I was recently made aware of a book called "Zone to Win" and having just watched a video summarising the key points, I found it fascinating.
It's not just about why established companies struggle to embrace disruptive innovation but about how they can do it.
Even though I have not yet read the book, I thought it would be helpful to share some of the key points with you as they can be an eye-opener.
The author, Geoffrey Moore, argues that companies struggle with disruption because of internal issues. Having worked in different types of industries and different organizational sizes, I can definitely agree. Internal processes and challenges stall innovation. Companies get too bogged down into fixing things rather than innovating and changing.
To resolve such issues, the book says organisations need to segment the enterprise into distinct management zones, each with its own methods and metrics.
These zones are also aligned with the strategic horizons of the company - a model defined by McKinsey around annual planning of investments and resources and when you get a return on them.
The Three Investment Horizons
Where most companies get stuck according to the author, is Horizon 2.
Established enterprises manage well in Horizon 1 as they figure out how to hit their targets in the fiscal. Many of them also have fantastic innovations and experiments going on in Horizon 3 but can't take advantage of them.
Why? Because of Horizon 2 and it not being an R&D challenge but rather a Go-To-Market problem due to constraint resources and other priorities from Horizon 1.
To figure out how to attack this problem, the author worked with Salesforce and Microsoft and defined four zones where established enterprises find themselves (with the forth one only if they get disruption right).
The Four Management Zones
#1. The Performance Zone
Home to the people who make what you sell and sell what you make with critical metrics being bookings and revenues. This is typically the Sales organisation.
#2. The Productivity Zone
Home to all the various cost centre functions that enable the performance zone to perform with critical metrics being efficiency, effectiveness, and regulatory compliance. Here you would have HR, Marketing, Customer Support, Legal etc.
#3. The Incubation Zone
Home to experiments in disruptive innovation that are deliberately sequestered from the prior two zones with critical metric being viable options to catch the next big wave.
#4. The Transformation Zone
Home to any initiative that will fundamentally change the structure of the enterprise, ultimately resulting in a newly configured performance zone that becomes a normal part of revenue. This zone is not permanent and it has a lot of demands that are deeply disruptive to the functioning of all the other zones. Transformational initiatives can only succeed through relentless prioritization and supervision by the CEO as well as enforcement of strict discipline for the duration of the transformational period.
As long as it's not time for the next wave, the first three zones operate together well and typically show up permanently in all companies. But when the time comes to truly catch the next wave (or it catches you), none of them has the power to respond and act appropriately. This is where the CEO and executive leadership need to come in and actively drive the transformation zone for a transitional period of time.
Now as to how you make things work in every zone practically, watch the full video from the author Geoffrey Moore, I highly recommend it:
What did you find particularly interesting?