Getting new products through the Transformation Zone

One worthwhile book I read in 2019 is Zone to Win, from Geoffrey A. Moore. He is the brilliant author of another best-seller, Crossing the chasm: A must read if you're looking to re-discover a classic in market development.

This new book is focusing on how to “organize to compete in an age of disruption”. I will try to summarize for you in this post the key take-aways from this methodology.

Catching the next wave

The imperial reason for a business to get interested in the subject is to find out how to catch the next wave of disruptive innovation. We could define it this way:

Something that used to be expensive and scarce now becomes virtually free.

Here are a few example of disruptive innovations in the world of technology:

Another significant wave that has been a relentless interest of mine for the past 6 years is Open Source. Another book I would recommand if you want to better understand the forces at play on this matter is Free - the future of a radical price, by Chris Anderson.

With the recent acquisition of Red Hat by IBM for $34 billion, we cannot argue anymore with the impact of Open Source on the technology landscape (one of the biggest acquisition in the field of technology after the Dell buying EMC for $67 billion).

Horizons of Return on Investment

Coming from McKinsey, this framework is trying to answer a simple business question:

“If I give you money on this year exercise, when do I get it back?”

This methodology spreads the answer on 3 horizons of Return on Investments:

• Horizon 1: ROI in 0 to 12 months
• Horizon 2: ROI in 12 to 36 months
• Horizon 3: ROI in 36 to 72 months

Organizing around 4 zones

The core idea of the book is to provide a methodology to organize business around 4 zones:

• Performance Zone: Focus on sells
• Productivity Zone: Maintaining costs, quality and time
• Incubation Zone: Make sure you don’t miss out on brilliant ideas
• Transformation Zone: Take one idea into a product and scale

Performance zone

Performance organizes around a matrix where:

• Every row and column has a unique owner.
• No row or column subtotal can be less than 10% of total
• Rows & Columns interlock at the cell level for joint accountability

Key metrics: Revenue, contribution margin, churn/renewals, growth rate

Productivity zone

Most centralized functions are gathered in the productivity zone, and managed either as systems or programs: do not blend them. Systems and programs are mutually incompatible.

Programs:

• Customized services
• User funded
• Optimized for effectiveness
• Programs adapt to users’ need

Systems:

• Standard infrastructure
• Centrally funded
• Optimized for efficiency
• Users adapt to system’s rules

Incubation zone

This zone should be organized into Independent Operating Unit (IOU). Each IOU should be run by a dedicated General Manager. All functions report into GM (no shared resources with Performance Matrix).

It follows venture-based metrics:

• Seed: Technology Proof Of Concept
• Series A: MVP + first customers
• Series B: Win beachhead market
• Series C: Exit to scale

Transformation Zone

In order to accelerate a net new line of business that would amount for 10% of your revenue in 12 to 36 months, you have to focus on one (and only one) innovation to scale up.

Read more

I recommend that you watch this summary to get one step further in the understanding of this framework. You can also scrawl the slides. Maybe it will motivate you to read the book!