Managing Disruption—The Metrics That Matter

By Geoffrey Moore

Author – The Infinite Staircase: What the Universe Tells Us About Life, Ethics, and Mortality

There is a ton of material on how to manage disruption, but most of it is from the disruptor’s point of view.? Crossing the Chasm is in this vein, as is The Lean Start-up, as well as a host of other contemporary takes on how to break out and break through.? This is all well and good except for one thing.? For every disruptor, there are a dozen or so disruptees—what about them?? By the way, for all the cool stuff the disruptors have, these folks have the one thing they all crave—customers!? And one more thing—those customers include you and me, and who the heck wants to change vendors if you don’t have to??

All of which brings me to my current vocation, which is to give aid and comfort to the disruptees, those wonderfully profitable but under-appreciated enterprises that are the subject of Zone to Win .? “Zone your enterprise” has become my new battle cry so you can get into position to protect the most valuable asset you have—your installed base.? You still organize around your Performance Zone , but now with the understanding that it is under attack.? You still need a strong Productivity Zone , but now with the understanding that time to neutralize the disruptor has become the number one priority.? You still need a creative Incubation Zone , but now with the understanding that it is service to neutralization, not differentiation.? And you definitely need a Transformation Zone because absent making an aggressive, proactive response right now, you are destined to be road kill, despite your storied brand, despite your current profitability, despite global reach.?

Think not?? Well, here’s a list of some of your predecessors:

Every one of these folks built an iconic franchise and was at the top of their game with some of the best management teams around.? They did a lot of great things but faced with a disruptive innovator, one thing not a single one of them did was manage to the metrics that matter.? So, please, listen up, because here they are:

Metrics that Matter in the Performance Zone

The metrics that matter here are signals of vulnerability, the sort of thing you like to manage through rather than pay attention to.? Your first thought may be sales lost directly to disruptors, but in fact, you won’t see many of these, for as Clay Christensen taught us in The Innovator’s Dilemma, they are mostly going after customers you are not actively serving or, at best marginally so, and when you lose one or two of these, you are more apt to say good riddance than uh oh!? What you will see more of, on the other hand, is shrinking customer budgets, longer sales cycles, and increasingly deeper discounting wherever your established offers are getting repositioned as old technology.? You will also see year-over-year deterioration in bookings from new logos as your top-of-funnel marketing ceases to inspire and your sales teams retreat more and more into the installed base to make their numbers.

The point is your Performance Zone is under attack, and you must act swiftly to shore up your defenses, following the kind of zone defense playbook that Microsoft has used so brilliantly, getting to good enough as fast as possible.? That means your product team has to bring out a next release that features the disruptive technology in some portion of the offer.? It doesn’t have to be, and indeed almost certainly will not be, amazing, or frankly, even all that good, but it will send a signal that you are on the case, that your head is not in the sand, and will buy some time, and even some goodwill, to help your sales teams during this tough time.? The key metric here, the one that matters most of all, is time to market.? Every month you are still in development is a bad month.? This is transformation time, and everything must be done to accelerate your response.

Metrics that Matter in the Productivity Zone

When you are under a disruptive attack, the first priority of the Productivity Zone is to manage risk, the second to reduce friction and accelerate response time in your administrative systems, and the third to deliver programs to the Performance Zone that improve their competitive effectiveness.?

The biggest risk you face is an upcoming cash flow crunch that could permanently marginalize your enterprise.? It is not profitable to fend off a disruptor, and at some point, you are going to disappoint your investors, particularly those that are value-oriented.? They will drop your stock like a hot rock, and you are going to need to recruit new investors with a growth orientation, one warranted by successfully incorporating the disruptive technology into your established product lines, but that is going to take time.? We call the intervening period the nasty bit, a time when everyone is second-guessing you (including your spouse), and you have to get enough cash in the bank to make it through on your own.

With respect to the core systems you manage year in and year out, understand that compliance with each and every one takes time, and that is the one thing you don’t have enough of.? You still need to run them, but you can go many an extra mile by having your people step in to accelerate the processes, taking a bit of the load off the plate of both the Performance Zone and the Incubation Zone.? On the engineering front, this means cutting some slack on meeting standards that are a must once you are at scale but, at this stage, pose minimal levels of risk.? On the IT front it means doing whatever it takes to get the right data as fast as possible to the people in the midst of the fight.? On the HR front, it means moving people in and out of positions more quickly than normal, again because you do not have the luxury of time.?

Finally, when it comes to running programs, remember the goal here is to change state, not to maintain state.? These programs, in other words, are interventions designed to accelerate the response to disruption.? On the go-to-market front, this calls for first-rate sales enablement, demos, and marcom materials to tell your neutralization story, the one that says why it is better to stay the course with you than run off with some new vendor.? On the development front, it may entail a special effort with partners to get a whole product in the hands of the installed base faster.? This is not a time to run steady-as-she-goes programs in the background.? If it is not in the path of the attack, let it be for now, and get your troops closer to the action.

Metrics that Matter in the Incubation Zone

This is a tough time for anyone in the Incubation Zone because, like as not, they signed up to be a disruptor, not a disruptee.? Their orientation is to differentiation, not neutralization, and they have no appetite for the “me too,” and “just copy” tactics that are critical to neutralization success.? But that is what is required, so either they must adapt or go elsewhere.

The metrics, in other words, are not the problem.? They are clear.? Just copy the disruptor as best you can as fast as you can, and integrate whatever you can into the next release, which will ship as soon as you can.? What you are not allowed to do is drag your feet.? This is a time-to-market footrace, and your team is behind.? So, suck it up, put the team ahead of your ego, pay your dues, and then, with any luck, you will be in position to counterattack.? The empire can strike back, but first, it has to get itself onto the playing field.

Metrics that Matter in the Transformation Zone

Here, I am talking to the CEO, and the CEO only.? The metric that matters the most for you is your stock price because that reflects the marketplace’s level of confidence in your leadership and your enterprise’s future prospects.? The problem is, the actions you must take in the immediate future are going to result in weaker earnings reports, lowering your perceived value not raising it, especially in the eyes of value investors.? Meanwhile growth investors have no reason yet to take up the slack, so you are on swampy ground indeed.? You need to buy time, and your best tactic to do so is to change the corporate narrative.?

First, you need to acknowledge the attack, explaining that your entire industry is going to be impacted.? Second, you need to embrace the change, explaining how you, too, can catch this new wave, and how that wave will power your industry and your enterprise for years to come.? Third, you need to highlight the wins you are gaining under the new banner, ideally including one or more flagship client references who are early adopters of your new vision.? And fourth, you need to install a public metric that allows investors and financial analysts to hold you accountable for making real progress quarter on quarter.?

Even with all this, however, the investment community will be a tough sell.? You have to keep in mind, to them your company is a financial instrument, that’s all.? For them, the old saying goes, you want loyalty—buy a dog.? But your installed base is different.? They are invested in you much more deeply than any investor.? They want and need you to succeed.? So, they need a new narrative too.? This is one about how you are investing in their future, both organically and potentially through M&A as well.? Your offer to them is to get the benefits of the next wave without having to go through the topsy-turvy ride of working with a new generation of start-ups.? Your goal is to recruit a handful of early adopters from this cohort and bring them in under the tent with special executive briefings, co-development projects, special deals, whatever it takes. ?It only takes a few of these testimonials to change the game.

And that is your ultimate metric, what Malcolm Gladwell taught us to call the tipping point.? Prior to the tipping point, you get the doubt of the benefit; after, the benefit of the doubt.? The tipping point itself is signaled by third parties—industry analysts first, then partners, and then financial analysts.? You start getting listed with the new crowd, not just with the old one.? Microsoft did this masterfully, and so, recently, has Oracle.? Many of their peers are still in limbo.? How can you tell?? Well, to be brutally honest, you just have to ask, how excited would a bright and talented engineer or a cracker-jack salesperson be to join your company today?? And if you are not satisfied with your answer, then ask, what would it take for them to be, and how fast can you become that company?

That’s what I think.? What do you think?

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