Lessons from the Performance Matrix
Geoffrey Moore
Author, speaker, advisor, best known for Crossing the Chasm, Zone to Win and The Infinite Staircase. Board Member of nLight, WorkFusion, and Phaidra. Chairman Emeritus Chasm Group & Chasm Institute.
One of the keys to being a successful consultant is to keep a firm grasp on the obvious.?That’s because most of the trouble your clients get into stems from them having some kind of blind spot.?It is not that the issue is hard to see.?It’s that they just don’t see it.
Case in point.?The performance matrix is a simple table in which the revenue-generating offers in the Performance Zone are represented in rows and the sales channels for booking those revenues in columns.?Each cell in this matrix contains planned versus actual financial data about bookings, revenues, contribution margins, and the like.?Because companies must report their results at the overall table level, and because each cell competes with every other cell for budget, there is a natural tendency to apply one set of metrics across all the cells.?This turns out to be a big mistake, and it is important to see just how and why this is so.
Consider, for example, an enterprise with five rows in its performance matrix, each representing a line of business operating at scale in an established market (no incubations, no transformations, just good solid citizens paying the freight for everyone else in the enterprise):
(Spoiler Alert: I cheated!?The consulting services business is nowhere near the scale of the other four and is therefore bundled into the professional services row.?But since this is to the detriment of both lines of business, I am going to break it out in order to address an important blind spot.)
Each of these five business lines has a distinctive business model and operating model with its own set of critical success factors for creating radiating customer references.?At the risk of radically over-simplifying (another domain where consultants shine), this plays out as follows:
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As I said at the beginning, these five sets of ideas are not novel.?Nonetheless, companies consistently mismanage one or more of the rows in their performance matrix by applying rules that are relevant to some other row.?The lessons are simple.?Honor the business model of the row and hold it accountable to the metrics specific to it.?Call out any instances of applying the wrong model to the wrong row.?Just following these two rules can keep you and your team from inadvertently shooting yourselves in the foot.
That’s what I think.?What do you think?
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Vice President, AI Solutions at Softchoice
3 年Thanks Geoffrey Moore for the article, the lines of business resonate well with our business. The one I'm stuck on is Consulting services. For us this area provides a ton of value to our select Enterprise customers and they are willing to pay well for it. It also spins out substantial revenue in the other lines of business. If the customer is willing to pay for the consulting services wouldn't we do that?
Excellent article!
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3 年Tom Gavin
Digital Marketing Developer ? Glass Bottles & Jars, Plastic Bottles & Jars, Lips ? Anything is Possible? with the only Hybrid Packaging Supplier?
3 年yes, especially when they lost their control in the emotion