Hierarchy

of Powers
Five types of economic power, organized in descending order from most general to most specic:
1. 2. 3. 4. 5. Category power Company power Market power Oer power ExecuJon power

Category Maturity Life Cycle

Indenitely elas-c middle

Revenue Growth

A
Emerging Categories

B
Growth Categories

C
Mature Categories

D
Declining Categories

End of Life

Technology Adop-on Life Cycle

Time

Fault Line!

Figure 2.1

PorSolio Management The Growth/Materiality Matrix

High Growth Low Growth

Material

Growth 2 1 3 4

Mature

Not Material

Emerging

Declining

Figure 2.2

Typical PorSolio PaUern

High Growth Categories Material to Current Financials
2 1 3 4

Low Growth Categories

Not Material

Figure 2.3

The Three Horizons Model

High Growth Businesses Todays revenue growth + tomorrows cash ow Current Businesses Generate todays cash ow
Horizon 1 0 to 12 months

Managing a PorSolio

Accumulated Total Returns

Horizon 3 36 to 72 months

Horizon 2 12 to 36 months

Growth OpJons OpJons on future high-growth businesses

Expected Window of Returns

Figure 2.4

Three Horizons Model Mapped to Growth/Materiality Matrix

High Growth Horizon 1 Material Horizon 0
Figure 2.5

Low Growth

Not Material

Horizon 3

Horizon 2

Goals, Metrics, and the Three Horizons

Dierent Metrics for Each Horizon
HORIZON 1 (0 - 12 mos)
Maximize Economic Returns Revenue vs. plan Bookings ContribuJon margin Market share Wallet share

TIME FRAME
Driving Goal Key Performance Indicators

HORIZON 2 (12 - 36 mos)

Become a Going Concern Target accts vs. plan Sales velocity Deal size Segment share Time to -pping point

HORIZON 3 (36 - 72 mos)

Create a Category Name-brand customers Deal size Name-brand partners PR buzz Flagship projects

Opex
Figure 2.6

Timex

Capex

Achieving Escape Velocity Focus on CompeJJve SeparaJon

Compe-tor 1

*
* YOU * Compe-tor 3

An Unmatchable Oer

Compe-tor 2

Gain bargaining power by gedng separaJon from your compeJJve set Failure to separate means lower revenues or prot margins or both

Compe--ve Set

Figure 3.1

Two Business Architectures

Complex Systems vs. Volume OperaJons
Sweet Spot Sweet Spot

EecJveness

Complex Systems

Volume OperaJons

100 Government Programs

Complexity 101 102

Volume

103 104 105 106 Number of Customers Small Business Figure 3.2

107

108

109 Societal En-tlements

Enterprise

Consumer

9-Point Market Strategy Framework

Key sponsor

1. Target Customer 2. Compelling Reason to Buy

Core problem

Complete soluJon FuncJon of whole product complexity

3. Whole Oer 4. Partners and Allies 5. Sales Strategy 6. Pricing Strategy

Value based Needed for whole product

LegiJmate alternaJves

7. CompeJJon 8. PosiJoning
DierenJaJon

Next growth segment

9. Next Target
Figure 4.1

Return on Innova-on
Dieren-a-on Neutraliza-on

Failed AYempts

Op-miza-on

Waste

Figure 5.1

Free Resources Trapped in Context Tasks

1. 2. 3. 4. Centralize. Bring operaJons under a single authority to reduce overhead and create a single point of control to manage mission-criJcal risk. Standardize. Reduce the variety and variability of processes delivering similar outputs to eliminate costs and minimize risks. Modularize. Deconstruct the system into its component subsystems and standardize interfaces for future cost reducJons. Op-mize. Eliminate redundant steps, automate standard sequences, streamline remaining operaJons, subsJtute lower-cost components, or otherwise cost- and resource-reduce. Instrument. Characterize the remaining processes in terms of the variability of key parameters and develop monitor-and-control systems to manage their performance. Outsource. Drive processes out of the enterprise enJrely to further reduce overhead, variabilize costs, and minimize future investment. Incorporate vendor use of monitor- and-control systems into Service Level Agreement.

The Six Levers

5. 6.

Figure 5.2

Price/Benet SensiJvity How Customers Internalize Value

HI Price Sensi-vity COST PERFORMANCE

CONVENIENCE

PREMIUM

LO LO Benet Sensi-vity
Figure 5.3

HI

Value Disciplines and Price/Benet SensiJvity

HI Price Sensi-vity Product Leadership HI Benet Sensi-vity
Figure 5.4

OperaJonal Excellence

Customer InJmacy

LO LO

CreaJng the Unmatchable Oer The Core/Context Model

Core Unmatchable DierenJaJon Mission Cri-cal Context Neutralizing InnovaJons

Enabling

Figure 2.1

The Arc of ExecuJon

Complex Systems Enterprises
Playbooks

Deploy

Projects

Products

Invent

Op-mize

Figure 6.1

The Arc of ExecuJon

Volume OperaJons Enterprises
Partners

Deploy

Products

Processes

Invent

Op-mize

Figure 6.2

Catalyzing Escape Velocity

The Tipping Point Role of Programs

TransiJon Program
l

Deploy

TransiJon Program
l

Invent

Tipping Point

Tipping Point

OpJmize

Figure 6.3

Four Modes of ExecuJon

Execution Mode

Invention
Visionary Inventor

Deployment
Pragmatic Deployer

Optimization
Conservative Optimizer

Transitions
Pragmatic Orchestrator

Type of Leader

Core Competence

Creativity

Competitiveness

Control

Collaboration

Core Attribute

Spontaneous

Tough-minded

Prepared

Empathetic

Decision Style

Intuition

Experimentation

Deliberation

Consensus

Functions Most in Alignment

R&D, Creative Services

Sales, Engineering

Finance, Operations

HR, Marketing, Customer Suppt

Figure 6.4

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