I recently read a book called Escape Velocity, and I was super excited while reading it because it was written by Geoffrey Moore! Yes I’m a raving fan 🙂
Escape Velocity is a book that attempts to help companies figure out how to free their future from the pull of their past. What does this mean? Companies, especially large ones, usually have a tendency to want to maintain the status quo. The embodiment of this tendency is the practice of using last year’s operating plan as the foundation for this year’s plan. While this practice may be applicable in some mature, cyclical industries, it is pure suicide in fast changing ones like the technology industry. The reason is that globalization is constantly changing the needs, markets, and competitors of the industry. Therefore, companies must stay responsive to market and industry dynamics, and not their operating plan, if they want to remain relevant in the marketplace.
Geoffrey Moore attempts sets a clear trajectory for achieving escape velocity by leveraging his Hierarchy of Powers model. This model sizes up all economic competitions in relation to five types of economic power, organized in descending order from general to specific:
1. Category Power: this refers to a function of the demand for a given class of products or services relative to other classes. For example, the smart phone category has more power than that of email.
2. Company Power: Company power is the prospects and status of specific vendor relative to others. Think Apple in smart phones as opposed to LG.
3. Market Power: This is also company power, but with respect to a specific market segment. For example while SAP leads the ERP category, Lawson Software holds the number one position in the U.S health care segment.
4. Offer Power: the most transient of all powers in the hierarchy, offer power is a function of the demand for a given product or service. Facebook has the most offer power in the social network space, just like Microsoft Office for office productivity and Groupon for daily deals.
5. Execution Power: Like it’s name suggests, this is about the ability to outperform your competitors under conditions that favor no one in particular.
The goal for companies seeking to achieve escape velocity is to ensure that all these powers are properly aligned. A lot of tools are presented in the book for analyzing companies and crafting a suitable growth and innovation strategy. However, one of the ideas that really resonated with me was the concept of asymmetrical bets. If you want to be extraordinary, you can’t afford to sprinkle resources around and hope for the best. You have to look at your capabilities and build some of them to the point that your competition cannot or will not match. Also, the market has to be willing to reward you for these newly developed capabilities.
Something else I like about the book is that it provides a a lot of case studies of companies that have actually implemented these frameworks. The video presents a good summary of the book’s ideas. The first 30 minutes looks at escape velocity from the CEO’s perspective, and the next 25 minutes drills down to the level of a product manager. Watching it was time well spent.