Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet

Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet

by Geoffrey A. Moore
     
 

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First came the groundbreaking Crossing the Chasm and the revolutionary product adoption life cycle principle. Then came its successor, which honed and furthered the radical ideas that have since become the canon of high-tech markets. Now, Silicon Valley guru Geoffrey A. Moore reveals the key management practices that will ensure a competitive advantage in… See more details below

Overview

First came the groundbreaking Crossing the Chasm and the revolutionary product adoption life cycle principle. Then came its successor, which honed and furthered the radical ideas that have since become the canon of high-tech markets. Now, Silicon Valley guru Geoffrey A. Moore reveals the key management practices that will ensure a competitive advantage in high technology in the years to come. He explores-for the first time anywhere--how the strategies and structure of an organization must adapt and change as their products move through the high-tech product adoption cycle. With guidelines on rethinking the quarterly report, reinterpreting profit and loss statements, managing to create shareholder value, and more, Living on the Faultline provides new models to help managers analyze current business practices and change them to meet--and surpass--the challenges of the marketplace.

Editorial Reviews

Clayton Christensen
Managers who have wondered whether today's seemingly irrational competitive and capital market behavior might become 'normal' again need to read Living on the Fault Line. Moore shows convincingly that technology and capital market efficiency have fundamentally changed not just the reality that all managers face, but have changed the way they need to define, measure and manage success. This is a great book.
John Chambers
Cisco is committed to creating unprecedented value and opportunity for our shareholders, customers, partners and employees. Geoffrey Moore's new book, Living on the Fault Line, reveals his understanding of fast growth industries and offers insight to help us manage shareholder value in today's Internet Economy.
Bob Herbold
When you live on the fault line, you have to reinvent yourself every single day. In the past year we have been incorporating ideas from this book into the strategy training portions of our executive development program, and the feedback has been tremendous.
Thomas G. Stemberg
Geoff's book provides both vocabulary and guidance to help our company and its associates leverage the power of the new economy.
George Conrades
Having lived on the fault line as a senior executive at IBM,BBN, GTE, and now Akamai, I must say that this book, unlike any other I have ever read, clearly lays out the blueprint for how old economy franchises can make a full transition to the new economy. It is also a great guide for those of us leading new economy companies as we chart our paths forward.
Guy Kawasaki
New economies require new rules. If you don't read this book, you're not going to be the Billionaire next door. And it will be your fault, not Geoffrey's or mine.
Rick Adam
At NEON managing for shareholder value is a way of life. We have experienced the extremes of the fault line as we and the global capital markets work to find a consistent and enduring basis for shareholder valuations. In the process Geoff's models have brought clarity and insightto both our internal and external communications. Going forward we seethem as key to shaping our strategy for the new economy.
Tom Kendra
From the epicenter of technology, Silicon Valley, comes another 'must read' from Geoffrey Moore, the man who crystallized the challenges of marketing high tech in Crossing the Chasm. Fault line will compel executives to examine the core value of their organizations under the harsh light of the New Economy and guide them with sound strategies for surviving the onslaught of the dot.coms.
Bob Gett
At Viant we help companies of all kinds build new economy digital businesses. Most traditional companies are greatly challenged in transforming their cultures to support the new Internet business model. Geoff Moore's new book offers a practical blueprint for building a culture of innovation and execution so vital to establishing enduring success in the Internet Age.
Aart J. de Geus
Geoffrey Moore once again demonstrates his ability to take a complex set of business dynamics and forge them into a clean, coherent model. He outlines the effect that the transition from a traditional economy to the new "e-conomy" has on companies - their internal behavior, their interactions within and across industry lines, and their perception by Wall Street. I found it an enormously helpful and engaging read.
Bob Peebler
Geoffrey Moore looks beyond today's e-buzz to help executives understand the fundamental changes needed to morph from the old economy to the new. Time is more valuable than money, assets don't matter, and market cap counts more than your P&L. Geoffrey gives hope for bricks and mortar companies, but the changes required will make most CEOs' hearts beat a little faster.
Dick Cheney
This book is a must read for CEO's and their executive team who are wondering what e-business is all about. According to Geoffrey Moore, you had better start shedding non-core activities quickly or your company will become a victim of the new economy. Geoffrey develops a model that provides the organizational flexibility and speed to navigate the choppy waters of the internet age.
Dominic P. Orr
At HP, we set a 3-year business plan that was adjusted annually. At Bay Networks, we set an annual business plan that was adjusted quarterly. Now, at Alteon Websystems, we set a multi-quarter business plan that is adjusted almost every month! In Living on the Fault Line, Moore details a prescription for a company to mutate its corporate genetic makeup in order to effect all these changes with a single company confine... He hits the nail on the head, again.
Paul R. Gudonis.
Using the Internet, someone is revolutionizing your industry. It's either you, one of your traditional competitors, or a dot.com you've never heard of until it's too late. Since the Internet fault line is going to be part of the landscape, you better find out how to survive on it. And there is no better person to teach you about it.
Mark Hoffman
As CEO at both Sybase and Commerce One, I can attest to the power of what Geoff Moore calls the fault line to disrupt existing markets and reset the rules of competition in a flash. Geoff's new book, like his prior ones, gives executives in the middle of the fray a frame of reference for setting new strategies and changing old ways.
Paul R. Gudonis
Using the Internet, someone is revolutionizing your industry. It's either you, one of your traditional competitors, or a dot.com you've never heard of until it's too late. Since the Internet fault line is going to be part of the landscape, you better find out how to survive on it. And there is no better person to teach you about it.
Business 2.0
Living on the Faultine should be required bedtime reading for troubled corporate managers.

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Product Details

ISBN-13:
9781841121185
Publisher:
Capstone Publishing Company
Publication date:
06/01/1900

Meet the Author

Read an Excerpt

The Age of the Internet

Living on a fault line causes one to take an interest in what geologists call plate tectonics. These are the forces under the earth that create the conditions for recurrent and severe earthquakes. In the case of the new information economy, the emergence of the Internet is demonstrating itself to be just such a force.

In this chapter, we are going to examine how what used to be bedrock for our economy, the foundation upon which most established companies "built to last," is now in fact shifting beneath our feet. This in turn will call us to put a new focus on information technology, require us to manage to a new resource equation, and demand from us a new level of commitment to focus our resources increasingly on core processes only.

By the end of this chapter, we will see that in the new economy strategies that heavily leverage outsourcing have a distinct competitive advantage. At the same time, we will acknowledge that the inertia within established organizations resists moving to such strategies. In the search for a lever to move our companies forward, we will hit upon shareholder value and stock price, which will transition us smoothly into the next chapter.

It is a known disease of writers and editors to declare the era they live in "the age of . . ." something, and for the present "the age of the Internet" seems reasonable enough. But why should any self-respecting manager or executive fall prey to this vice? The answer is, only if it will help you to manage for shareholder value better. In this case I think it will.

The claim that we are entering a new age is based on the notion that over the past decade aseries of subtle but profound changes in the nature and structure of business have fundamentally changed the game we are playing. At one level, we see the impact of these changes in the unprecedented behavior of our stock market: It appears to overvalue the new and speculative and undervalue the proven waysdramatically. At another level, we see line functions that used to be the heart of our businesses-like manufacturing-now being outsourced while other disciplines that used to be staff functions-like computer systems-have come to the fore. Looking elsewhere, we see the graduates of our finest business schools uniformly agreeing that a Fortune 500 corporation is the last place they would want to work-even when that corporation is footing the bill for their schooling! What makes this last observation even more chilling is that it is not based on the corporation being boring, slow-moving, or lacking in advancement opportunities. No, the big beef the new crop of graduates has with the Fortune 500 is that they think going forward, these companies are going to be losers! (Heaven only knows what they think is in store for all the other corporations out there.)

So in the words of the Buffalo Springfield, "Something's happening here, though what it is ain't exactly clear." The job of this chapter is to bring that something to light and to assess what it means for the management agenda.

Backfield In Motion

The forces that are reshaping business are for the most part happening in the background and not manifesting themselves directly in events happening in the foreground. As a result, they don't get reported in the Wall Street Journal, do not come up on quarterly conference calls with the investment analysts, and are not raised by customers in advisory board sessions. Thus, not surprisingly, they do not tend to register on the executive team's radar screen.

These forces are best understood in terms of a series of remarkable transitions, of which we will look at six. In each case, note that power is shifting away from something that has long been a trusted source of value creation and toward something that heretofore was considered secondary, derivative, or tangential.

From Assets To Information

In Being Digital, Nick Negroponte describes how value in the age of the Internet has migrated from atoms to bits. The implication for the new management agenda is that information about an asset has become more valuable than the asset itself. It is now more profitable, in other words, to own information about oil than to own oil, information about airline flights than to own an airline, information about a nation's currency than to own the currency itself.

This is bizarre, so let's take a moment to see why it is true. Suppose you own 100 barrels of oil worth $10 each. In other words, you have $1,000 invested in oil. Suppose the price of oil goes up $5 per barrel. You make $500. But suppose for $1 per barrel you could buy the option to buy oil at $10 a barrel at some future date. You wouldn't own any oil; you would just own "a position" in oil. Now you could take your $1,000 and instead of buying 100 barrels of oil you could buy the option to purchase 1,000 barrels. Once again, the price of oil goes up $5. Now you can call in your option, buy (virtually) 1,000 barrels of oil at $10 and sell them (again, virtually) at $15. Instead of $500 you make $5,000 minus the $1,000 you paid for the options, or $4,000.

Ah, you say, but what if oil prices had gone down $5? Where would we have been then? Well, if you had owned the 100 barrels of oil, and the price went down, you just lost $500. Worse still, if you had bought 1,000 options at $1 per barrel, you just lost $1,000! But here's the real kicker-if you had used that same $1,000 to buy options for $1 to sell oil at $10 a barrel, then once again you would have made $4,000!

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