During one of my first commutes from Irvine to LA for my current gig, I listened to a podcast featuring Geoffrey Moore, where he discussed concepts from one of his newer books, Escape Velocity. The core of the book is about a company’s “power”, which is a condition or position of a company which allows it to execute.
One of the profound concepts is this: Power fuels Performance and Performance consumes Power.
However, most organizations don’t have a good vocabulary around power, so all they talk about is performance. In fact because of this, most organizations incentivize and reward performance, but not replenishing power. This causes a problem where companies may find themselves consuming their power without replenishing it, resulting in their eventual inability to perform.
When I first listened to the podcast, much of it went over my head, so I bought the book. A very clever piece of marketing by Mr. Moore, I might add.
Moore only had an hour, since the podcast was recorded from a live session with Stanford students as part of the DFJ Entrepreneurial speaker series. During this hour, Moore started with his big idea, discussing why power is so important and why companies don’t manage it correctly. He then engaged the audience to think of themselves on a Board of Directors or a CEO of a company and discussed concepts like Category Power, Company Power, and Market Power. He then shifted gears and engaged the audience to think of themselves as Product Managers–this is where my interest was piqued.
Moore brought up an interesting point: Product Management in the high tech industry is probably one of the most important roles because as a product manager, you have your finger on the pulse of the company. You are driving the offers of the company, which directly impact the company’s ability to earn revenue. The remarkable thing about this is that most product managers serve in this role within the first 10 years of their career (which is true in my case). So, if you’re a product manager, you should consider it an amazing privilege to be in that role.
I listened to this podcast again more recently and I reviewed the Offer Power chapter in Escape Velocity, and I found that the concepts Moore presents are extremely relevant when it comes to creating a roadmap. His chapter on Offer Power discusses three types of innovation.
Productivity Innovation: This type of innovation (product, process, or otherwise) is designed to “free you from the pull of the past”. This allows you to free up resources that are currently doing unproductive or ineffectual things that are sucking up time and other resources. An example here might be to do some code refactoring or reducing surface area of a product. You want to use Productivity Innovation to fund the following two types of innovation: Neutralization Innovation and Differentiation Innovation.
Neutralization Innovation: This type of innovation is basically playing “catch up”. Your competition has feature X and you don’t (to an acceptable level), and in order for you to compete, you need “good enough” feature X. This is extremely important because if you don’t neutralize, you can’t compete, and all other efforts are wasted. This is probably one of the most boring types of activities, but you do it because you have to (it’s part of being an adult). Note that “good enough” is extremely important. You don’t need “best in class” feature X–just good enough. Moore posits that customers don’t pay a big price premium for “best in class”, but only some increment over the mean. Customers pay a big price premium for “beyond class”, which is what you’ll get if you execute Differentiation Innovation correctly. A popular example here is Microsoft Internet Explorer 3.0 neutralizing Netscape Navigator.
Differentiation Innovation: This is why you get up in the morning. What makes you different? What is your core value proposition? This type of innovation is designed to break you away from the pack. This type of innovation creates value for your customers and you should be 10x greater than your competition in this area. This is a very asymmetrical bet, which is what makes it scary. As Moore put it: You’re putting all your chips on one square on the roulette table. You may not win, but you will get noticed. A popular example here (and not using Apple), is Salesforce.com providing 10x greater benefits around software installation and operating costs for customers due to its hosted software architecture and Software as a Service business model.
From an execution perspective, you should fund Productivity first, in order to free up resources. You should then fund Neutralization in order to achieve parity with your competition. You then must fund Differentiation in order to create that next-generation offering that will make you “beyond class”.
So when you plan activities and features for your roadmap, I’ve found that categorizing features against these different types of innovation and identifying the (rough) strategy of “Productivity before Neutralization before Differentiation” to be very effective. Not only does it give stakeholders a clear vision of purpose for the activity and help you rationalize feature priority, but it puts you in the best position possible to create that next-generation offering that will make you “beyond class”.