I finished reading through one of the strategy (play)books by Geoffrey Moore titled “Zone to Win”. The strategic framework developed by Geoffrey Moore in this book are now being used by some of the leading companies such as Salesforce, Microsoft, Intel and others. This provides a sort of playbook for established companies to navigate through the age of disruption which are challenging their underlying core business model. To get a quick sense of the strategic framework, please look through the presentation in the slideshare - https://www.slideshare.net/rstrad1/zone-to-win-organizing-to-compete-in-the-age-of-disruption
Before we start, we need to ascribe on the fundamental shift in the organizational model of enterprises. The pyramid used by the author below is to describe the extent of disruption at different levels of the organization. Disruption could happen at the infrastructure level (led by Amazon’s of the world) or could happen at the operating model using better digital interface (digital only banks such as Atom, Moven, Fidor etc..) or it could happen at the business model level (led by digital startups such as Lending club, Betterment, SOFI in banking; Lemonade in Insurance). The pyramid is no more erect but increasingly getting inverted as companies are looking at revamping their business model to face the existential threat from the new breed of disruptive competitors. It is not anymore, “Let’s move some of my workloads to cloud” or “Let’s have a beautiful customer interface”. It has to cut through the entire value chain of organization with a collaborative effort from multiple stakeholders. CEO of DBS bank puts it nicely when he says, “it’s not enough to apply digital “lipstick.” (Excerpt from “The digital reinvention of an Asian bank” By McKinsey, March 2017). It has be an end-to-end digital transformation agenda for enterprises dictated by business model innovation.
Pyramid Inversion
The Pyramid inversion highlighting the increased direction and influence coming out from top of the CEO agenda is also exhibited by the representation from EPAM’s latest quarterly investor presentation. Here the new driven by digital which was once smooching the surface of organization is now becoming prominent across all the endeavors and driving or influencing majority of revenues as we step into the next decade. Whole IT action is now being dictated by digital innovation requiring multitude of specialized skillsets.
Now, coming to the core question on the relevance of the strategic framework. As we have seen the businesses are increasingly shaped by digital and the incumbents/established companies are in a tough spot to react and act proactively to protect their turf at the least. There are plenty of strategic frameworks and models which are being used by organizations. Take for example, three horizons of growth or GE Matrix or combination of multiple models out there in the market. A quick view of the framework is provided below. The zone management is a natural extension of the three horizons of growth (Near-, Medium- and Long-term) and provides you with the playbook on how to play offense and defense during the times of disruption by focusing on three horizons. You could get a quick assessment on the zone attributes and how to play offense and defense from the slideshare. https://www.slideshare.net/rstrad1/zone-to-win-organizing-to-compete-in-the-age-of-disruption
On the X – axis you would have the degree of innovation and on the Y-axis you would have the revenue generation and enablers to support this revenue performance. You would have a 2X2 matrix where the zone to the top right is the performance zone that is all focused on the established lines of business with market share leadership, etc…The zone below that is the productivity zone with the focus on improving the margins or the bottom line through improvements in efficiency and productivity. So the two zones to the right are focused on topline and bottom-line improvements where majority of the core business is concentrated. The zone to the top left is the transformation zone which is focused on building the net-new line of business with next-gen capabilities which has the potential to contribute more than 10% of the overall revenues within the next 3-5 years. This should be under the purview of the CEO to expedite and to drive the significance of the group to the overall organization. The zone below that is the incubation zone where the future business options are worked out. This zone includes investments in startups or on the next promising business idea. One difference that it has from the three horizons strategy is that it informs us that each of these zones need to have its own playbook with its own management team, structure, resource allocation to ring fence it from each other as each one requires its own timeline and investments. At the same time, each of these need to collaborate strongly in times of need to play offense of defense in the market with innovative offerings and capabilities incubated and developed over the period. So the business groups within the organization need to be aligned accordingly to drive independence as well as the investments to determine its own growth prospects.
You could get a quick glimpse on the operating of the model from the web or from the book. Looking more on the relevance of the model, few things strike. One, this combines the view from both top line as well as the bottom line and aligns us to focus on profitable business growth. Two, provides an investment picture in terms of how the savings and the revenue growth from performance and productivity zones can be used to fund the incubation and transformation zone through investments. Three, it helps us to have one leg in the present with the intent on optimization (Right of the model) and one leg in the future (Left of the model) with the intent to neutralize/differentiate in the next wave of disruption. Four, it drives the importance of churn cycle where a new idea from incubation gets rolled up into transformation zone and businesses from transformation zone gets into performance zone periodically. This could be a useful framework for organizations to better organize (structure), govern (metrics), manage (leadership) and drive (business ideas) growth potential for the future. This could be applied at overall organization or can be customized for individual business groups within organizations as well.
Happy reading the book and applying the principle as needed.
No comments:
Post a Comment