street, that's the right thing to do.  

33:47: Dom Hawes 

Yeah, it strikes me that Main street might be where a lot of questionable value, questionable disciplines happen.  

33:55: Geoffrey Moore 

It's like, look, it happens in politics. It's not graft, but it's close. It's people coasting on their laurels. It's people taking past efforts which were successful and they contributed to and trying to monetize them beyond their sell by date.  

34:13: Dom Hawes 

There's a lot of good work going on there, obviously as well. Specifically by a lot of our agencies, of course.  

But good. Look, I've taken a lot of your time. There is one area we haven't touched on at all, and it's around the kind of organizational design and organizational leadership, which I know is one of your areas too. And we haven't talked at all about leadership in marketing, which is my sort of specific area of interest. I wonder whether you could give me some pointers or give our listeners some pointers on kind of marketing leadership and culture, the requirements these days and how specifically how cmos can equip themselves to get more influence in the boardroom.  

34:50: Geoffrey Moore 

This reminds me of when CIOs wanted their seat at the table in a past time as well. I think digital transformation has now gotten the CIO their seat at the table. What happened is the salespeople depositioned the marketing people, and they have a tendency to just do this. We're in the performance zone. You're in the productivity zone. We're the people that are important. You're not. Carry my bag and frankly, fill out my expense report for me. I mean, it's like you're my indentured servant. So the first deal is, look, I'm sure you need a bank, not me. But there are cultures, and particularly if it's an engineering led culture who's pretty naive about sales and marketing. That is a very typical position for marketing to be in. In that situation.  

If you're going to stay there, I think you have to say, okay, marketing in this company is marketing communications. It is not strategic. And if I'm okay with that, I can stay there. But if I'm not okay with it, I have to leave. That's part one but part two is, this is what's interesting to me, spending time with winning companies. Now I'm watching the senior sales executive role shift from being a sales expert to being a general manager. And if you're a general manager, you want the kind of CMO that you and I have been talking about. You want a CMO who can balance power with performance. You still need performance, you still need lead gen, you still need pipeline coverage, three x pipeline coverage, absolutely required.  

But you also need to position yourself for power, and you need to be able to have the target market, compelling reason to buy, discussion and segment the market, et cetera, et cetera. I think the game then is, as we move this, if we ask the sales role to step up to general manager, then there's still kind of a pure sales play under that sales exec. That general manager is probably called chief revenue officer. I mean, that's sort of the title. And when you put marketing under sales, it was just oppressed. But I think in this more enlightened configuration, it should be a thing about where is the trap value? Do our offers, are they really attacking the trap value? The engineers are doing really cool stuff, but is it actually releasing the trap value? Because if it doesn't, we're not going to get paid.  

That, I think, is marketing's job.  

37:12: Dom Hawes 

And it strikes me now the revenue role is one I'm really interested in. And I think there's a route for marketers into chief revenue and there's a route for sales, as you say, into chief revenue. And what underpins it now. I mean, back in the day, marketing, sales and customer success all were operating on different systems, none of which spoke to each other completely siloed. Now, there's one piece of technology that sits underneath them all, so you can track your customer relationships and your markets all the way through. It's going to be interesting to see how that develops. But I feel, certainly in tech, I'm feeling a pull of marketing back towards sales.  

And I think the ABMers are taking it in that way a little bit because they talk about marketing and sales alignment and integration, and if you suck them too far into the performance zone. And it's interesting, although I knew that marketing sat in productivity, I kind of half wanted them to be in performance. But I totally get why, actually, you need to resist that temptation. Keep them in the productivity zone, keep them thinking long term. It's a different.  

38:11: Geoffrey Moore 

By the way, the productivity zone also has short term obligations to sales. I mean, look, it's not an all or nothing game, but it does require principled asset allocation. By the way, I think the biggest sin with marketing is the corporate marketing that becomes communication oriented and then it's going to do corporate branding and feels like it's just money that evaporates. Like what? Then we tell these kind of fanciful stories. It's like, no, you're not a literary. This is not a literary competition. I either want power or performance. Don't give me something. There's no third option for a return on investment from marketing. Then I think the question is what percentage should be power versus performance? That I think changes every year. But the more declarative you can be about, I intend to spend this amount of my budget on power and this performance.  

I think that then the people that underneath you don't get confused. I'm doing a power play. I'm doing a performance play. Great. We're playing by different playbooks. We don't have to criticize each other because we're doing something different.  

39:10: Dom Hawes 

So I just want to say a very quick thank you to Renaye Edwards, Lorna Charlish and Chris Willocks from Digital Radish, who sent some questions in because. They knew Geoffrey was coming to speak to me. And here we go.  

So when Chasm was written and in your Regis McKenna days, the trade press was really influential and could be used to educate and influence. Of course, particularly with early stage technologies. These days, the media is kind of not so much because we can all self publish and everyone does.  

So if you got a business at the early stages of development, whether there are startups entering the track or they're entering a transition zone, and they need to get attention, these days, that's hard.  

39:45: Geoffrey Moore 

The gift of the media is at one level, it's much more open, but of course, it's just become cacophonous. It's like. It's like a noise factory. And so I think what you have to be able to do is to say, look, first of all, when you want to get this message out, you're probably more in the compelling reason to sell than compelling reason to buy mode. So the first thing is, just remember, nobody cares about you except your mom. Your mom does care about you, but nobody else does. So don't talk about yourself because nobody wants to listen. So what would they talk about? Well, if you talk about an issue that is important to them, typically it's a pain, particularly in the doldrum, it's a pain issue, not a gain issue, typically. But it could be either one.  

It could be an opportunity or a gain. And you talk in an interesting way about it. This is thought leadership marketing. Then people begin to engage with that idea, and that creates the permission to then say, okay, we can now start a dialogue. That would be a marketing dialogue leading to a sales dialogue, but it's about them and it's about the issues, not about yourself. Whereas when you're in the middle of an established market, then it's different. Then it's like, well, you've got a budget. You're going to spend it this year. You can spend on me or my competitor. Let me tell you why you should spend it on me. That's okay, because the customer is already leaning in. But for a lot of the situations, and certainly any new thing or transitional thing, the customer is not leaning in.  

So you have to court the customer in the customer's language, not your language. And I think when you do that, then you have to go to the forum where the customer is not the forum where you say, like, you and I like to publish on LinkedIn. Well, God bless. But if our customer is not on LinkedIn, who cares?  

41:29: Dom Hawes 

Wow. I would like to say a huge thank you to Geoffrey Moore for the time he spent with us exploring his work. Now, as usual, we are going to list an extended set of show notes.  

At Unicorny Co. UK with links to goodies and more of the good stuff. Or you can find abridged notes on the platform that you are listening to this on right now.  

As you have probably guessed by now, I've been a fan, probably more of a disciple of Geoffrey's work for years. I think. In fact, it's been around 25 years since I had my first chasm Aha moment.  

And I hope that if you didn't know his work already, you've had an aha moment, and you are now a convert, too. For as long as I've followed and used Geoffrey's models, I've also had to defend their validity to businesses that are neither tech firms nor disruptive.  

Now, look, I know that's who he wrote them for, and you will have heard his passion for tech disruptors. But the reason I've held onto his work so tightly is this. Buried in his playbooks are the models that we all learn at business school.  

And if you follow his process, you will be following the best business school models available without having to get too heavy into any of theory. So what you get by using Geoffrey Moore's Playbooks is a very practical and easy to follow way of being strategically sound. I may come back to that. I think in a standalone episode at some stage in the future because I think it does warrant further exploration. And by the way, if you want to talk about this directly to me or any of today's content with me in more detail, then please connect to me through the website at Unicorny.co.uk. Leave me a voicemail there or connect to me on LinkedIn.  

From today's episode, though, I am going to go away thinking deeply about Geoffrey's concept of marketing for power marketing for profit, or I guess even better, marketing for both.  

In a team talk in my own business at the end of 2020, I said the following. I said: 

“Money brings power to the moment, influence delivers power long into the future.” 

Now, today we talked about money bringing power to the moment because marketing for profit seeks to deliver power in the short term. It's a harvesting tactic to maximize returns, and profit gives companies and the people that can attribute the margin to their work power. Power to make choices, power to reinvest, power to fuel growth, power in all sorts of other ways. But that power is short term.  

That kind of power disappears as quickly as it appears. I don't suppose it's a coincidence that marketing effectiveness from performance or profit related activity also only has a short term effect on value creation. You can run a campaign to drive sales quarter to quarter, and if you have good discipline in the business, you can probably drive short term profits too. But the power you gain from short term activity is only related to the revenue you create. Stop the activity, lose the power. It's proven that long term profitability and power come from investment in brand. Over the long term, influence and brand are synonymous in my meaning here, Geoffrey referenced the venture capital playbook of investing in long term power at the expense of short term profit. They value businesses based on how much territory they can take.  

Conversely, private equity generally works well the opposite way round, looking for profitable growth with valuations based on multiples of profit. Creating value under these two paradigms, therefore, is very different. In the former, you scale as fast as you can with no consideration about profit. You're excluding as many competitors from the market as possible by taking as much territory as fast as you can. When you're dominant, you flip your model and start to monetize. Thus, with VC backed businesses, expect brand to be at the forefront of activity. In the latter, you scale as fast as you can without sacrificing EBITDA. It's a more controlled form of value creation.  

And by the way, of course, the returns are risk adjusted, certainly for the limited partner in a PE fund, but with PE backed businesses, you can expect performance marketing and other shorter term techniques to feature VC is often marketing to no budget. What they're backing is a business that's making a market. PE, conversely, is marketing to existing budgets. What they are backing is a business that's taking budget. Now, if you don't relate to either of these models, Geoffrey's advice for the current downturn is this in times of economic trouble, it's wise to invest in building power for future performance. But real success comes from a principled allocation of marketing resources between building power and delivering performance, right? I have talked enough today. I'd love to talk more about the detail of Zone to Win, but I think this episode is already long enough.  

If you want to hear more about Zone to Win, you know where to find me. Let me know.  

But for now, I am going back to the bookshelf to look for our next inspiring author and thought leader to invite to Unicorny. Suggestions welcome. See ya.  

You've been listening to Unicorny, the antidote to post rationalized business books. If you've enjoyed the show, why not hit follow? We'd love you to rate or review us on Apple Podcasts or Spotify, and it only takes a few seconds, but it means a lot to us. Or if it's easier for you, please recommend us to a friend or post on LinkedIn. Tagging at Unicorny, I'm your host, Dom Hawes. Nicola Fairly is the series producer, Laura Taylor McAllister is the production assistant, Pete Allen is the editor, and Ornella Weston and me, Dom Hawes, are your writers.  

Unicorny is a Selby Anderson production. Now go win the future.