Work Models You Need To Know Ep.2 – ZONE TO WIN by Geoffrey Moore

Video embedded below if you prefer to watch rather than read. 5 mins, has captions.

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Today’s article is Work Models You Need to Know, Episode 2.  The model is Zone to Win and it’s by Geoffrey Moore.

Why do you need to know this?  It’s a way to organise your entire enterprise, your division or your team to both deliver for your customers today, while ensuring that the strategic innovations needed for success and viability in the future are discovered and brought into the mainstream.

It’s how to do strategy right.

The Basics

The full title of Moore’s book is Zone to Win: Organizing to Compete in an Age of Disruption.  This title is spot on. 

The starting point is the classic consultant’s four-box model, where we divide the world into:

Sustaining vs Disruptive – things we need to do to be profitable and/or viable today vs different things we need to do to be profitable and/or viable in the future

Revenue vs Enabling – the things that people will pay for or that we are funded to do vs the things that support or create the Revenue

Looks like this, and you can see the four quadrants it gives us which are called ‘Zones’

The Zones

Performance Zone

You find here the main lines of the enterprise, the core products and services.  This is what you are given money to do, be it via sales or from ratepayers or government funding.  It’s useful to draw a distinction between the revenue or funding each line provides, as well as the range of channels by which people find your products and services. 

Productivity Zone

This is where you put all the activities that support the Performance Zone.  You know the ones – ICT, People & Culture, Finance, Risk, etc.  Moore makes a great distinction between ‘community assets’ and ‘funded programs’.  The former are those that all in the enterprise must use.  The payroll system is a great example, compliance stuff is another.  The latter are initiatives that will help the Performance Zone become more efficient and effective, and the idea here is that these are at the discretion of the Performance Zone and are paid for by that line of the business. 

If the goal of the Performance Zone is revenue, the Productivity Zone’s purpose is profit.  It’s there to support the Performance Zone in being efficient, effective and compliant so we are sustainable and successful.  Most of the work of this Zone is focussed on the Performance Zone, but it also can support the two Zones in the Disruptive column, which are….

Incubation Zone

This Zone is for possible future products or services that are believed to have a genuine chance of one day catching a wave to become a full-blown Performance Zone line.  Not experiments or hobby farms. 

The key to the Incubation Zone is about how things exit; it’s not a permanent home.  The options are:

• It moves the Transformation Zone.  This is not common, see below.
• It moves to the Performance Zone as a ‘strategic differentiator’ which is a fancy way to say an add-on to an existing line of business
• It’s exited from the enterprise, which means it is either shut down or sold.

The key is to be decisive! 

Transformation Zone

The Transformation Zone is for the one thing that the enterprise has decided it will make into a full-blown Performance Zone line.  Moore is very clear that this Zone may spend a lot of time with nothing in it at all.  And when there is something in it, there must be only one.  Why?  Because the Performance Zone quite rightly will reject any attempts for a new line to come into it, because without those current big lines of business…we don’t have a business.

How To Run It

The model is all about organising and governing this stuff.  This is where the gold is.  First, the assessment standards.

Targets and Assessment Standards

The Incubation Zone must not be held to the same targets as the Performance Zone.  The latter is all about sustainable ROI.  Revenue, profit, margins, market share…all that.  The Incubation Zone targets need to reflect the different purpose it has – to watch, observe and learn so a decision can be made on how it will exit that Zone.   While financial measures are needed to see whether there is demand and how much providing the offer costs, holding Incubation Zone initiatives to the same ROI targets as the big line will crush them.

Making a Transformation Occur

An initiative in the Transformation Zone is there for the one reason of it becoming a Performance Zone line.  The simple but powerful advice Moore gives is this initiative is piloted directly by the CEO, and it sits at the top of every Exec agenda.  This is necessary to overcome that tendency referred to earlier for the Performance Zone to (quite rightly) crush new things.

Funding and Governing

The Board cannot be the ones that oversee the Incubation Zone.  This is because their number one duty is to ensure the enterprise is still there.  To do their jobs well, this requires the starting point for anything new to be ‘no’, which then becomes ‘no, unless….’ 

The way we set it up is similar to a Venture Capital Board.  We might have one or two Board members that have experience in such a space as well as an external person with significant experience in start-ups and entrepreneurial work.   One or two Executives can also round out this Board.  Note – this is not a Board Sub-Committee.

What, then, is the main Board’s involvement?  To agree or otherwise that a given line should cross into the Transformation Zone.   The Incubation Zone provides information for that decision.

The Incubation Zone is funded by a defined allocation of funds from the main Board.  This is not based on what is potentially in the Incubation Zone, but instead is based on the level of need for such a Zone.  In a rapidly changing and evolving industry, this need is higher.  

Here’s the hard part – it needs to be established that this is an expense, not an investment.  For some, this is the big leap. 

What About the Experiments?

To avoid them cluttering up the Zones, experiments can be funded by a sort of ‘seed capital’ and by setting up a formal or informal ‘lab’ to try things.  Moore’s model helps clarify the purpose of such experiments – to see if there is the possible combination of a viable line of business and a future wave such that it’s a candidate for the Incubation Zone.

I draw the experiments here to show how they fit:

Putting it into action

The Zone to Win model can be of great use at any level, not just enterprise.  And can apply to internal facing teams as much as those in the external market.   Here’s how I use the model when I’m helping clients:

• Get clear on your Performance Zone – what are you funded to provide (at team level, the funding is your salary budget to pay people!) to who, and how do they receive it?  Is each line of your business doing its job?
• Get clear on your Productivity Zone – write down all the current Productivity Zone activities or areas, and then divide them into ‘community assets’ and ‘funded programs’.   Now take the brave step of going to those on the receiving end of all ‘funded programs’ and ask if they would still want them if they had to pay for them.  (And yes, your ‘agile’ roll-out is one of these)
• Clear both Disruptive Zones – this means putting a temporary freeze on all activities that are not Performance or Productivity Zone.  All of them.  It will be fine – you had so many on that they weren’t going anywhere anyway 😊.
• Choose initiatives for the Incubation Zone – go through all the initiatives and choose only those that have a genuine chance of one day being Performance Zone to go into the Incubation Zone.  Those that don’t make it are either terminated, go back to being an experiment, or are offered to the Performance Zone lines as a strategic differentiator (which they can refuse).
• Resist the Transformation Zone – you’re going to argue why your situation is different so you need more than one thing in the Transformation Zone.  Geoffrey Moore is no amateur.  You will reap the benefits if you have the discipline to have nothing in the Transformation Zone unless… and then when you do – it’s a full-court press to get it across to the Performance Zone. 
• Clarify the Targets – remove any ROI targets that currently exist for the Incubation Zone, and replace them with reports and dialogue about what we are learning, how they might exit that Zone, and why.  And remove all cost allocations onto Incubation Zone initiatives.  Just do that.
• Set up the Governance – and finally, or first…set up your own version of a Venture Capital Board to oversee the Incubation Zone, and get that funding allocated as an ‘expense necessary for future survival’, and not as ‘investment for financial return’.  And make sure that the Board understands the model and doesn’t interfere by providing them great information on what is being learned on a regular, but spaced-out basis.

That’s Zone to Win by Geoffrey Moore.   It’s a great model, I often recommend it.

Get the book – in it he goes into the offence and defence that can be played with the Zones, and he writes brilliantly – so easy to read.

And of course, if you’d like a quick yarn on how this might work in your particular situation, just Reply to this email.  I love the chat.