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Living on the Fault Line |
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by Geoffrey A. Moore This is a significant book. The message is that shareholder value (AKA market cap) is a function of competitive advantage, and organizations achieve it by focusing on core. Everything else is context, and context is a needless distraction. Unless eLearning is your core strength, you should outsource it. |
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The Chasm Group's Managing Director Mark Cavender has a strong interest in emerging e-Learning technologies and advises a variety of start-up and growing e-Learning companies.
Fault Line presentation by Geoff Moore (Real Audio) |
Moore is a wonderful synthesizer, and Fault Line integrates concepts from Clayton Christensen, Michael Porter, Michael Treacy & Fred Wiersma, James Collins & Jerry Porras, Kevin Kelly, William Schneider, and others, including Moore himself. Read Living on the Fault Line and you'll get the essence of all of these in the bargain:
Not only is Fault Line a virtual Dummies' Guide to Management Strategy, it's also a compendium of practical advice.
Below, I'll slowly describe some of the tremblors along the Fault Line that most appeal to me. |
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| To everything there is a season. A new technology
sprouts up and takes off. After an initial growth spurt, its producers focus
on incremental changes to make things better for their customers. Out of
left field, a entire new technology comes along, changing the rules of the
game and undercutting the competitive advantage of yesterday's winners.
New guys ride the new technology wave; mature producers drown in it. "Incrementalism
is innovation's worse enemy." Slippage between the tectonic plates of
the traditional economy and the new runs a fault line under every enterprise
in the world. High-tech's rapid cycle of corporate birth, growth, decline,
and death becomes the fate of us all.
Any behavior that can raise your stock price is core -- everything
else is context. Context is "hygeine." Do you bathe? Good.
If you didn't you'd lose your job. But don't expect to receive a promotion
for bathing no matter how squeaky clean you are. Differentiating on context
is the single biggest waste of resources in Fortune 500 operations.
Without very careful management, context always gets in the way
of core because it absorbs time, talent and management attention.
Business processes that worked well enough when we filtered them though individuals break down when they are exposed to the self-service pressures of the Web. |
"Geoffrey Moore has climbed to the top with nary a new idea. So why is he so useful?" "Moore serves as living proof that market leaders achieve prominence more through marketing brilliance than product innovation. He says his success is "rooted in the essence of the adoption model itself ... the way in which people make adoption decisions is based on looking at the behavior of the people in the adjacent neighborhoods. The overwhelming majority of high-risk, low-data decisions are based on the actions of the herd." |
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Two factors account for the slope of the curve: management's forecasts and investors' discount for risk. The space under the line is the present value of future earnings, discounted for risk. | |||||
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The next biggest source is joining the winning value chain and achieving a leadership role within it. In all markets, competitive advntage is a function of market segment leadership, execution focus, and differentiated offerings. Capital is like water. It doesn't flow uphill against the gravity of competitive advantage. You can increase Market Cap by boosting competitive advantage (differentiating yourself from your closest competitor) and/or maintaining your advantage longer (sustaining advantage with barriers to competitive entry or customer exit.) "Managing for shareholder value" means focusing on strong, sustainable competitive advantages. That's what the rest of the book it about. |
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"Current organization models are not time-based. They still operate in a three-dimensional universe of being rather than becoming. Notions of a real-time business and of an organizational life cycle are not widely held or used." Stan Davis, |
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What's fresh and exciting is how Moore ties culture, and its values, to the stage of its products in the adoption lifecycle. Wow!
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Culture |
Value discipline |
Where it shines |
Source of shareholder value |
Global focus |
End stage |
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Cultivation |
Discontinuous innovation |
Early market |
Infectious charisma |
Shared vision |
Cult |
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Competition |
Product leadership |
Early, bowling alley, tornado |
Fierce competitiveness |
Measurement & compensation |
Caste systems |
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Control |
Operational excellence |
Tornado, Main Street |
Relentless improvement |
Business Planning |
Bureaucracy |
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Collaboration |
Customer intimacy |
Bowling alley, Main Street |
Perceptive adaptation |
Customer focus |
Club |
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Focus
on core; outsource context.
Stock
Price equates directly to sustainable competitive advantage. 
In
high tech, the single biggest source of competitive advantage is simply
catching and riding the next technology wave. 
Organizational
culture is what holds everything together. That's hardly new.