Hierarchy of Powers
Five types of economic power, organized in descending order from most general to most specific:
1. Category power 2. Company power 3. Market power 4. Offer power 5. ExecuJon power
Time
Revenu
e Grow
th
Growth Categories
Mature Categories
Declining Categories
Indefinitely elas-c middle
End of Life
Fault Line!
E D C B A
Technology Adop-on Life Cycle
Category Maturity Life Cycle
Emerging Categories
Figure 2.1
PorSolio Management The Growth/Materiality Matrix
High Growth
Low Growth
Material
Not Material
Emerging
Mature Growth
Declining
1
2 3
4
Figure 2.2
Typical PorSolio PaUern
High Growth Categories
Low Growth Categories
Material to Current Financials
Not Material
1
2 3
4
Figure 2.3
Managing a PorSolio The Three Horizons Model
Horizon 1 0 to 12 months
Horizon 2 12 to 36 months
Horizon 3 36 to 72 months
Current Businesses Generate today’s cash flow
High Growth Businesses Today’s revenue growth + tomorrow’s cash flow
Growth OpJons OpJons on future high-‐growth businesses
Expected Window of Returns
Accumulated
Total Returns
Figure 2.4
Horizon
2
Horizon 1
Horizon 3 “H
orizon
0”
Three Horizons Model Mapped to Growth/Materiality Matrix
High Growth
Low Growth
Material
Not Material
Figure 2.5
Goals, Metrics, and the Three Horizons Different Metrics for Each Horizon
TIME FRAME HORIZON 1 (0 - 12 mos)
HORIZON 2 (12 - 36 mos)
HORIZON 3 (36 - 72 mos)
Create a Category
Maximize Economic Returns
Become a Going Concern
Driving Goal
Key Performance Indicators
Revenue vs. plan
Bookings
ContribuJon margin
Market share
Wallet share
Target accts vs. plan
Sales velocity
Deal size
Segment share
Time to -pping point
Name-‐brand customers
Deal size
Name-‐brand partners
PR buzz
Flagship projects
“Opex” “Timex” “Capex”
Figure 2.6
Achieving Escape Velocity Focus on CompeJJve SeparaJon
Compe-tor 2 *
Compe-tor 1 *
Compe-tor 3 *
YOU * Gain bargaining power by gedng separaJon from your compeJJve set
*
Compe--ve Set
Failure to separate means lower revenues or profit margins or both
An Unmatchable
Offer
Figure 3.1
Two Business Architectures Complex Systems vs. Volume OperaJons
Complex Systems
Volume OperaJons
Sweet Spot
Sweet Spot
Complexity Volume
EffecJven
ess
Small Business
Government Programs
Societal En-tlements Enterprise Consumer
100 101 102 103 104 105 106 107 108 109 Number of Customers
Figure 3.2
1. Target Customer
2. Compelling Reason to Buy
3. Whole Offer
4. Partners and Allies
5. Sales Strategy
6. Pricing Strategy
7. CompeJJon
8. PosiJoning
9. Next Target
Key sponsor
Complete soluJon
FuncJon of whole product complexity
LegiJmate alternaJves
Next growth segment
Core problem
Needed for whole product
Value based
DifferenJaJon
9-‐Point Market Strategy Framework
Figure 4.1
Failed AYempts
Waste
Return on Innova-on
Differen-a-on Neutraliza-on
Op-miza-on
Figure 5.1
The Six Levers Free Resources Trapped in Context Tasks
1. Centralize. Bring operaJons under a single authority to reduce overhead and create a single point of control to manage mission-‐criJcal risk.
2. Standardize. Reduce the variety and variability of processes delivering similar outputs to eliminate costs and minimize risks.
3. Modularize. Deconstruct the system into its component subsystems and standardize interfaces for future cost reducJons.
4. Op-mize. Eliminate redundant steps, automate standard sequences, streamline remaining operaJons, subsJtute lower-‐cost components, or otherwise cost-‐ and resource-‐reduce.
5. Instrument. Characterize the remaining processes in terms of the variability of key parameters and develop monitor-‐and-‐control systems to manage their performance.
6. Outsource. Drive processes out of the enterprise enJrely to further reduce overhead, variabilize costs, and minimize future investment. Incorporate vendor use of monitor-‐and-‐control systems into Service Level Agreement.
Figure 5.2
Price/Benefit SensiJvity How Customers Internalize Value
Price Sensi-vity
Benefit Sensi-vity HI
HI
LO
LO
PREMIUM
PERFORMANCE COST
CONVENIENCE
Figure 5.3
Value Disciplines and Price/Benefit SensiJvity
Price Sensi-vity
Benefit Sensi-vity HI
HI
LO
LO
Prod
uct
Leadership
Customer InJmacy
OperaJonal Excellence
Figure 5.4
CreaJng the Unmatchable Offer The Core/Context Model
Core Unmatchable DifferenJaJon
Context Neutralizing InnovaJons
Mission Cri-cal
Enabling
1 2
3 4
Figure 2.1
The Arc of ExecuJon Complex Systems Enterprises
Playbooks
Projects Products
Figure 6.1
Invent
Deploy
Op-mize
The Arc of ExecuJon Volume OperaJons Enterprises
Partners
Products Processes
Figure 6.2
Invent
Deploy
Op-mize
Catalyzing Escape Velocity The “Tipping Point” Role of Programs
Deploy
Invent OpJmize
TransiJon Program
TransiJon Program
Tipping Point
Tipping Point
l l
Figure 6.3
Four Modes of ExecuJon Execution Mode Invention Deployment Optimization Transitions
Type of Leader Visionary Inventor
Pragmatic Deployer
Conservative Optimizer
Pragmatic Orchestrator
Core Competence Creativity Competitiveness Control Collaboration
Core Attribute Spontaneous Tough-minded Prepared Empathetic
Decision Style Intuition Experimentation Deliberation Consensus
Functions Most in Alignment
R&D, Creative Services
Sales, Engineering
Finance, Operations
HR, Marketing, Customer Suppt
Figure 6.4
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