Goeffrey Moore’s new book Escape Velocity is like business advice for tall people about skiing. A tall person skiing has a mortgage to pay and knows the risks and consequences of falling. They take less risks.
Geoffrey Moore’s new book Escape Velocity presents models and advice for how established, successful companies can continue to grow and compete against start-ups. He offers advice on how to keep the core business cash cows and expand into new markets to escape velocity.
Here are a few insights from the book…
“Once a year, at the beginning of the strategic planning process…reimagine your enterprise from the outside in…agree to temporarily let go of your inside-out perspective and ask the question what does the world really want from us?”
“You need to apply a force that is greater than the internal momentum of current operations.” Essentially he’s saying don’t plan looking at the rear view mirror of what you’ve always done and want to do more of. Stop. Think.
“Bring to the table and outside-in, market-centric perspective that is so compelling and so well-informed that it can counterbalance the inside-out company-centric orientation of last year’s operating plan.”
“Being able to enter new categories and exit old ones if fundamental to freeing your company’s future from the pull of the past.”
“Malcolm Gladwell has taught us to call a tipping-point outcome, a moment of transition in which customers in the segment move en masse to the new offer and its preferred vendor. Once the tipping point is reached, the flood of market interest is released…dramatically lower cost of marketing, leading in turn to revenue gained at a dramatically lower cost of sales.”
“Something that catches the attention of consumers and hooks them as retained users or repeat buyers, be that on daily, weekly, monthly or annual basis. Think Facebook, HP inkjet cartridges, or the latest Kindle from Amazon.”
“Where there is no competition, there is no market. Your competitive set is part of your overall value proposition. You are judged by the company you keep. Position yourself credibly relative to worthy alternatives…dissing and differentiating are two very different activities.”
“Your competitive set is the primary means by which your customers and partners understand your role in the marketplace. “
“Customers either want to pay up for customization or save money via the standardization.”
“The goal is to accelerate mainstream acceptance of a disruptive next-generation technology by first winning over a beachhead segment.”
“The key to tipping-point strategies is for prospects to hear the same message from three or four different sources, all from within their own community.”
He presents several new terms in Escape Velocity
- Category power - “demand for a given class of products or services relative to others. Categories in high demand, like smart phones, are more successful in securing customer budgets…thus they grow faster and typically enjoy better profit margins…Conversely, low category power such as desktop computers is an exercise in playing on the margins. ”
- Company power – status of a vendor relative to its competitive set…market share…brand recognition and awareness. He talks about Tier 1 companies (high market share, brand awareness and preference); Tier 2 companies (lower market share but brand recognition – think Volvo for cars, Sony in PCs); and Tier 3 companies that are unknown brands with no company (or brand) power. “Tier 1 attracts customers looking for the safe buy and willing to pay up for it, whereas Tier 3 attracts those who see the category as a commodity and are looking for the lowest price, and Tier 2 attracts those looking for something out of the ordinary, specific to their particular needs or taste, what one might call the thinking person’s choice.”
- Market power – is company power in one market segment. Market power he defines as “word-of-mouth reputation with a community of reference.” When markets are in transition, market power is highly desirable. An example he uses, Cisco is the clear category leader in switching and routing, Juniper has the lead in the telecommunications segment.
- Offer power – demand relative to competitors. “Microsoft Office had what once was thought to be insurmountable competitive separation, but lately it is getting commoditized by ‘good enough’ alternatives from Google and others…Ditto for HP’s inkjet printers, Cisco Linksys’s home routers and Dell laptops.”
- Execution power – ability to outperform your competitive set under parity conditions.
“So, what does it take to execute an escape-velocity strategy? Basically, three things:
- You must innovate sufficiently to achieve competitive separation. This is the domain of invention.
- You must institutionalize the activities that underlie that separation so that it can be scaled and sustained. This is the domain of deployment.
- You must drive the transition from invention to deployment to a tipping point such that the world will go forward as newly aligned and not fall back into its old ways.”
”There are four execution modes – the two that are key to escape velocity, invention and deployment; a third that is key to mature markets, optimization; and a fourth focused on managing the hand-offs among the other three, transition programs.”
“Solving for the ‘stuck in neutral’ problem. This is somewhat like a turnaround but actually harder to execute, because you do not have the energizing impact of a ‘near-death experience’ to galvanize the troops. Tier 2 vendors, in particular, have tough time energizing anyone – their customers, their partners, or their employees. Everyone tends to take their existence for granted, but no one is disposed to pay a price premium for their offerings. This portends a slow but steady slide into commoditization, acquisition, and dissolution…management can take control by targeting a niche market segment in need and becoming its favorite candidate. Win at the primary, and you have delegate votes during the nominating convention. Come in middle of the pack, and you have none.”
Some great insights on customer segmentation…
“Just because you own a laptop or drive a SUV doesn’t mean you participate in a community of like-minded individuals…how do communities align…socially. Specifically, in the social structure of business-to-business complex-systems markets, they align by industry, profession, and geography. That is:
- Executives in the entertainment industry all know or know of each other, to a much greater extent than they know executives in the automotive industry.
- Chief financial officers typically know peers in their profession across many different industries, as they often compete for each others jobs.
- And people who live in the geographies of England, Japan, and France show a strong preference to interact with other people who live there, and not coincidentally speak English or Japanese or French.”
And these are just my notes up to page 110 of Escape Velocity. It’s a great read with really practical, immediately useful advice and models you can apply to your business.
Want to hire a consultant to help you understand and implement this for your business? I can personally highly recommend Michael Eckhardt, Managing Director of the Chasm Institute. He’s a practice leader within Geoffrey Moore’s consulting business to help companies apply these ideas and frameworks. Think of Michael like the equivalent of a Personal Trainer for escaping velocity. He’s on our Board of Advisors for MarketingZone.com and one of the smartest people I know. He’s also extremely personable and funny which makes him extraordinary. You can learn more about him and the workshops and consulting he provides at www.chasminstitute.com
Have you read the book? What do you think?