In this episode, Michael and Sarah welcome Geoffrey Moore, an author, speaker, advisor, and legendary cloud marketer whose life's work has focused on the dynamics surrounding disruptive innovations. They discuss his seminal book, Crossing the Chasm, which unpacked the challenges startup companies face transitioning from early adopters to mainstream customers.
Moore joined Michael and Sarah to discuss how Crossing the Chasm still applies to cloud companies looking to move beyond early adopters and expand their marketshare, and succeeding during times of disruption.
What’s changed since Crossing the Chasm and the Cloud continues to grow?
- “What happened in the beginning of this century was there was a huge explosion in consumer computing, enabled by cloud and enabled by later on by mobile, and it created a whole new infrastructure for computing that had its own market dynamics.” (1:52)
- “As long as there's a B2B portion of the value chain, there will always be a chasm.” (2:25)
Use Cases, Moving Beyond Early Adopters & the Tornado
- How do you find customers for solutions with specific use cases? “The early adopting segment of any population will learn enough about it and get attracted to it and say, ‘This is a disruptive force that I want to take advantage of.’ (7:37)
- “Pragmatic people tend to hang back at that moment. And then they get involved with that second set of use cases, which we call the "pragmatists in pain" use cases. This is where people have a business problem they cannot solve with conventional technology.” (8:06)
- “The tornado was when pragmatic people said, "Oh, my God, everybody's doing it – I better get in before I get left behind." (9:40)
- "Cloud computing is still in the tornado, meaning people have realized this is the future, the economics are just so compelling, as well as the other advantages around access to data, and enabling this whole digital interaction with customers and partners and employees." (10:01)
Zone to Win for Enterprises
- “The challenge for an established enterprise...is how do you now manage your core business and catch the next wave of technology before it, frankly, catches you?” (12:10)
- “The sad part was Xerox PARC invented the Macintosh but it took Apple to actually take advantage of it.” (14:52)
- “It's incredibly important to zone the initiatives that you are funding and pursuing. And whatever zone you put them in, you run the playbook from that zone, which means you use the success metrics unique to that zone.” (18:24)
- “There's a tendency for a zone to try to use its success metrics as a qualifier for getting next year's budget. And that's fair– they're competing against other alternatives in their zone. But it's not fair to ask other zones to meet their success metrics.” (20:53)
Why Great Companies Die
- “If you don't race through the transformation zone, you get halfway in and you stall...and that's how great companies die. And they've been dying like that for a long time.” (17:08)
Zone to Win for Startups - and Individuals
- “My [individual] productivity zone is what am I doing offline to make myself better? A better more capable agent to the performance zone?” (25:54)
- “Any framework can always help. If you can take the noise out of any system with any framework, that's always a plus...[but] the bigger a company gets, the noisier it becomes.” (28:12)
Michael Pollack 0:09
Hello, everyone and welcome to Selling in the Cloud, a podcast about the business of cloud sales and marketing brought to you by Intricately, the authoritative source and digital product adoption, usage, and spend data for sales and marketing teams. I'm Michael Pollack and here with me is Sarah Brown, and we are your co-hosts.
Sarah Brown 0:38
Michael, great to be here with you on the show.
Michael Pollack 0:41
Sarah, it's great to be here as well.
Sarah Brown 0:43
In this episode, we are speaking with Geoffrey Moore, who is an author, speaker and advisor, and well-known marketer whose life's work has focused on market dynamics surrounding disruptive innovations.
Sarah Brown 0:53
His first book, Crossing the Chasm, focuses on the challenges startup companies face transitioning from early adopting to mainstream customers. And his most recent work, which we'll dive into today, as well, is called Zone to Win: Organizing to Compete in the Age of Disruption, which addresses the challenges that large enterprises face when embracing disruptive innovations. Very excited to chat with Geoffrey, shall we dive in?
Michael Pollack 1:16
Sarah Brown 1:17
Geoffrey, welcome to the show, so grateful to have you here with us.
Geoffrey Moore 1:21
Nice to be here and thank you very much.
Sarah Brown 1:23
So you're the author of many influential books throughout your career, perhaps the most well known of which is Crossing the Chasm, which came out nearly 20 years ago. Curious, what's what's changed since then, particularly for enterprises?
Geoffrey Moore 1:35
Well, a lot as you can imagine. You know, when Crossing the Chasm came out, computing was primarily a B2B venture, there was some B2C computing and consumer computing, but frankly, it was sort of trickled down and somebody's bringing their office PC home and, and then maybe playing games on or something like that.
Geoffrey Moore 1:52
What happened in the beginning of this century was there was a huge explosion in consumer computing, enabled by cloud and enabled by later on by mobile, and it created a whole new infrastructure for computing that had its own market dynamics.
Geoffrey Moore 2:06
So the Crossing the Chasm models apply very, very well to B2B. They're not as good for B2C. So there are probably better models for B2C consumer marketing. But now they're coming back in an interesting combination, but much of my work now is what I would call B to B to C companies (B2B2C).
Geoffrey Moore 2:25
So technology enabling companies that sell to businesses who are trying to leverage the consumer digital fabric to get better and closer to their customers going forward. And so that's created a return of dynamic, if you will, the chasm and making the chasm work. The chasm was not as important; There wasn't a big chasm for Facebook, or Google. But as long as there's a B2B portion of the value chain, there will always be a chasm.
Michael Pollack 2:50
And, Geoff, to follow up on that: I'm curious to understand when you talk about the B2BC, and you delineate the Facebooks of the world, right, which are directly B2C, do you find that these B2B's are operating in a wildly different world when it comes to identifying their best prospects, then at the turn of the last century? When you make the point about computing, and you think about that, IBM 30 years ago or 40 years ago, could target large industrial companies and could easily understand who the best fit for them may be. In this new world today, how does your work address that? How do you deal with the challenge of identifying the best "B's" for the "B's" to pursue that open up the greatest opportunity to those "C's"?
Geoffrey Moore 3:34
Yeah, it's interesting. What's happening is that, and this has to do with how digitally mature are the "B's" trying to sell to the "C's." Because the early adopters, of course, self-identify and they kind of come out of the woodwork and you see them as opportunities because they're looking, they're looking for digital enablement.
Geoffrey Moore 3:52
But after that, what I've been doing is working with frameworks of saying, well, okay, so the next likely group to come on board are the people who are being essentially attacked by the digital disruptors. So if you say, well, look, Amazon's an amazing disrupter. Well, then who are they disrupting? It's every retailer on the planet. Now, maybe every logistics player on the planet. Cloud computing is an amazing disrupter. Well, who are they disrupting? Well, anyone on-premise, you know, hardware company on the planet? And so you use that kind of logic to sort of say, what segment should we be going after?
Geoffrey Moore 4:26
And I come from a qualitative as opposed to a quantitative background. So the next thing that I tend to get involved with is, you know, doing qualitative interviews in those segments and getting a sense of how much pressure do these management teams feel they're under. It doesn't do and it's not to contrast and say with what Intricately does, it doesn't identify specific prospects. What it does identify is hunting territories, if you will. And so it helps with segmenting your sales and marketing, but it doesn't help with actually prioritizing specific opportunities.
Michael Pollack 4:58
I see. So that's a great distinction. So when you talk about being able to plan territories or understand the totality of a territory, I guess at that TAM level, I'm curious when you work with some of your clients today. And they say, wow, Jeff, this is great, I understand the market I should be pursuing. How do they then operationalize that into the prioritization inside that market? Or maybe is that a challenge for many of your clients today?
Geoffrey Moore 5:25
Yeah, most enterprises, I think, default to start from a pretty reasonable base, which is a draw triangle hit the top of the bottom. And the top will be the Global 2000. And the bottom will be small, medium enterprises. And the middle will be something about public law commercial or something like that, or enterprise, whatever it is, can you actually apply this strategy in the following way.
Geoffrey Moore 5:45
For the bottom of those pyramids, really, just geographical, territorial, by any sort of arbitrary boundary, you say, to a territory, okay, these are within your patch, and you get a bit every kind of company within the patch. And basically, you put out advertising and promotional materials, which say, if you're looking for our kind of product, you should talk to us – it's very horizontal.
Geoffrey Moore 6:08
The place where the market segmentation with more industry or market specific has the biggest impact is in the middle of that triangle, where you start saying, look, we'd be better off organizing by vertical market, as opposed to by geographical territory. So we should have a financial services or an oil and gas or retail, or transportation, logistics or hospitality, whatever it is. And yes, to some degree, that there are centers of excellence for those industries in particular cities, but we probably should have our talent focus on industry not, not geography.
Geoffrey Moore 6:41
And at the top of the pyramid, it's just a question of who are the centers of power and those are, each company has almost its own segment, when you're talking about the Global 2000. And so those you tend to go after, with global account managers, strategic accounts, something like that.
Michael Pollack 6:56
Interesting. So I'm curious to dig into that a little bit more when you talk about, there's these logical groupings, like vertical or geographic when it comes to kind of segmenting, those make complete sense. When you think about today, if you imagine a company like Azure, or Google or AWS, where increasingly they're selling almost to a specific use case, back to your comment of B2B2C, right?
Michael Pollack 7:19
There are certain companies who are focused on let's say, machine learning or artificial intelligence; do you find among your clients today, they're actively trying to almost sub-segment by use case or by specialization to help kind of accelerate their sales cycle? Or that's not something you're commonly seeing today?
Geoffrey Moore 7:37
No, I do definitely see it, I would say that the use case goes through this technology adoption lifecycle that I spent much of my life trying to teach people about. So at the beginning, it is technology defined use cases like machine learning, artificial intelligence, autonomous vehicles, to be a technology defined conversation, and the early adopting segment of any population will learn enough about it and get attracted to it and say, "This is a disruptive force that I want to take advantage of."
Geoffrey Moore 8:06
Pragmatic people tend to hang back at that moment. And then they get involved with that second set of use cases, which are we call them the "pragmatists in pain" use cases. This is where people have a business problem, they cannot solve with conventional technology.
So, yes, they want to apply artificial intelligence. They want to play artificial intelligence to stop hackers, but they want to play machine learning to create preventative maintenance for their factories. In other words, they're thinking in terms of their industry.
Geoffrey Moore 8:33
So the use case then becomes very vertical. And then when it gets more general purpose, like cloud computing, right now, it's like, well, hey, I don't need a specific use case for cloud computing. I mean, there's tons of use cases, I just need to be able to make sure I go to the right cloud provider gives me the right kind of deal, that's going to give me the right kind of service going forward. And that's much more of a horizontal land-and-expand kind of sales motion, as opposed to the more rifle shot earlier ones.
Michael Pollack 9:01
And I'm curious, then is your use there, The Crossing the Chasm analogy, and you think about that, we're probably starting to get into kind of the middle or the later portion of the adoption curve amongst cloud computing. I'm curious, from your standpoint, do you envision or do you see a future on cloud computing where it's so ubiquitous, it is commoditized that, to some extent, it's thought of perhaps like electricity is where you don't really think about the difference between Power Company A and Power Company B? Do you think that commoditization represents potentially an existential risk to these businesses or your point of view is the industry is so large, maybe that's not relevant here or something different altogether?
Geoffrey Moore 9:40
So the opposite of the chasm, there was a book that followed that was called Inside the Tornado. But the chasm and the tornado were just mirror opposites. So the chasm was when pragmatic people were saying, you know, I don't see other people doing this yet, I'm going to slow roll it. The tornado was when pragmatic people said, "Oh, my God, everybody's doing it. I better get in before I get left behind."
Geoffrey Moore 10:01
And I think the cloud computing is still in the tornado, meaning people have realized this is the future, the economics are just so compelling, as well as the other advantages around access to data, and enabling this whole digital interaction with customers and partners and employees and whatever.
Geoffrey Moore 10:17
So the cloud thing, that genie is completely totally out of the bottle. But I think we still have another decade of essentially making that prevalent throughout the...at that point, what when you see it commoditized, yeah, well called first generation services will commoditize and will eventually, you know, go close to zero.
Geoffrey Moore 10:38
But what you do, whenever that happens is you put the next generation of complexity on the table and say, "Well, now we're going to create value by using the commoditized incredible infrastructure to go after the next generation or problem." Kind of the with the seventh... this is how Moore's Law works. They kept on adding transistors to the chip, what are you going to use it for which they commoditizeded? and adding machine used to be an expensive thing to buy? Right? Now you can get it for free. But an iPhone, still cost you 1,000 bucks. Someday an iPhone will be, quote, free, but it'll be something else that will cost you a thousand bucks. I think that's how it works.
Sarah Brown 11:12
So in your recent book Zone to Win, you talk about how enterprises can navigate disruptive innovations, would you be open to briefly describing the model you put forth and how specific enterprises you've worked with have successfully adopted this, particularly since the book came out?
Geoffrey Moore 11:27
Yeah, so the idea behind Zone to Win is this challenge of Crossing the Chasm. And then later on of taking advantage of the tornado, those books were written from the point of view of a startup who essentially was trying to break into the market, and they were the ones who were the disruptor.
Geoffrey Moore 11:43
And they had a singularly focused mission, which was to take their next-generation technology, create a market for it, and be first mover and rise to success. And so the assumption of that model is that you start with private equity capital, and after the you might go public halfway through, but you only have one real use for this money, which is to grow this incredible business as fast as you can. So think of this would be like Airbnb, or this would be like Uber, or something like that.
Geoffrey Moore 12:10
So the challenge for an established enterprise, who's actually done that, and got the scale is how do you now manage your core business and continue to invest in and at the same time, catch the next wave of technology before it, frankly, catches you?
Geoffrey Moore 12:30
And so that's been a huge challenge has been dozens and dozens of tech companies who have failed at that challenge. And so the Zone model, which was built with the management teams at Salesforce under Marc Benioff, and the management team at Microsoft under Satya Nadella and a fellow named Qi Lu, was to say, how could we organize in a way to do this in a principled way, because the challenges, if you're a publicly held enterprise, you're evaluated very substantially based on your quarterly performance.
Geoffrey Moore 12:58
And if you're going to really catch the next wave, you have to go deep into an investment trough before you come out the other side. And it makes your performance metrics look terrible, which creates real problems with your investor relationships, potentially, of your stock price here, your partners, I mean, all kinds of trouble could happen.
Geoffrey Moore 13:17
So we wanted to be able to organize to do that, we've said, Look, we need to organize around zones, because each one of these missions is valid, but they're going to play by entirely different rules. And so the three permanent zones that we ended up putting together were the performance zone, which is the zone which has to make the quarterly number and the annual number. And that's the zone that all the investors are seeing. And they... by the way, this is where you deliver your goods and services to your customers. And so this is actually you acting in the world as a company. So arguably, it's the most important of the four zones, because you're fulfilling your mission through the performance zone.
Geoffrey Moore 13:51
We then said, that's a productivity zone, which are other cost centers behind the scenes that enabled the performance zone. So Finance and HR and IT and anything you don't charge a customer directly for, but you have to do to be in business that was in the productivity zone. Different culture, different set of metrics, you don't try to manage the productivity zone, the way you manage the performance zone, or vice versa. Much more process oriented, performance and much more results oriented. But both of those together equal what we call the core business. And in any normal company, that's 90% of your people and your money's going there.
Geoffrey Moore 14:26
The incubation zone was a take off on on what in the 20th century was it in the tech sector, there it was a corporate lab model. The corporate lab model wasn't intended to get you near the next wave or on to the next wave. It actually did in terms of technology, but it didn't give you enough business momentum, if you will, or product-market fit information to actually get from the laboratory into the performance zone.
Geoffrey Moore 14:52
So the sad part was Xerox PARC invented the Macintosh but it took Apple to actually take advantage of it that kind of a problem. So the first thing we want to do is say, let's set up an incubation zone that's modern, meaning it should look more like a venture capital portfolio – not from a financial point of view, but from a management point of view.
Geoffrey Moore 15:10
So you manage it like startups, and you would look for leads to all the Lean Startup stuff that Eric Reese, and Steve Blank, and all those guys have really champion. It's like, yeah, that's what you want to do in any incubation zone? By the way, you don't want to do that anyplace else. So the incubation zone was a third zone, third management model, third mission, and how do you govern that?
Geoffrey Moore 15:30
It turned out that most enterprises were not governing very well at all, they were setting it up, but then they kind of walked away, or they tried to leave it alone, they did not have a good governance model. And that's still true today, by the way. A lot of the work I do is just helping companies set up a enterprise-quality incubation zone with appropriate governance and metrics, and that that's a, there's still a lot of work to do.
Geoffrey Moore 15:53
And then the fourth zone was okay, now you're going to actually catch the next wave. And you are going to go through this crisis of prioritization around your resources, and how do you do that? And that, that's a huge challenge, you hope you don't have to do it very often. When you do it, the best practices were set up by guys like Steve Jobs, who said, when you do this, that becomes the singular focus of your entire corporation. And it trumps every other priority, including making the quarterly number.
Geoffrey Moore 16:21
You still try to make the quarterly number, but at the margin, prioritize the transformation over everything else, everybody in the company has to be 100% focused there, and if they're not, they have to be asked to leave. Because you have to. Because once you go into these – they call them J-curves, so you go down before you go up – you do not want to slow down or in any way impede momentum.
Geoffrey Moore 16:42
So that's the push that's a huge challenge for an existing corporation, where, frankly, most of the political power is in the performance zone and in the productivity zone. And now all of a sudden, you're saying no, I'm sorry, guys, the transformation zone has the most power and the highest priority. And often the CEO and by the way, the CEO is the only person who can who has the authority to drive this transformation. So it's a very hands-on job for the CEO.
Geoffrey Moore 17:08
And, by the way, there are people in the other two zones that don't want to cooperate, they have to be asked to leave. And this is very, very challenging for most CEOs, particularly in a more collaborative era where we're trying to be more participatory, and kind of have everybody you know, work together to get to a conclusion. But if you don't race through the transformation zone, you get halfway in and you stall. And that's how great companies die. And they've been dying like that for a long time. So that was what the book was about.
Michael Pollack 17:36
I'm curious to follow up on those Zone to Win comments. And when you talk about these various zones and setting those up, what are some of the tools that successful teams are able to deploy? Obviously, besides processes? Are there specific things tools that are you've seen with to make this better? I understand that part of its vision and discipline of execution? Are there other things that jump to mind that you think are relevant here?
Geoffrey Moore 18:01
Yeah, I think the most important one is sort of success metrics that affect compensation. So we've historically had performance zone success metrics, and tied everybody's compensation print the good performance zone metrics, the thing that we've learned about zones is the metrics for any one zone, create success in that zone, will create failure in the other three zones.
Geoffrey Moore 18:24
So it's incredibly important to actually zone the initiatives that you are funding and pursuing. And whatever zone you put them in, you run the playbook from that zone, which means you use the success metrics unique to that zone. And you tie people's compensation to those success metrics, not another zone's success metrics. And that's been probably the single most important tool, if you will, that people use.
Sarah Brown 18:49
And for marketers and sellers in these different zones. How do you advocate that they do their jobs better? What's your advice for them in different zones?
Geoffrey Moore 18:57
Well, so the sellers are typically the canonical players in the performance zone. They have quarterly quotas, and annual quotas. And their bookings oriented or sometimes revenue oriented. And there may be a churn factor or whatever. But those are all results-oriented mechanisms. And that's exactly what the performance zone metrics are for. That wouldn't just keep that on course, that's fine.
Geoffrey Moore 19:20
For Marketing, it's interesting and actually, as we get into more of a land-and-expand world, and more complex solutions, we're realizing we need to get more of the support organization involved earlier in the sales cycle before it's closing, and then have better handoffs after the sales cycle, so that people can actually get more business value out of their purchases than we were worried about in the past. Because they don't get more business value, we're going to lose them or they're going to minimize their investment with us going forward. So we'll have some a retention problem or an attrition problem or flattening problem or churn problem, whatever you want to call it.
Geoffrey Moore 19:58
So for the marketing people they're part of the productivity zone, you don't want to tie them to the sales people's number, but you want to tie them to his two metrics of success. It might be Net Promoter Score, it might be as simple as lead-to-sales, conversion ratios. It might be adoption, you know, monthly active users or weekly active daily active users, those kinds of things. You want to improve the ratios of the business, and make sure that we continue to invest, you're getting better, better, better, never best. That's a very different set of metrics than what the salespeople are going for. But that's key to the productivity zone.
Michael Pollack 20:36
And then I'm curious when you think about these various zones, is the biggest challenge, you see that organizations struggle from a discipline standpoint to implement and really stick to them? Is that the biggest challenge facing most organizations is just being able to design the zones correctly and stick to them.
Geoffrey Moore 20:53
I think, look, none of this sounds surprise anybody like but I spent time with coming up with like, oh, wow, we've never heard that before. So the problem is, when we all get together in the same room, like when we're all doing annual budgeting, and we're competing for a budget or whatever, there's a tendency for a zone to try to use it ssuccess metrics, as a qualifier for getting next year's budget. And that's fair, that they're competing against other alternatives in their zone. But it's not fair to ask other zones to meet their success metrics. So classic challenges people have, you know, we want to fund the incubation zone and the performance zone, people say why they're losing money and making money while you're giving them those dollars, I can use those dollars to make more money.
Geoffrey Moore 21:36
The answer is their job isn't to make money, that's not their job, we're not funding them to do that. So that's an example of people taking the metrics of their zone, and imposing them on the metrics of another zone. Same thing, those marketing people, we've got to hold more accountable, I want to have X percent of leads this kind of stuff. And you're going, again, you're taking your culture of your zone, you're imposing it on another zone, you're not respecting process, you're not respecting quality improvement, you're not respecting any of the disciplines of the productivity zone when you do that.
Geoffrey Moore 22:06
And so it's, I would say politics, but it's, it's not so much the politics, it's just the social power of zones trying to assert themselves over other zones. And so it becomes the the executive team has to be respectful. The key mantra is, honor every zone; zone your business. You know, you can say you can put an initiative in one zone or another zone. And there's there could be arguments for saying it should be in this zone or that so that you should definitely, you know, hammer out. But once you put it in a zone, then do not hold it accountable to anything but the success metrics of that zone.
And don't let other zones, impose their metrics on it and don't let it impose its metrics on others. Because by the way, the incubation zone, say where everybody ought to be agile, but nobody shouldn't, the performance zones, make a number this quarter, right? They can't fast fail. And the productivity zone's gotta obey the law, they can't fast fail. So everybody's got their own success formula respected, but also keep it within his own limits.
Sarah Brown 23:11
I have to ask, When marketing and sales folks are misaligned, are we supposed to say well respect my zone? Is that sort of the line we should be...?
Geoffrey Moore 23:18
Well, this is an important issue where, which is to say, what are we trying to do? Because there's been these two definitions of Marketing ever since I've been involved in this world for the last 40 years.
One of which is what I will call sales support functions. And that is, you know, do whatever it takes to get my sales people more productive. And the other is strategic marketing, which creates an environment where we will have a higher propensity to buy from us at a higher price - in other words, make us more powerful.
So the way Marketing helps you be more powerful, is that you segment the market for the people that have the most valuable use cases for your most differentiating capabilities. And you direct a disproportionate amount of not only your Marketing, but even your R&D and your development, your M&A, and everything toward maximizing your power in that ecosystem. So that you get the advantage of being the leader in that ecosystem, the partners rally around you, everybody gives you the benefit of the doubt. Salespeople just want to say no, no, I just want to hunt wherever I want to hunt. And they tend to be very tactical rather than strategic.
Geoffrey Moore 24:22
And so that the disconnect between Sales and Marketing is Sales thinks that they have an indentured servant often, which is usually just carry my bag and do whatever it is I tell you to do. And that's a classic, just, make me tactically more efficient in this moment. And the marketing people want to be able to say, well, we're the ones who really understand the world and you should be following our plan. The sales people are saying, I have to make my number this quarter.
So, there's a real reason why these two – the productivity zone and the profit zone – often find each other a little bit at odds. But the truth is, we need both. We need to have performance every quarter. But we also need to invest in our power so that we can perform next quarter and not just in cash in whatever power we have right now.
Michael Pollack 25:04
And then I'm curious, you know that when I think about zone when I think about large organizations like the Microsoft's of the world, or even a Salesforce, nowadays, this makes sense, right?
Because you have the effective amount of resource heft and infrastructure maturity to make this work. For software-based businesses today are smaller startups, is there a zone light approach? Is it just a discipline around where to focus efforts? How do you scale down a kind of zone approach into a smaller-size business? Is it your point of view? It's kind of, it fits all businesses, if used correctly?
Geoffrey Moore 25:38
Yeah, I mean, we get all the way down to the individual. So if you ask yourself, what is my company buying? For me in terms of a performance? That's my performance zone? In other words, they're buying something from me? And how do I measure that? And how do they measure it? How do they value it? Well, that's my performance zone.
Geoffrey Moore 25:54
My productivity zone is what am I doing offline to make myself better? A better more capable agent to the performance zone.
That would be I'd be investing, maybe I'd be going to classes, maybe I would be seeking a mentor, you know, whatever. Maybe I'd be building relationships with other people, whatever would be.
Geoffrey Moore 26:12
My incubation zone would be are there new things that I'm not being asked to do today, but I think are on the horizon, and I'm going to invest in getting a step up on them? I'm hearing a lot about machine learning, maybe I should, you know, go over there. How would machine learning be applied to my, to my function or my job? And so, I think you can do it at the individual level, you could certainly do at the organizational level, you know, what am I buying from what I'm buying bookings from sales, I'm buying product from engineering, you know, what am I buying from finance? What am I buying from HR? What, maybe I’m HR, I’m buying a pool of talent, or I'm buying, maybe I'm just buying compliance, a certain amount of, they just want you to comply with the laws.
Geoffrey Moore 26:51
Whatever it is your company is buying from you, that's your performance contract, that you must fulfill. That is your performance zone, and you would measure your employees relative to the success metrics of that effort. But if you went to an off-site, you would measure their performance very differently, because you're not asking them at the off-site to deliver on the performance zone, you're asking them to, you know, step back and be more strategic and maybe more incubation, or transformational, or, or whatever it is. And so again, you can apply zones at any...at any size.
And this crisis of prioritization that happens at every stage, you know, where you're a pure startup, it's not so much of a crisis of prioritization because you really only have one use for the money. But as soon as you have more than one use for the money you have used for zones.
Michael Pollack 27:35
So when you unpack that crisis, for prioritization, which I think is it reframing? And is it fair to say that the biggest issue here fundamentally at the individual level or perhaps even at the business level, is really around discipline of focus, right? This focus, this prioritization challenge, when you think about this today, for some of your clients, even for larger companies, is the biggest challenge facing them that they've many of them grown to a large size, and it's just challenging to focus? So by deploying these zones, the upside is, they're able to have both discipline and a framework to be able to keep the organization oriented on the end goals and kind of the way you traditionally think about it?
Geoffrey Moore 28:12
Any framework can always help. If you can take the noise out of any system with any framework, that's always a kind of a plus it, as you point out, the bigger a company gets, the noisier it becomes, I would say the distinction that has the most impact is this distinction between power and performance. And the idea behind that is that the performance zone is about creating performance in the present year, the productivity zone is designed to do a lot of efforts to ensure that performance.
Geoffrey Moore 28:41
So both the productivity zone and the performance on a really focused on this year's plan. And performing is essentially achieving the KPIs or the OKRs in that plan. And that's the game we're playing.
Geoffrey Moore 28:55
The incubation zone and the transformation zone are not about that. They're not about achieving results this year in that sense. What they're about is creating positions of future opportunity, or growing to a point where you have a position of power. And that's what the transformation zone is about. It's about becoming powerful in the world, that power will translate into performance, but not this year. Even even today: Uber is an incredibly powerful company, it still is losing a boatload of money every quarter.
Geoffrey Moore 29:24
So from a point of view of financial performance, it's horrible. But the stock is crazily high because it's accumulating power and the investors are saying, I can see that the power you're accumulated can be translated into performance kind of whenever we want. But I'm willing for you to build even more power to be even more powerful in the future going forward. But that distinction between are we playing a power agenda? Or are we playing a performance agenda is important and particularly in an established company.
Geoffrey Moore 29:55
So I challenged Microsoft in a conversation with them about five years ago. I said, look guys, you been the most powerful company in tech that I've known. But you've lost power every year of this century, because you've essentially been harvesting it in the performance zone year after year after year after year after year. And frankly, people are tired of it. And frankly, you're getting a little long in the tooth, you're not the current stuff. And so what Azure allowed them to do is to say, look, we need to invest in losing money in Azure in order to get this powerful enough to compete with the likes of Amazon, and then future competitors that came in like Google and others.
Geoffrey Moore 30:30
And they did, but part of that process was Amy Hooters, their CFO, made power and performance separate parts of the budgeting process, a separate kind of contracts, if you will, in the funding process. So they can hold themselves accountable, to not just say, well, I get my power for free, you just have to perform every quarter, because it was clear that if you did that, eventually you lose power. And in fact, you know, their back office software company was able to, to convert to Azure, their front office software was able to convert to Office 365. But their Windows operating system was not and their Windows operating system, I mean, it's lost a ton of power, and it's not going to regain it. And so, the danger of just having a performance zone only approach to things is you will eventually, Kodak film, you'll eventually run out of the category runs out of power, and you're up.
Geoffrey Moore 31:23
And so it's very important to have this conversation around. am I playing for performance? am I playing for power? And how much? And then I think a lot of the confusion large companies is we talk out of both sides of my mouth. Well, why bother? Well, yeah, no, I don't get to the crisis of prioritization. Is this dollar going to power? Is it going to performance? And if you don't have clarity about that, you end up with these very mushy things that create subpar execution, and frankly, subpar accumulation of power leading to subpar stock prices and drift.
Michael Pollack 31:54
So I'm curious to unpack that just with one kind of final question here. When you talk about an organization like Microsoft with a long history, and I'd say a culture that very much is primarily profit motivated. least that's my impression from the outside, when you contrast that culture, perhaps within Amazon, which is much more customer centric, first and foremost, under the assumption that if we make the customer happy, the profit will follow. I'm curious, when you look at those two organizations, how much do you think cultural DNA, where just kind of mindset, impacts the ability to set these zones , and maybe the zones can trump some of that cultural DNA? Or maybe it's irrelevant, but just curious how you address that. Or if you've thought about that,
Geoffrey Moore 32:38
Oh, it's great. My experience of tech is that the two great success cultures have been a collaboration culture, which tends to focus on customer success, and a competition culture, which tends to focus on beating the competitor.
Geoffrey Moore 32:52
And both of those cultures have had great success in tech and will continue to happen success in tech. Microsoft has historically been a competition culture, the way you activated Microsoft's creativity is you gave them a competitor to go after – actually, a competitor that somehow was threatening them. And then they would just take them out. I mean, they took out WordPerfect with Word, they took out l\Loans 123 with Excel, they took out Novell with Windows NT, they took out Netscape Navigator, with Internet Explorer, you know, bang, bang, bang, bang. And they certainly have responded to Amazon with Azure going forward.
Geoffrey Moore 33:24
Now, the other thing is you can have a customer-centric collaboration culture, which is about our mission is to be in service to the customer, we will always find ways to do that. And what both of those things do whether you're focusing on the competitor or the customer, you're not focusing on yourself. So both of those help companies, stay creative, stay responsive to the world, stay alert to change going forward.
Geoffrey Moore 33:46
I would say that with respect to Microsoft in specific, but the change from the era of Bill Gates and Steve Ballmer to the change of the era of Satya Nadella and Scott Guthrie, is a change from a competition focus to a collaboration focus. Microsoft has become remarkably more collaborative. For anybody who knew Microsoft over its own history. astounding, more collaborative. And as a result, I think they're getting opportunities and getting customer mind that they that they would never have gotten in the past. And so I think that from a CIO's point of view, Microsoft is probably more attractive than Amazon, just as from an independent developer's point of view, I think Amazon's more attractive than Microsoft. But I think both of them actually have become customer centric.
Sarah Brown 34:29
Fantastic. Well, we could ask you questions all night, but we want to respect the rest of your evening. Thank you so much for joining us. We'll of course link in the show notes to your books and when as well as your other work, and your website. It's such a pleasure and such a gift to have you on and really excited to share your insights with everyone.
Geoffrey Moore 34:46
Well thank you, I certainly enjoyed being here.
Michael Pollack 34:47
That's it for us. This episode may be over, but we can continue the conversation on Twitter with the hashtag #sellinginthecloud. On Twitter I'm @MRPollack.
Sarah Brown 34:56
and I'm @SEBMarketing.
Michael Pollack 34:58
Thanks to everyone for joining us for his episode of Selling in the Cloud brought to you by Intricately, the authoritative source of digital product adoption usage and spend data for cloud sales and marketing teams. If you like the show, head on over to iTunes or wherever you listen to podcasts, and please give us a review. We appreciate it. Until next time!
Ready to Accelerate Your Cloud Sales and Marketing with
Authoritative Cloud Product Adoption, Usage, and Spend Data?