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Stanford Entrepreneurship corner, Geoffrey Moore: Reach Your Escape Velocity No.4

Geoffrey Moore: Reach Your Escape Velocity No.4

So in each one of these areas people make mistakes. And I mean, I'm not this -- everybody makes mistakes. I mean, they make perceptual, conceptual mistakes. They think about it wrong. And so the intent of the next few slides is to say here is the most typical way you think about this thing wrong and I want you to think about it differently. So differentiation. First of all, well, it's different but the thing is if you've ever actually noticed the world, everything is different. There's no two things that are the same, right? So different isn't a big deal, OK? This differentiation along a vector value, OK, so how much differentiation do we have and can we go beyond the limits of the competitive set? What that means is, you'll see in the next slide. I want to be the iPhone. I don't want to be the Samsung or the LG or the Rim or the whatever the other guys are. I want to be the one that's really different. Then however, you've got to realize you've got to subtract out the unneutralized competitive threats. I'm an iPhone, I'm on a ATT network and there's no coverage. Oops, that's not so good. You have to have coverage it's a rule. So well maybe it isn't, maybe it's not an iTouch but the point is that you have things where you fall behind and you go, that's not -- it's a Macintosh but it's slower than dirt. That kind of problems.

So you can't just say I'm different, you have to say I'm also meeting the norms of the category in the stuff that I'm not trying to differentiate on and then as I said, if I can add back in optimization, I can spend it more in one of the two above. So the net differentiation is what -- as an offer manager, product manger, service manger, that's what I want you to think about. Every year my power increased because my net differentiation increased relative to my competitive set in my category. So this idea by differentiation is most of the time most offers live inside the yellow circle here which means that they have to compete against each other, mano-a-mano for winning a customer's business. Shell gasoline, Chevron gasoline, Union 76 gasoline, you don't go like, whoa, that was amazing gasoline, right? That's not what happens, OK. But periodically, people do get separation from the competitive set. And your job as an offer manager is to imagine that blue arrow and that blue asterisk and to say what could we do with my offer to take it that far. Now, you may not get permission but the company may say back to you, you know what, I'm sorry, it's your first product you every got, we're not spending any money on your product. Rats. But sooner or later as a product manager you will get an offer that says, you know what, if you could do that I would like to see your plan for doing that. So do that and if you don't do it, now you're just back in to doing mano-a-mano. So if you look at some case examples, the people on the left all got competitive separation and the people on the right did not. So IBM PS/2, it was not quite compatible with everything else. It never kind of made it. The Kindle versus Sony's PRS 500, OK, good. Got a glass screen, OK. iPhone versus Palm Treo and this is really tough if you're Palm because it was very different but it just didn't get the separation. It just didn't happen. Cisco TelePresence versus HP Halo, almost identical but not quite. Not quite. So in innovating to differentiate, separate yourself from the pack so stay in the gap. This is an investment moment, you get to champion the idea somebody above you is actually will give you the go ahead or not but you need to champion, you need to create a vector that somebody could believe, wow, you really are going to get separation. And typically, what you have -- the reason why they believe it is there's something that the company owns that's unique to that company that can create what Andy Grove called the 10x effect. So Andy Grove will say 10x will get you apart from the crowd. So sales force was using SAP against Siebel against SAP, Oracle whatever, and they put themselves up. SkyPad, peer to peer technology, Wikipedia had its open source model and look how massively these things have changed the planet. VMWare with its virtualization technology, Akamai with its overlay routing network, all of these companies are like do not have any -- do not have -- they have unmatchable offers at this state in the game.

Now, are people catching up? Yes. Are there CDN people attacking Akamai? You bet. Are there virtualization technologies attacking VMWare? Sure, of course there are. But look where they set themselves apart and how long -- how much power those offers had to change the trajectory of a company. So -- because there were companies that didn't have company power. They were all kind of start-ups. Who'd heard of Skype? Who'd heard of Akamai? Who -- VMWare? And Wikipedia for God's sakes had no money, right? How could they take the Encyclopedia Britannica and Encarta and make them irrelevant? Through offer power. Offer power did it. Crown jewels. Now the neutralize thing is the one that I think people make the most mistakes with but with crown jewel -- the problem with the previous one is sometimes there aren't many crown jewels around. And sometimes you can't find a way to be unmatchable. You just have to suck it up.

Neutralization is a different problem. Neutralization means you know the world's progressing, competitors are innovating and now all of a sudden, it's my job to get back inside that yellow circle because I've kind of fallen out of favor. And I've got to at least -- I don't have to try to beat the blue asterisk. I just got to get my asterisk back inside, back in gears as it were. And so we're focused -- and once I get inside there then I can talk about my differentiation, again, but if I'm missing -- if I'm still out here the market won't talk to me at all. They'll say, you're not even qualified to be in the conversation because you haven't met the minimum table stakes to be in this game. So failure to neutralize, there's some real cautionary tales on this one. So Microsoft brilliantly neutralized the Mac with Windows but Nokia, did you see the memo from Steven Elop a couple -- this was last month or the month before? There's a sentence in that thing, the new CEO of Nokia, he writes a memo that's a public memo to the world which says how is it possible that Apple came out with an iPhone in 2007 and Nokia does not have response? Would you want to answer that question? Gee, Steven, I wasn't the product manager. But the point was -- so ask yourself why. Why do you think? I don't know but my bet is because the engineers at Nokia were too proud to neutralize because they wanted to differentiate. They wanted to over leap the over leaper. And when you do that, you leave year after year after year of no effective response in the market which is absolutely fatal. Microsoft in the Web -- remember there was a memo when Bill Gates -- where software company were not a Web company and then it was like, oh, no. And then it was like he immediately neutralized Netscape Navigator. Now, Internet Explorer 1.0 was a farce. It was a pathetic attempt to pretend it was a browser. The second release, not much better. But the third release, better than Navigator 3.0. So Microsoft actually is a brilliant neutralizer. Lotus Notes did not make the same kind of response. Lotus Notes kind of went inside the IBM world and it's kind of doing its General Motors thing. Netflix -- Netflix with the Web, didn't you think when all of a sudden this stuff comes over. I'm not saying Netflix, right? Netflix is a CD distributor. Not so. Mr. Hoffman is still the scourge of the media industry. He is Conan the Barbarian, they hate -- I mean, they were just like -- they would love to -- but I won't go into assassination, not this week. But they're thinking about it. But Blockbuster -- when Netflix came out, Blockbuster just stood there like a deer in the headlights and charged more for late stuff. Google apps versus Microsoft Office, Google is not trying to beat Microsoft Office, it's just trying to annoy them. It's just trying to keep them busy and to kind of keep something going. Yahoo on the other hand, was more like Nokia. Yahoo wanted to overtake Google Search. It was kind of like Captain Ahab and the white whale and it was a quest. And it was a fatal quest. And so what Carol had to do is get in and sell off the business because she had to free her company's future from the pull of the past. That was a really, really important thing for her to do. Apple and Kindle, so what did Apple do with Kindle? It co-opted it. Kindle -- most people -- most read their Kindle books on iPads because they co-opted it. Whereas the borders and their thing, no -- and borders -- OK, next.


Geoffrey Moore: Reach Your Escape Velocity No.4 Джеффрі Мур: Досягніть своєї швидкості втечі №4

So in each one of these areas people make mistakes. Тому в кожній із цих сфер люди роблять помилки. And I mean, I'm not this -- everybody makes mistakes. І я маю на увазі, що я не такий - усі роблять помилки. I mean, they make perceptual, conceptual mistakes. They think about it wrong. And so the intent of the next few slides is to say here is the most typical way you think about this thing wrong and I want you to think about it differently. І тому мета наступних кількох слайдів полягає в тому, щоб сказати, що тут є найбільш типовий спосіб, у який ви думаєте про цю річ неправильно, і я хочу, щоб ви думали про це інакше. So differentiation. First of all, well, it's different but the thing is if you've ever actually noticed the world, everything is different. По-перше, це по-іншому, але справа в тому, що якщо ви коли-небудь помічали світ, усе по-іншому. There's no two things that are the same, right? So different isn't a big deal, OK? This differentiation along a vector value, OK, so how much differentiation do we have and can we go beyond the limits of the competitive set? Ця диференціація вздовж векторного значення, гаразд, тож скільки ми маємо диференціації та чи можемо ми вийти за межі конкурентного набору? What that means is, you'll see in the next slide. I want to be the iPhone. I don't want to be the Samsung or the LG or the Rim or the whatever the other guys are. I want to be the one that's really different. Then however, you've got to realize you've got to subtract out the unneutralized competitive threats. I'm an iPhone, I'm on a ATT network and there's no coverage. Oops, that's not so good. You have to have coverage it's a rule. So well maybe it isn't, maybe it's not an iTouch but the point is that you have things where you fall behind and you go, that's not -- it's a Macintosh but it's slower than dirt. Так что, может быть, это не так, может быть, это не iTouch, но дело в том, что у вас есть вещи, в которых вы отстаете, и вы идете, это не - это Macintosh, но он медленнее грязи. That kind of problems.

So you can't just say I'm different, you have to say I'm also meeting the norms of the category in the stuff that I'm not trying to differentiate on and then as I said, if I can add back in optimization, I can spend it more in one of the two above. So the net differentiation is what -- as an offer manager, product manger, service manger, that's what I want you to think about. Every year my power increased because my net differentiation increased relative to my competitive set in my category. So this idea by differentiation is most of the time most offers live inside the yellow circle here which means that they have to compete against each other, mano-a-mano for winning a customer's business. Таким образом, эта идея дифференциации заключается в том, что большую часть времени большинство предложений находятся внутри желтого круга, что означает, что они должны конкурировать друг с другом, mano-a-mano, чтобы завоевать бизнес клиента. Shell gasoline, Chevron gasoline, Union 76 gasoline, you don't go like, whoa, that was amazing gasoline, right? That's not what happens, OK. But periodically, people do get separation from the competitive set. And your job as an offer manager is to imagine that blue arrow and that blue asterisk and to say what could we do with my offer to take it that far. Now, you may not get permission but the company may say back to you, you know what, I'm sorry, it's your first product you every got, we're not spending any money on your product. Rats. But sooner or later as a product manager you will get an offer that says, you know what, if you could do that I would like to see your plan for doing that. So do that and if you don't do it, now you're just back in to doing mano-a-mano. So if you look at some case examples, the people on the left all got competitive separation and the people on the right did not. So IBM PS/2, it was not quite compatible with everything else. It never kind of made it. The Kindle versus Sony's PRS 500, OK, good. Got a glass screen, OK. iPhone versus Palm Treo and this is really tough if you're Palm because it was very different but it just didn't get the separation. It just didn't happen. Cisco TelePresence versus HP Halo, almost identical but not quite. Not quite. So in innovating to differentiate, separate yourself from the pack so stay in the gap. This is an investment moment, you get to champion the idea somebody above you is actually will give you the go ahead or not but you need to champion, you need to create a vector that somebody could believe, wow, you really are going to get separation. And typically, what you have -- the reason why they believe it is there's something that the company owns that's unique to that company that can create what Andy Grove called the 10x effect. So Andy Grove will say 10x will get you apart from the crowd. So sales force was using SAP against Siebel against SAP, Oracle whatever, and they put themselves up. SkyPad, peer to peer technology, Wikipedia had its open source model and look how massively these things have changed the planet. VMWare with its virtualization technology, Akamai with its overlay routing network, all of these companies are like do not have any -- do not have -- they have unmatchable offers at this state in the game.

Now, are people catching up? Yes. Are there CDN people attacking Akamai? You bet. Are there virtualization technologies attacking VMWare? Sure, of course there are. But look where they set themselves apart and how long -- how much power those offers had to change the trajectory of a company. So -- because there were companies that didn't have company power. They were all kind of start-ups. Who'd heard of Skype? Who'd heard of Akamai? Who -- VMWare? And Wikipedia for God's sakes had no money, right? How could they take the Encyclopedia Britannica and Encarta and make them irrelevant? Through offer power. Offer power did it. Crown jewels. Now the neutralize thing is the one that I think people make the most mistakes with but with crown jewel -- the problem with the previous one is sometimes there aren't many crown jewels around. And sometimes you can't find a way to be unmatchable. You just have to suck it up.

Neutralization is a different problem. Neutralization means you know the world's progressing, competitors are innovating and now all of a sudden, it's my job to get back inside that yellow circle because I've kind of fallen out of favor. And I've got to at least -- I don't have to try to beat the blue asterisk. I just got to get my asterisk back inside, back in gears as it were. And so we're focused -- and once I get inside there then I can talk about my differentiation, again, but if I'm missing -- if I'm still out here the market won't talk to me at all. They'll say, you're not even qualified to be in the conversation because you haven't met the minimum table stakes to be in this game. So failure to neutralize, there's some real cautionary tales on this one. So Microsoft brilliantly neutralized the Mac with Windows but Nokia, did you see the memo from Steven Elop a couple -- this was last month or the month before? There's a sentence in that thing, the new CEO of Nokia, he writes a memo that's a public memo to the world which says how is it possible that Apple came out with an iPhone in 2007 and Nokia does not have response? Would you want to answer that question? Gee, Steven, I wasn't the product manager. But the point was -- so ask yourself why. Why do you think? I don't know but my bet is because the engineers at Nokia were too proud to neutralize because they wanted to differentiate. Я не знаю, но держу пари, что инженеры Nokia были слишком горды, чтобы нейтрализовать, потому что они хотели выделиться. They wanted to over leap the over leaper. Они хотели перепрыгнуть через прыгуна. And when you do that, you leave year after year after year of no effective response in the market which is absolutely fatal. Microsoft in the Web -- remember there was a memo when Bill Gates -- where software company were not a Web company and then it was like, oh, no. And then it was like he immediately neutralized Netscape Navigator. Now, Internet Explorer 1.0 was a farce. It was a pathetic attempt to pretend it was a browser. The second release, not much better. But the third release, better than Navigator 3.0. So Microsoft actually is a brilliant neutralizer. Lotus Notes did not make the same kind of response. Lotus Notes kind of went inside the IBM world and it's kind of doing its General Motors thing. Netflix -- Netflix with the Web, didn't you think when all of a sudden this stuff comes over. I'm not saying Netflix, right? Netflix is a CD distributor. Not so. Mr. Hoffman is still the scourge of the media industry. He is Conan the Barbarian, they hate -- I mean, they were just like -- they would love to -- but I won't go into assassination, not this week. But they're thinking about it. But Blockbuster -- when Netflix came out, Blockbuster just stood there like a deer in the headlights and charged more for late stuff. Google apps versus Microsoft Office, Google is not trying to beat Microsoft Office, it's just trying to annoy them. It's just trying to keep them busy and to kind of keep something going. Yahoo on the other hand, was more like Nokia. Yahoo wanted to overtake Google Search. It was kind of like Captain Ahab and the white whale and it was a quest. And it was a fatal quest. And so what Carol had to do is get in and sell off the business because she had to free her company's future from the pull of the past. That was a really, really important thing for her to do. Apple and Kindle, so what did Apple do with Kindle? It co-opted it. Kindle -- most people -- most read their Kindle books on iPads because they co-opted it. Whereas the borders and their thing, no -- and borders -- OK, next.