Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolutionby Geoffrey Moore
Many companies thrive during the early stages of their life cycle, only to fall slack during periods of inertia and die out while others surge ahead. But
The Darwinian struggle of business keeps getting more brutal as competitive advantage gaps get narrower and narrower. Anything you invent today will soon be copied by someone else—probably better and cheaper.
Many companies thrive during the early stages of their life cycle, only to fall slack during periods of inertia and die out while others surge ahead. But as Geoffrey Moore shows, some notable companies have figured out how to deal with Darwin in their mature years—making changes on the fly while fending off challenges from every quarter.
Business is becoming increasingly competitive - globalization, deregulation and commoditization have taken their toll everywhere you look. Companies are forced to innovate or fold; it's a constant pressure that goes beyond mere competition - it's about survival. Who will the survivors be? The ones that win the scarce resources of customer purchases; the ones that gain customer preference because of their innovation; the ones creating next-generation offers and raising the bar for the future. It's evolution in every sense of the word. Survival of the fittest. In this summary, bestselling author and consultant Geoffrey A. Moore puts into clear relief the fact that innovation is not an optional "nice-to-have" in business - to innovate forever is a design specification. It's no longer a strategy; it's a requirement.
The economic argument in favor of innovation focuses on pricing power - avoiding commoditization and the resulting vendor price wars brought about by consumers simply searching for the best deal. Over time in these situations, the market stabilizes at prices at or below cost, creating returns for investors below the cost of capital. Investors do not stay in marketplaces like these very long. When innovation is applied, however, offers become more and more differentiated from one another, leading to different ones becoming the preferred choice for different market segments. Vendors in those segments then have pricing power, and the markets stabilize at prices well above cost, creating returns above the cost of capital, attracting more investment.
The Economics of Innovation
In essence, when innovation creates differentiation, it creates attractive economic returns. This is not, however, the only possible outcome from innovation. In addition to differentiation, there are three other possible outcomes: neutralization, productivity improvement and waste.
Types of Innovation
To better understand the various types of innovation, Moore organizes these types into clusters. The innovation types fall into these four clusters or innovation zones: the product leadership zone, the customer intimacy zone, the operational excellence zone and the category renewal zone. Beyond these zones, innovation strategies are formed, one that gives every promise of creating the separation you need from your direct competitors, earning the customer preference your profit margins require. Now, says Moore, you must overcome the inertia of your own organization that fosters resistance to making the changes necessary to implement it.
Inertia is not the enemy of innovation, but it does resist it at the point of change. Therefore, at that very point, management must learn to deconstruct inertia in order to reconstitute it elsewhere. You must extract resources from context in order to repurpose them for core. Context includes most of the things you do to meet commitments to key stakeholders and to comply with industry laws and standards. Core is that which differentiates your company to create sustainable competitive advantage. Extracting resources from context to repurpose for core accomplishes three key objectives:
- It solves your balance sheet problem, enabling you to fund your future from your current asset base.
- It solves your income statement problem, enabling you to increase the revenues and margins earned by your current asset base.
- It solves your inertia problem. By taking mass out of context, you reduce its inertial resistance to core. The more mass you move from context to core, the more powerful this change dynamic will be.
Natural selection is a game with no time-outs. It does, however, allow for unlimited substitutions. Resource recycling not only delivers efficiency; it also provides refreshment. There is respite for the weary as long as it is followed by an energized willingness to re-engage. Communities need abiding sources of employment. Customers need stable sources of supply. Governments need a vital tax base. Investors need opportunities to create attractive returns. We are all more or less strategically aligned. We are just being asked to execute at a new level of competitiveness. Copyright © 2006 Soundview Executive Book Summaries
- Penguin Publishing Group
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- 5.50(w) x 8.40(h) x 0.90(d)
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- 18 Years
Meet the Author
Geoffrey A. Moore is the author of four bestselling, highly infl uential business books: Crossing the Chasm, Inside the Tornado, The Gorilla Game, and Living on the Fault Line. He has made the understanding and effective exploitation of disruptive technologies the core of his life's work. He is a managing director with TCG Advisors, a consulting firm specializing in strategy and business transformation services, and a venture partner with Mohr Davidow Ventures.
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