Roundtables at Dreamforce, Part 3 of 3 One Disruption In Three Ways Out

This is part 3 of a 3 part series. Read Part 2 Here: https://ow.ly/SzBuJ

This is the final installment in a series of blogs about a set of five executive roundtables I facilitated at last week’s Dreamforce on the topic of Organizing to Compete in an Age of Disruption. In the first part of each session the participants prioritized a set of five disruptive technologies—Cloud, Mobile, Social, Data Science, and Internet of Things, and in the second part, they prioritized which of three points of intervention was most likely in their enterprise—to improve the efficiency of their infrastructure model, the effectiveness of their operating model, or the competitive advantage of their business model. In this the third part we applied the Four Zones model to see how best to organize to onboard a disruptive innovation into an enterprise that has material ongoing legacy commitments.

The Four Zones model is the focus on a new book, coming out November 3, titled Zone to Win: Organizing to Compete in an Age of Disruption. I subjected this blog’s readership to an alpha version of it earlier this year, and I must say, it is much the better for your feedback. The model itself has not changed:

The idea behind the model is that established enterprises embracing disruptive innovations need to organize around four zones, each with its own operating model, each with well defined APIs to the other three zones. This is not as strange as it may seem as virtually all enterprises already have installed three of the four zones and have working APIs among them. To be specific, they are operating effectively in their:

• Performance Zone. This is the revenue engine for the enterprise, consisting of its Go-to-Market team accountable for bookings and its Line-of-Business leaders responsible for revenue. Anyone who “has a number” works out of this zone and plays by its rules, including the Horizon 1 mandate to pay back investment within the current fiscal year.
• Productivity Zone. These are all the cost-center functions that support the Performance Zone, including IT, marketing, customer support, outsourced services, purchasing, HR, finance, and the like. They are baked into the annual plan below the revenue line and also are expected to pay back investment in the current fiscal year.
• Incubation Zone. This is where all the futuristic initiatives live, ones that are not expected to pay back in any foreseeable future, but which are intended to create options to participate in the next-generation disruptive innovations. People often say big companies can’t innovate, but these Incubation Zones are typically rich in opportunities. The challenge is getting them to scale.

And that brings us to the Transformation Zone, the bane of enterprise leaders and their shareholders, because to succeed here one must put all one’s eggs in one basket and then commit the organization to making its success the number one priority. Even with this commitment, performance metrics will go south before they go north, typically causing stock price to take a hit, potentially even putting the company in play. Explaining how to navigate this challenge is the primary purpose of Zone to Win. All I will say here is that it is not for the faint of heart.

But you don’t always have to go through the Transformation Zone, and that is the key (and final) takeaway that came out of the Dreamforce roundtables. Here is the operating protocol we came up with that gives teams the best “risk adjusted returns” from encounters with disruptive innovations:

1. All disruptive innovation are first put into the Incubation Zone, assigned a team, and vetted for their potential relative to the hosting enterprise. This potential can be encapsulated in the choice of which model—infrastructure, operating, or business—the innovation will be used to disrupt.
2. If the choice is the infrastructure model, then the initiative can be transferred to the Productivity Zone and put under the functional manager who will use it to reengineer processes local to that function in ways that will be transparent to the rest of the company. Moving a class of data processing to the Cloud would be an example of this.
3. If the choice is the operating model, then the initiative can be transferred to the Performance Zone and put under the sponsorship of the executive in charge of the operations that are to be modernized. They fund the initiative and lead the business process engineering end while the infrastructure leads take on the technology end. It is a challenging journey, to be sure, but it does not normally put the enterprise as a whole at risk.
4. If the choice is the business model, however, then the initiative must be transferred to the Transformation Zone and the CEO must personally sponsor it and make it the number one priority of the enterprise as a whole. This means, among other things, there can never be more than one initiative in this zone at a time, and realistically that equates to a three year hiatus for any new entrants. The good news here? If your enterprise succeeded in only one transformation per decade, it would be in the top decile.

So the final image I would leave you with is this:

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

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Geoffrey Moore | Zone to Win Book | Geoffrey Moore Twitter | Geoffrey Moore YouTube