Recently I attended a talk by my friend and colleague Geoffrey Moore at the Association for Strategic Planning California Chapter, sponsored by the Strategy & Growth Roundtable for the Harvard Business School Association of Northern California. His talk was called "Hierarchy of Powers: A Framework to Organize the Strategic Conversations and Decisions Across Organizations." It is the beginning of a new book that he will be releasing in the future. In my humble opinion, this will do for large companies what Crossing the Chasm did for technology start-ups.
Geoffrey introduces a hierarchy of powers and discussed their purpose. He then discusses how to optimized the hierarchy of powers. This hierarchy plays out as follows and includes:
- Category power - total economic potential to generate future returns
- Company power - assets, status and leverage
- Market power - category power specific to a target market segment
- Offer power - offer differentiation relative to target customer values
- Performance power - effectivenes and efficiency of execution
It serves three purposes:
- Organizing strategy dialogs
- Diagnose the current state of affairs
- Prioritizing executive focus
Geoffrey then describes planning horizons:
- Horizon 1 is 0-12 months and is focused on current business for generating cash flow today. Think profitable business from current customers.
- Horizon 2 is 12-36 months and is focused on high-growth business where substantial resources are required for success. Think "crossing the chasm in the belly of a whale."
- Horizon 3 is 36-72 months and is focused on future high-growth business. Think Early Market success with name-brand customers.
He then drilled down in to Horizon 2 planning, and why it is so difficult.
- There is no material contribution to revenues
- There is a heavy cost burden that will only get heavier over time
- It competes for scarce, high-quality resources
- It makes high demands on management attention
Finally, he offers three shared values / best practices for making Horizon 2 planning and execution successful:
- Create a high-growth buisness that contribute materially to revenues and earnings
- Do so as qickly as possible to reduce the current drag on resource, earnings an management attention
- Measure success in terms of substantial customer acquisitions in the targeted market segment
After the talk Geoffrey was interviewed by Adrian Ott, Founder and CEO of Exponential Edge, Inc. You can read the interview here, where there is also access to a full recording of Geoffrey's presentation and the slide, courtesy of Exponential Edge, Inc.