Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet
304
Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet
304eBook
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Overview
The fault line -- that dangerous, unstable seam in the economy where powerful innovations and savage competition meet and create market-shattering tremors. Every company lives on it; no manager can control it.
In the original edition of Living on the Fault Line, Geoffrey Moore presented a compelling argument for using shareholder value (or share price) as the key driver in management decisions. Moore now revisits his argument in the post-Internet bubble world, proving that the methods he espouses are more germane than ever and showing companies how to use them to survive and thrive in today's demanding economy.
Extending the themes of Crossing the Chasm and Inside the Tornado, his first two books on the dynamics of the high-tech markets, Moore shows why sensitivity to stock price is the single most important lever for managing in the future, both as a leading indicator of shifts in competitive advantage and as an employee motivator for making necessary changes in organizations heretofore impervious to change.
This revised and updated edition includes:
- A deeper emphasis on core versus context, which has emerged as the key distinction in allocating resources to improve shareholder value
- A new Competitive Advantage Grid that will aid managers in achieving and sustaining competitive advantage, the most important component in managing for shareholder value
- An expanded Value Discipline Model as it relates to the Competitive Advantage Grid
- Analysis of the powerful new trend toward core/context analysis and outsourcing production duties
- Updated models of organizational change for each stage of market development
As disruptive forces continue to buffet the marketplace and rattle the staid practices of the past, Moore offers a brilliant set of navigational tools to help meet today's most compelling management challenges.
Product Details
| ISBN-13: | 9780061850370 |
|---|---|
| Publisher: | HarperCollins Publishers |
| Publication date: | 10/13/2009 |
| Sold by: | HARPERCOLLINS |
| Format: | eBook |
| Pages: | 304 |
| File size: | 1 MB |
About the Author
Geoffrey A. Moore is the author of Escape Velocity, Inside the Tornado, and Living on the Fault Line.
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!
Table of Contents
| Acknowledgments | xi | |
| Introduction | xv | |
| 1 | The Age of the Internet | 1 |
| 2 | Shareholder Value | 41 |
| 3 | Competitive Advantage | 92 |
| 4 | Living on the Fault Line | 139 |
| 5 | Triage | 188 |
| 6 | Building to Last | 229 |
| Epilogue | 271 | |
| Index | 279 |
What People are Saying About This
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.
—
(John Chambers, CEO, Cisco Systems)
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.
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(Mark Hoffman, President and CEO, Commerce One )
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.
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(Clayton Christensen, author, The Innovator's Dilemma: When New Technologies Cause Great Companies to Fail )
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.
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(Bob Herbold, Executive Vice President and COO, Microsoft)
Geoff's book provides both vocabulary and guidance to help our company and its associates leverage the power of the new economy.
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(Thomas G. Stemberg, Chairman of the Board and CEO, Staples Inc.)
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.
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(George Conrades, Chairman and CEO, Akamai)