Keep looking ahead Featured

8:01pm EDT December 31, 2011

In difficult economic times, many companies take a management approach that forces their focus to change from quarter to quarter to month to month. The demands of stakeholders to grow the customer base and increase profits can undercut an organization’s efforts to live beyond today. In “Escape Velocity,” author and tech strategist Geoffrey A. Moore provides some much-needed accelerant to smash through the barrier presented by the past. In this interview, he discusses the importance of secular growth, the skewed dialogue concerning innovation and why it’s so important to continue looking forward.

Describe the difference between cyclical and secular growth and why the latter is critical to the strategy of any organization.

The established businesses that are cash cows for most companies have been around for a decade, two decades, maybe longer. Cyclical growth is extremely normal in any established business. The people that have bought [from you] are buying again, but you’re not getting a lot of net new customers. Secular growth happens whenever a new category comes onto the economic scene. Think about the tablets from Apple or smartphones or the kinds of things in high tech that are very obvious examples. All of a sudden, a whole bunch of net new customers come into the category. It’s a one-time only event.

You argue that companies need to take an investor’s view of their organization. Why do so many companies fail to take an investor’s view?

I think what happens is when you get involved in running anything, the day-to-day responsibilities of what’s going on are overwhelming. Whether it’s the supplier in China that didn’t do what it said it was going to do to an angry employee that’s making claims about harassment, there’s so much to do right in the moment that it’s very difficult to get outside of that. Maybe once each year people go to a strategy off-site meeting or something, but even then, it’s very hard to integrate those perceptions [from the off-site] back into the flow of things.

Is there a way for a business to identify if it is pursuing a declining category and not cling to the past?

This is where this issue of having to confront the need to invest in power as well as deliver performance, which is the underlying theme of the book, really comes to a head. In the short term, there’s this temptation to continually extract short-term performance gains from a category that’s declining. The risk there, of course, is that every quarter you have to produce more gains and the category is becoming capable of producing less and less. What the book strongly advocates is that you divest yourself of those categories early on to, potentially, a private-equity investor who actually has the right setup in order to harvest the remaining returns without being punished by the public stock market.

Innovation is a term that so many companies overuse. Do you think there’s a misplaced definition of what innovation is and what it means to a business?

There’s really three outcomes of innovation and we tend to only talk about one, which is massive differentiation. This is the kind of innovation we love to celebrate when it comes to a company like Apple. But a lot of innovation is centered around what we call neutralization. This means keeping up with the category, keeping up with your competitor. This allows your existing customer base to continually support you. The third outcome of innovation is productivity improvements. These don’t really affect your competitive footprint but certainly affect your return-on-investment capital.

The dialogue around innovation has been way too skewed toward differentiation, as if that were the only problem to solve and the answer to all problems, which just isn’t true.

“Escape Velocity: Free Your Company’s Future from the Pull of the Past”

By Geoffrey A. Moore

Harper Business, 213 pages, $27.99

About the book: “Escape Velocity” provides a workable answer to one of the most frustrating questions faced by today’s businesses: How can we find next-generation success when we’re expected to deliver quarterly results? Moore explores the danger of staying obedient to past success methods and provides a “framework of frameworks” to rocket your company into its next era of greatness.

The author: Geoffrey A. Moore is chairman emeritus of three consulting firms: The Chasm Group, Chasm Institute and TCG Advisors. He is also a venture partner with Mohr Davidow Ventures, a California-based venture capital firm specializing in specific technology markets, including e-commerce, Internet, enterprise software, networking and semiconductors. His previous books include the best-sellers “Dealing with Darwin” and “Crossing the Chasm.”

Why you should read it: Many businesses, particularly public companies, are so focused on quarter-to-quarter growth that they are unable to make the necessary moves to secure the long-term future of their business. Rather than leave valuable opportunities lying on the table where they can be snapped up by start-ups (or worse, current competitors), Moore provides businesses with a manageable method to align the company’s priorities and carry it forward without sacrificing current gains.

Why it’s different: Despite being based in the technology field, Moore’s work is applicable to a variety of industries. His examination of the hierarchy of powers forces executives to drop the day-to-day and take an investor’s view of their organization. By redirecting this focus, Moore does an excellent job of connecting the realities faced by many businesses with the hard truth about what it takes to grow, rather than endure in a changing market. He is not afraid to point out that some of today’s most successful companies would be labeled a risk if evaluated on their long-term focus. Moore defines what will propel tomorrow’s great companies then provides the fuel to get today’s organizations into that rarified air.

Can’t miss: “Company Power.” One reason businesses are unable to pursue next-generation opportunities is that they lack clarity. Part of this problem stems from a complete misidentification of a company’s competitive set. In this chapter, Moore provides companies with much-needed direction and gives examples of companies that completely missed the mark on defining their own business architecture and, therefore, their true competitors.

To share or not to share: This book is critical reading for executives but doesn’t need to be distributed throughout an organization.

How to reach: For more information on this book, visit www.Summary.com.