Give Your Team a Common Business Vocabulary . . .

... so they will be able to think and act strategically.

Frameworks provide a guide for making critical decisions. Our frameworks include:.

  • The Hierarchy of Powers
  • The Tech Market Model
  • The 9-Point Strategy Checklist

 

The Hierarchy of Powers

From Geoffrey Moore's book Escape Velocity: Free Your Company's Future from the Pull of the Past.

The Hierarchy of Powers is a Framework of Frameworks. This hierarchy derives from taking an investor view of your company. The first decision investors make is what categories to invest in. Once they have determined that, then they choose specific companies. Oce they hold stock in a company, they dig into the dynamics of the markets it serves, the competitiveness of its offers, and its track record for executing to the forecasts it provides. That covers the hierarchy top to bottom and explains why it is in the order it is. It sizes up all economic competitions in relation to five types of economic power, organized in descending power from most general to most specific, as follows:

Category Power

Category power is a function of the demand for a given class of products or services relative to all other classes. Categories in high demand, like smart phones,storage systems, and cloud computing, are more successful than their peers in securing customer budgets to fund them. Thus they grow faster and typically enjoy better profit margins. So participating in a powerful category is a very good thing. Core questions to answer for category power include:

  • Where is category growth conributing to our overall growth objectives?
  • Where is lack of category growth inhibiting our growth objectives?
  • To the degree we participate in multiple categories, how well balanced is our overall portfolio in terms of contribution to current earnings, current growth, and future growth objectives?
  • In light of the above, do we need to enter a new category, divest ourselves from a category we are currently in, or stay the course with our current portfolio?

Company Power

Within a given category, company power reflects the status and prospects of a specific vendor relative to its competive set, power typically siignaled by that company's market share. Note that the same enterprise can have different levels of company power in different categories, so total company power is based on the sum of the positions it has in the total set of categories that make up its revenues, multiplied by the power those categories hae in their own right, as well as by whatever snergy there may be among them. This is the calculus of investor valuation, and as you may well appreciate, there is plenty of room for multiple points of view. 

We refer to current advantages that can be leveraged as our crown jewels. These are the unique assets and capabilities under your direct control that have the potential to confer on your company substantial and sustainable competitive advantage in the primary categories in which you participate or intend to participate. When it comes to managing or acquiring crown jewels that will truly support sustainable company power, there are a host of questions that must be addressed, including the following:

  • What exactly are our crown jewels, and are we investing enough to sustain or even increase their unique capabilities?
  • Do our innovation investments focus on leveraging our crown jewels, or are we spreading ourselves too thin and failing to achieve genuine competitive separation?
  • Have we engineered our offers and our organization to leverage our crown jewels for maximum sustainable differentiation from our competitive set?
  • Are we optimizing and economizing aggressively enough in areas that are not core to our defining differentiation?

Market Power

Market power is company power within the confines of a single market segmet. Market segments are defined as sets of customers who share a common and unique set of needs and who reference each other, directly or indirectly, when making their purchase decisions. Market power is measured by word-of-mouth reputation within this community of reference and is confirmed by market share specific to that segment.

When pursuing a strategy of market-segment focus, there are any number of qustions that challenge executives:

  • Is the market segment big enough to matter, yet small enough to win decisively?
  • Are our market-specific commitments sufficiently focused and intense to win market power?
  • Are we winning fast enough?
  • Are we making the market sufficiently lucrative for our partners so that they will proactively participate in completig our whole offer?
  • Are we capturing a price preium commensurate with the unique value proposition we provide?
  • Do we have a clear line of sight to our growth opportunities in adjacent market segments?

Offer Power

Offer power is a function of the demand for a given product or service relative to its reference competitors. In mature categories the reference base is simply the competitive set that makes up the category. In emerging categories it also extends to status quo alternatives that are not in the same category but compete for the same budget. For executives facing challenges of how to allocate resources in creating a differentiated offer, the questions that most need answering are:

  • Is this offer a proven hit, a potential hit, or more of a product-line filler?
  • Is this offer sufficiently differentiated to gain escape velocity from its competitive set?
  • What can we do to amplify its differentiation further?
  • Where are we wasting resources majoring in minors or chasing a competitor's tail?

Execution Power

Execution power is the ability to outperform your competitive set under conditions that favor no vendor in particular. For he most part, it is focused on your existing book of business and thus is more about securing the present than freeing your future. For this reason, execution is often set in opposition to strategy, much the way that practice is set opposite theory or the real world is set opposite an imagined one.The issues and questions that arise when ennterprises focus on execution power include:

  • Are we clear about the state of each of our lines of business and the corresponding execcution mode that should be foregrounded?
  • Do we have the right kinds of leaders in charge, given the executionn discipline that is required?
  • Have we highighted the lines of business that are in transition, either from invention to deployment (the escape-velocity transition) or from deployment to optimization (the maturation transition)?
  • With respect to the transition prorams, do we have clear milestones and metrics and visibility to ensure we know when they have reached their tipping points?

The Tech Market Model

Early Market

Customers are visionaries under the influence of technology enthusiasts. Each new deal is greeted with enthusiasm. Product is still immature. Whole product has to be built from scratch for each customer, including a significant amount of “special work” unique to that customer’s requirements.

Chasm

Early market commitments now absorb all discretionary resources such that you cannot offer any more “specials” to visionaries. Pragmatists, however, do not see the references nor the evidence of a whole product that would make you a safe buy. Sales cycles are extended, and most that do close are for pilot projects.

Bowling Alley

Product is endorsed by pragmatist customers within the confines of one or more niche markets. Sales cycles within these confines are predictable with good margins. Outside these confines, there are only opportunistic sales, often at significant discount.

Tornado

The mainstream marketplace has taken off. Virtually any vendor who can supply this category of product can sell it. A fierce market share war has developed, and price discounting is vicious. A market leader has emerged, establishing the de facto standards, and this company gets much better margins than the competition.

Main Street

The hyper-growth era is over. Market growth slows down as the market saturates. To expand further some competitors are now modifying their “standard offerings” to appeal to niche markets. Other competitors compete on price alone. The market leader still gets a margin premium but is under pressure to reduce price.

End of Life

The product is either so pervasive that it is no longer being adopted for the first time, or is being replaced by a newer technology.

 

The 9-Point Strategy Checklist


Early Market

Bowling Alley

Tornado

Main Street
Target Customer Visionary LOB or functional executive Pragmatist departmental manager Pragmatist technical buyer End-users
Compelling
Reason to Buy
Dramatic competitive advantage Fix a broken business process Adopt new infrastructure Better values with no risk
Whole Product Application focus, differentiated Application focus, standardized Product focus, standardized Product focus, differentiated
Partners & Allies BPR and SI service providers Recruited for specific whole product Rationalize to reduce friction Minimum required, ideally none
Distribution Direct sales Direct sales transitioning to VARs Drive to higher volume, lower touch Low-cost, high-touch
Pricing Value-based, gain motivated Value-based, pain motivated Competition-based, pain motivated Competition-based, gain motivated
Competition Category vs. category Application vs. application Company vs. company Product / brand vs. product / brand
Positioning Technology-based leadership Niche market leadership Market-share-based leadership Better experience for end users
Next Target Another visionary in a different industry Adjacent niche market New platforms, channels, geographies Next micro-niche
© 2003 - 2016 Chasm Institute LLC. All rights reserved.

Chasm Institute LLC helps high-tech teams learn, apply, and implement best practices in market development strategy. These best practices are based on Geoffrey Moore's best-selling books Crossing the Chasm, Inside the Tornado, Living on the Fault Line, Dealing with Darwin, and Escape Velocity plus hundreds of client engagements with high-tech companies. 

Chasm Institute helps companies align their product development, marketing, and sales functions to achieve and maintain market leadership in their categories.

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