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Geoffrey Moore on why enterprises fail

Businesses fail not for a lack of innovation but rather a failure to bring an innovation to scale which is where transformation occurs.

According to organizational theorist and management consultant Geoffrey Moore, it’s not for lack of innovation. Most businesses perform very well in the first three zones of effort: the Performance Zone, the Productivity Zone and even the Incubation Zone (i.e., the zone of innovation). However, in the fourth zone — the Transformation Zone — many enterprises fail to successfully bring an innovation to scale. In this video, Moore explains why transformation is so difficult and how exactly where many innovative enterprises go wrong.


So what do we mean when we say we’ve been doing it all wrong? Well, in a recent book I wrote on this subject I listed 54 tech companies who are market leaders in their category, who were unable to catch the next wave, and who largely do not exist today at all. So these were very bright companies trying to do their very, very best. Something was going wrong. What was it? Well, we thought for a while it was innovation. We thought, “Well, they weren’t innovating enough.”

But when you do the research and you go back and look at it, they actually innovating enough. Most established enterprises do three things very well, and it’s the fourth one that trips them up.

So the three things they do very well: they run their existing book of business, they sell what they make, they make what they sell. They do that very well. They run a productivity set of cost centers to support that business, to do that work behind the scenes for that business, to stay out of jail, to be efficient, to be effective. We call that the Productivity Zone. They do that very well. And, surprisingly to many people, they also innovate very well. They create great options for the future.

The fourth thing, the place where they all stumble, we call it the Transformation Zone. And this is the place where you actually take an innovation and bring it to scale. And that is actually an unnatural act, and I think the mistake we were making is that we thought it was a natural act. The reason it’s an unnatural act is you have to take your very best resources and put them against an effort which is so immature that it is incredibly unproductive to prosecute.

You don’t have customers yet, your target customer doesn’t have budget yet, your ecosystem does not know how to support you, your brand does not have a message that is related to this new opportunity. Everything is going against you.

And people start out very optimistically, but about half way through that journey, as the pain of all of those contradictions begins to come home, they begin to hesitate. And as soon as you hesitate on a journey of transformation, the journey is over, because it signals to the rest of the world that you’re not actually going to complete the commitment, and then they too step back from their commitments and you cannot go forward. And so we’ve seen this history over and over and over again, of false start after false start after false start.

So the number one lesson of transformation is once you start it there is no higher priority until you complete it. And completing it means get the innovation to a scale where your existing book of business can absorb it, your existing ecosystem can support it, and your existing customers have budget for it and want it.