Geoffrey Moore - The Chasm Has Evolved

Summary

The speaker traces the evolution of technology adoption models over the last 20 years, emphasizing the shift from traditional enterprise to consumer-driven markets. They discuss the importance of innovation in differentiating products and services, especially in the face of globalization and commoditization. The talk highlights the need for businesses to specialize, outsource efficiently, and leverage consumer technology in the enterprise to maintain profit margins and stay competitive. The speaker also stresses the importance of disciplined innovation, focusing on differentiation, neutralization, and optimization as parallel but distinct strategies.

Takeaways

• 📈 The speaker discusses the evolution of market models over the past 20 years, emphasizing the shift from old models to new opportunities in different markets.
• 🛠 The Technology Adoption Life Cycle model by Everett Rogers is highlighted, detailing the five segments of a community's response to disruptive technology.
• 🌐 The importance of pragmatists in market dynamics is underscored, as their actions can create a 'chasm' between early adopters and the mainstream market.
• 🔄 The speaker identifies different business models (project, solution, product, consumables) and the unique strategies required for success in each.
• 🚀 The significance of innovation is explored, with a focus on how it must be more disciplined and focused to succeed in the current business environment.
• 💡 The concept of 'pragmatists in pain' is introduced as a key strategy for crossing the chasm and gaining mainstream market acceptance.
• 🌍 The impact of globalization and outsourcing on the tech industry is discussed, showing how it has led to a need for greater specialization and differentiation.
• 📱 The rise of consumer technology and its transformative effect on culture is noted, with the challenge of bringing consumer-like capabilities into the enterprise.
• 🔑 The speaker stresses the importance of security, global presence detection, and the ability to interface with existing systems of record for enterprise-ready technologies.
• 💼 The need for middle managers to have tools that facilitate communication, coordination, and collaboration across digital boundaries is identified.
• 🚨 The final takeaway is about the importance of not mixing modes of innovation (differentiation, neutralization, optimization) and ensuring they are pursued in parallel but separately.

Q & A

What is the main purpose of the speaker's discussion on technology adoption models?

The speaker aims to trace an arc over the last 20 years, grounding the audience in technology adoption models, discussing their evolution, and tying them into new markets that these models can serve going forward.

What does the speaker mean by 'Technology enthusiasts and Visionaries' in the context of technology adoption?

Technology enthusiasts are individuals who engage with new technology out of interest in its properties, often being the first to adopt. Visionaries are individuals with substantial resources and a clear vision who take significant risks to be pioneers in adopting and implementing new technologies.

What is the 'chasm' in the context of technology adoption models?

The 'chasm' refers to a gap or lull in the market adoption curve, separating the early market of technology enthusiasts and visionaries from the mainstream market. Pragmatists, who make up the mainstream market, often hesitate to adopt new technologies until they see others doing so successfully.

How does the speaker describe the shift in technology adoption from the early market to the mainstream market?

The speaker describes this shift as a two-wave adoption process, with an early market consisting of technology enthusiasts and visionaries, followed by a mainstream market of pragmatists. The transition between these two waves can be facilitated by focusing on 'pragmatists in pain' who are more likely to convert sooner due to a pressing problem they need solving.

What are the four distinct business models the speaker discusses for different stages of market development?

The four business models discussed are the project model for the early market, the solution model for a group of pragmatists sharing a common problem, the product model for capturing the rush of customers in a new category, and the consumables model for mature markets where the real value lies in the ecosystem around the product (e.g., iTunes for iPod).

How does the speaker characterize the impact of the internet and consumer technologies on society?

The speaker characterizes the impact as transformative, leading to a digitized culture where consumer experiences are digitally mediated. This has resulted in a significant shift in how we interact, conduct business, and engage with the world, making the digital experience a central part of our lives.

What is the 'Millennials' lament' as mentioned by the speaker?

The 'Millennials' lament' refers to the discrepancy between the power and control consumers feel they have in their digital lives and the lack of that same empowerment in their professional lives as employees. This gap is seen as a driving force for the need to bring consumer capabilities into the enterprise.

What does the speaker suggest as a key strategy for companies to maintain their profit margins in the face of commoditization?

The speaker suggests that companies need to differentiate their offers significantly from commodity offerings so that customers are willing to pay a premium. This requires specialization and creating unmatchable offers that provide unique value to customers.

How does the speaker define the role of middle managers in the modern business environment?

The speaker defines middle managers as the connective tissue along a value chain that spans multiple companies. They are responsible for communication, coordination, and collaboration across company and even national boundaries, making them key in navigating the complexities of modern business networks.

What is the speaker's perspective on innovation and its role in business strategy?

The speaker views innovation as critical for business strategy but also acknowledges a 'dark side' where much innovation results in waste. He emphasizes the importance of focusing innovation efforts on differentiation, neutralization, and optimization to ensure a return on investment and maintain competitive advantage.

What advice does the speaker give regarding the allocation of resources for innovation projects?

The speaker advises against mixing different modes of innovation within the same project. He suggests that teams should be given clear objectives for differentiation, neutralization, or optimization, and that these objectives should be pursued in parallel without overlap to avoid delays and inefficiencies.

Outlines

00:00

📈 Market Dynamics and Technology Adoption Curves

The speaker begins by outlining the trajectory of market models over the past 20 years, focusing on the adoption of disruptive technologies and the predictable patterns of community response. The classic model by Everett Rogers is introduced, segmenting the community into five categories: technology enthusiasts, visionaries, pragmatists, conservatives, and the resistant. The transformative impact of pragmatists is emphasized, highlighting the 'chasm' they create between early adopters and the mainstream market. The talk sets the stage for discussing market expansion and innovation strategies.

05:00

🛠 Business Models and Market Transformation

This paragraph delves into the evolution of business models in response to market dynamics. The speaker discusses the transition from project-based early markets to solution-driven models that cater to pragmatists facing common problems. The importance of identifying the right customer segments to bridge the 'chasm' and accelerate market adoption is underscored. The talk also touches on the shift from product models to consumables models as markets mature, reflecting on the different strategies needed for success in various market stages.

10:02

🌐 The Impact of Globalization and Technology Life Cycles

The speaker explores the effects of globalization and the outsourcing trends that have reshaped the technology landscape. The discussion centers on how these trends have led to the commodification of goods and the challenges faced by developed economies. The importance of maintaining profit margins and differentiating offers in the face of commoditization is highlighted. The speaker also introduces the concept of secular markets, which undergo a one-time shift, and cyclical markets, which experience ups and downs.

15:04

💡 Innovation Strategies in Cyclical Markets

In this section, the speaker discusses the need for different innovation strategies in cyclical markets, where high-risk, disruptive innovation is less viable. The focus shifts to customer intimacy and operational excellence as key strategies for value creation. Examples of value engineering and business model reformulation are given, illustrating how companies can innovate within the constraints of a cyclical market to stay competitive.

20:04

🚀 Consumer Technology and Viral Marketing

The speaker contrasts the rapid adoption of consumer technologies with the slower, more challenging enterprise market. The disconnect between the delightful, free experiences of consumer technology and the less dynamic enterprise tools is highlighted as a significant opportunity. The importance of creating viral products and the impact of Apple's product launches on various industries are discussed, emphasizing the need for 'cool' and viral marketing in the consumer space.

25:05

🔄 The Millennial Lament and Enterprise Transformation

This paragraph addresses the 'Millennials lament,' the feeling of empowerment as a consumer versus the lack of it as an employee. The speaker identifies the need to bring consumer-like capabilities into the enterprise as a major opportunity for wealth creation in the coming decade. The discussion also touches on the pressures of globalization and the need for enterprises to adapt and innovate to remain competitive.

30:06

🤝 The Changing Role of Middle Management

The speaker discusses the transformation of middle management in the new business landscape. Middle managers are now seen as connectors in a value chain that spans multiple companies. The need for effective communication, coordination, and collaboration across company boundaries is emphasized. The talk highlights the gap in tools and systems that support middle managers in their new roles.

35:07

🛡️ Securing and Scaling Enterprise Technology

The speaker addresses the challenges of making consumer technology enterprise-ready, focusing on security, data leakage, liability, and system integration. The importance of maintaining usability while ensuring that the technology is reliable, scalable, and maintainable is highlighted. The talk also emphasizes the need for technology to be mobile, global, social, and virtual to meet the demands of modern business.

40:07

💼 Innovation for Business Success

In this paragraph, the speaker discusses the importance of innovation in business, differentiating between differentiation, neutralization, and optimization as three distinct paths to achieving a return on innovation. The talk stresses the need to focus on creating unmatchable offers, being a fast neutralizer, and optimizing to self-fund further innovation. The speaker also warns against mixing these modes in innovation efforts.

45:09

🚨 Avoiding Waste in Innovation Initiatives

The speaker concludes by emphasizing the need to avoid wasting resources in innovation initiatives. By focusing on creating unmatchable offers, neutralizing competitors effectively, and optimizing processes, companies can self-fund their innovation efforts. The talk encourages identifying and eliminating waste to free up resources for more impactful innovation projects.

Keywords

💡Technology Adoption Life Cycle

The Technology Adoption Life Cycle is a model that describes how, why, and at what rate new technologies and products are adopted by different groups within a society. In the video, this concept is used to discuss the stages of adoption of disruptive technologies, starting from 'technology enthusiasts' to 'visionary sponsors' and eventually to the mainstream market. The script refers to Everett Rogers' model from the 1950s, which segments the community response into five categories and is crucial for understanding market dynamics and the transition from early to mainstream adoption.

💡Disruptive Technology

Disruptive technology refers to a new technology or innovation that disrupts an existing market or industry by introducing simplicity and convenience. In the context of the video, the speaker discusses how disruptive technologies, when introduced into a community, lead to a self-segregation into different response categories as described by the Technology Adoption Life Cycle. The video emphasizes the transformative impact of such technologies and the importance of understanding their adoption patterns for market success.

💡Pragmatists

In the script, 'pragmatists' are one of the segments within the Technology Adoption Life Cycle, representing individuals who adopt a technology after it has been proven successful by others. They are cautious and prefer to follow the lead of others rather than take risks. The video highlights the importance of pragmatists in driving market dynamics, as their adoption can signify a shift from early to mainstream market acceptance, which is critical for a technology to cross the 'chasm' and achieve widespread success.

💡Market Expansion

Market expansion refers to the process of growing a market by reaching new customers or expanding into new geographic areas. The video discusses an upcoming decade with a market expansion that is expected to be significant and interesting for the community. The speaker suggests that there will be opportunities to apply existing models to new markets, indicating a shift in focus towards growth and the application of innovative strategies to capture emerging opportunities.

💡Innovation

Innovation in the video is discussed as a critical component for business success, particularly in the context of adapting to new market conditions and consumer behaviors. The speaker emphasizes the need for innovation to be more disciplined and focused, suggesting that the traditional approaches may not be as effective in the new world. Innovation is portrayed as a key driver for crossing the chasm and achieving market leadership.

💡Solution Model

The solution model is a business approach that revolves around providing a solution to a common problem faced by a group of pragmatists. In the video, the speaker explains how this model is distinct from the early market model and is focused on creating a universal solution that can be rapidly adopted once it is proven to work. The example of Documentum is given to illustrate how a solution model can lead to rapid growth within a specific industry.

💡Product Model

The product model is a business approach where the focus is on creating and selling a product to customers. In the context of the video, the product model is contrasted with the solution model and is particularly relevant during the 'tornado' phase of market adoption, where there is a rush of customers coming into a new category. The speaker uses the example of HP inkjet printers to illustrate the success of the product model in capturing market share during periods of rapid growth.

💡Consumables Model

The consumables model is a business strategy where the primary profit comes from the sale of consumable items that are used in conjunction with a product. The video discusses how this model becomes increasingly important in more mature markets, using the example of iTunes and the App Store to illustrate how the real value in a mature market can come from the consumables associated with a product, rather than the product itself.

💡Enterprise IT

Enterprise IT refers to the Information Technology systems and solutions used by businesses and organizations to manage their operations, data, and communications. In the video, the speaker discusses the shift in Enterprise IT from growth to economization, with a focus on virtualization and cloud computing. The script highlights the challenges and opportunities presented by the changing nature of Enterprise IT and the need for innovation in this space.

💡Consumerization of IT

Consumerization of IT is a trend where consumer-oriented technologies and practices begin to influence business and enterprise IT strategies. The speaker in the video talks about the impact of this trend on the enterprise, suggesting that there is a need to bring consumer-like capabilities into the enterprise to address the 'Millennials' lament' and to create a more powerful and engaging employee experience.

💡Neutralization

Neutralization in the context of the video refers to the process of a company creating a product or service that is 'good enough' to compete with a market leader's offering, thereby regaining a foothold in the market. The speaker uses the example of Microsoft's strategy with Internet Explorer to illustrate how neutralization can be a critical and rapid response to maintain competitiveness.

💡Differentiation

Differentiation in the video is discussed as a strategy to create a product or service that is significantly better or unique enough to command a premium in the market. The speaker emphasizes the importance of creating an 'unmatchable offer' to gain significant bargaining power and protect against commoditization, using Apple's success with the iPad as an example.

💡Optimization

Optimization in the video refers to the process of making a company's operations more efficient and cost-effective. The speaker discusses the importance of optimization in the face of price deflation and the need for companies to continuously innovate in this area to maintain profitability and fund further innovation and neutralization efforts.

💡Waste in Innovation

Waste in Innovation is a concept discussed in the video that highlights the inefficiency and lack of return on investment in many innovation efforts. The speaker suggests that most innovation efforts do not result in significant differentiation and thus are wasted, emphasizing the need to focus on areas that will yield a true return, such as creating unmatchable offers or optimizing operations.

Highlights

Tracing an arc over the last 20 years to explore the evolution of technology adoption models and their application in new markets.

Grounding in the 60-year-old Everett Rogers model which segments community responses to disruptive technology into five categories.

Discussion on the transformative response of pragmatists in technology adoption and the concept of the 'chasm' between early and mainstream markets.

The identification of market dynamics through different phases: early market, chasm, tornado, main street, and total assimilation.

Different business models for different market phases: project, solution, product, and consumables models.

The importance of understanding the lifecycle of technology and its impact on corporate strategies and growth.

The shift in the tech industry after the dot-com bust, where tech began to resemble an industrial sector with a focus on the entire lifecycle curve.

The concept of secular and cyclical markets in tech and their implications for growth and innovation strategies.

The emergence of consumer tech and the decoupling of adoption from monetization, leading to new challenges and opportunities.

The need for tech to mature and take responsibility for the entire lifecycle, including dealing with commoditization and differentiation.

The impact of globalization and outsourcing on the tech industry, leading to a need for specialization and innovation to maintain margins.

The transformation of middle managers into connectors across value chains, necessitating new tools for communication, coordination, and collaboration.

The opportunity to bring consumer tech capabilities into the enterprise, creating a new market for enterprise-ready social and mobile technologies.

The importance of innovation in competing in the new world, focusing on differentiation, neutralization, and optimization.

The 'Millennials lament' reflecting the gap between consumer empowerment and employee experience, driving the need for enterprise transformation.

The key learnings on innovation, emphasizing the importance of not mixing modes and focusing on parallel tracks of differentiation, neutralization, and optimization.

The final thoughts on the importance of leveraging waste in innovation budgets to self-fund initiatives without downside.

Transcripts

[Music]

thank you very much thank you very much

okay so so the opportunity what I want

to do here is I want to trace an arc

over the last 20 years I want to kind of

for those of you who haven't maybe seen

these models before I'm just going to do

a quick grounding in them then I want to

kind of talk about where they've gone I

want to tie that into um uh a whole new

set of markets that I think we're going

to serve that we can apply these models

to going forward and when I mean serve I

mean right now and I I mean this

community right now I think there's a a

Market expansion in this decade that's

going to be extremely uh interesting and

important to everybody in uh in this

room and then some some a little bit I

want to close with some things we've

learned about how to play the game in

the in this new world and particularly

how innovation has to get focused in a

way that's more disciplined maybe than

we than we've done in the past so that's

that's kind of where this is

headed so um the old models to follow

okay so let me just kick this thing off

by saying this model here is 60 years

old Everett Rogers came up with this

model in the 1950s and basically what he

said was if you introduce disruptive

technology into any Community anywhere

that Community will self-segregate into

five different responses the first resp

and and and he he his names for these go

across the bottom here and I'm going to

give you the sort of the Silicon Valley

version of those names so the first

people to engage a new technology are

the technology enthusiasts and they do

it largely because they're just

interested in the properties of the

technology they're Geeks and and and you

know they're just dancing geek to geek

is kind of how these things start right

and then the first major thing that

happens with a technology happens when a

Visionary sponsor enters the game this

is a person with a lot of money and and

a and a dream or vision and and they

they take a lot of risks early on and

these they go ahead of the herd they

want to be the first people ever to do

this stuff and and that whole idea of

being the Pioneer they want to be that

Pioneer they're going to they're they're

going to put a lot of distance between

themselves and and everybody else

everybody else tends to get led by this

third strategy which is I'll do it when

I see you do it okay and and and

basically pragma just kind of say look

there's just too many things to evaluate

I can't really be an expert myself so

I'll just kind of check in with

everybody around me and when they go

I'll go and if they're not going I'm not

going to go the conservative strategy is

I just don't even like this stuff at all

so if I cannot do it I will not do it

and if I have to do it I'll wait until

as long as I can and then I'll do

whatever the pragmatist did hopefully

cheaper uh because you know it's it's

it's been in the market longer and then

the final response is you guys are all

instruments of the devil and and and you

know we this just never been never

should have happened okay so this model

has been very very stable but when we

when we applied it to the market

development the thing that we learned

about this model was that only one of

the five responses really was

transformative and that was what did the

pragmatist do because it's like block

voting in an election did the block vote

democrat or republican or did the

liberal Tor I can't remember how you

guys played up here right how the Brits

played anyway the prag the magst are the

key to the Dynamics of the market and so

instead of being this nice curve what we

ended up finding was a curve that had

broken into two pieces and the the the

first piece the piece out to the left we

called the early market and it was made

up of Technology enthusiasts and

Visionaries who both for their own

reasons preferred to go early or first

and engage and they kind of gravitated

toward the Innovation and then there was

this thing we called the chasm and the

chasm sep separated that group from the

rest because the pragmatists looked at

that going on and they they said well

that's interesting and then they turned

to each other and they'd say are you

doing this yet no no no no me neither

good okay okay good so so what would

happen is the market would stop there'd

be this Lull in the market and and when

it was first uh when when the book first

came out people we weren't seeing that

lull we were expecting to go right up

rogers's curve and so it was very

important to see it and that LOL is a

pragmatist group of people saying saying

I won't go unless you go so this is what

we ended up calling the Junior High

dance problem okay so boys on one side

of the gym girls on the other side of

the gym how do we get the dance started

and and and the interesting thing about

this model I'll just skip ahead for a

second is you know at some some few

minutes

later everybody's on the dance floor so

you go from a state of zero adoption to

a state of 100% adoption and it's the

same pragmatist decision respon resp

which is I'm going to do whatever you do

so I'm not I'm not I'm not and then all

of a sudden you do you do you do oh my

God I'm being left behind I'm going to

go do it too okay so tornadoes and

chasms were the exact same response it

was just is is is the switch on or is

the switch off now bowling alley was

this thing in the middle which was could

you as a marketing as a

company accelerate the transition from

Chasm to Tornado by focusing on somebody

who would be a group of people were more

likely to convert sooner rather than

later and we called these people

pragmatists in pain okay so they would

normally not convert but they've got a

problem that was bothering them enough

that if you could come up with a

solution they would do it and so a whole

lot AC crossing the chasm was all about

can you first of all can you get The

Visionaries then you is the Once you and

you use The Visionaries to get the

product to a point where it's it's done

or done enough that you can sell it to

pragmatist and then the question was who

who could you who could you find for

that first Beach head segment to get the

pragmatis community adopting it's almost

like there's two waves of adoption an

early market and then and then a

mainstream market and getting that

second wave of adoption that was the big

lesson uh of of the uh of the early

early 90s and then then things go on to

Main Street and and and and final to

finally total assimilation and so that

was kind of the model we were using for

the 90s and and we were using with

startups a lot and we just kept on

seeing Tech technology after technology

come through the

marketplace what happened next oh and

and the models you learn from this are

if you're in the early Market it's a

project game every customer is a unique

event you're not really selling a

product it's the product isn't even done

yet really so you're selling yourself to

your customer and you're kind of selling

the entire company to do whatever it is

you say your product does because it

doesn't do it yet so you're going to do

the project that will make it do it once

in one for one in one instance for that

customer and that becomes your Flagship

account or the or or your reference

account and it shows the rest of the

world this is possible but it doesn't

create pragmatist adoption to do that

you got to move to another model and

that's the solution model the solution

model is built around a herd of

pragmatists who share a common problem

and who want to see a common solution to

that problem that other pragmatists have

proven that works so once that solution

comes into view if the problem is

universal in that Community the solution

becomes Universal incredibly rapidly the

example we used early on was a company

called documentum and and the folks open

text here know them well so so that was

a $2 million a year $2 million a year $2

million a year three years in a row then

went eight 25 45 and went public on one

pragst community in pain the the the

pharmaceutical companies who were trying

to handle the documents around new drug

approval but that was a solution model

because they had built one for Boeing

and they'd built one for synex and

they'd built one for the a state

government those were three projects

they had to focus in pick one they pick

synex they generalize that into a

solution for the rest of Pharma when you

get into the tornado you got to leave

the solution model behind or or at least

the the model that is most rewarded in a

tornado is just a product model it's

just just

as in you know we're talking uh about HP

earlier this morning HP when the inkjet

printers first came out they had to ship

a million a month out of Vancouver just

ship it right and if they had a defect

that was a very bad moment because

you're just trying to get product out in

the market so the product model is

extremely successful for capturing that

Rush of customers that come into new cat

any any category whether it's an iPhone

an iPod an iPad kind of product that

that kind of stuff that first Rush is

huge The Rim the Blackberry

Etc when you get into a more mature

Market you realize hey it's not the iPod

it's the iTunes that's the real value

here it's not the it's not maybe the

iPad it's going to be the app store

right and so the consum oops the the uh

let me go back here the consumables

model becomes a really important thing

so part of what we learned in the last

half of the 90s is it wasn't just about

tornadoes there was this whole model

that we had to start sorting through and

what we discovered is those four

business models they're very very

different the leaders that are good at

them are different the the the operating

ratios that you have are different the

sales motions are different the partner

relationships are different and so when

when you if you're going through this

model the first time you have this very

very uh peculiar sort of experience of

company adolescence where you know

you're trying to figure out what model

of I supposed to be on and and how how

can we play this game and so for those

of you who are in startups and may go

through this curve this is this an

extremely valuable sort of road map to

have to kind of where where are we now

are we on the right model today and are

we headed toward another model and and

what would we have to do to get ready

for that kind of thing and that was a

lot of the turmoil that came out of the

the late 90s was about just trying to

figure out how do you do this in

particularly in a large company where

One Division might be at one part of the

life cycle and another division at the

another

part and then the and and this basically

drove our life for the '

90s then we had the dot the Y2K and the

dot bubble and then the.com bust and

that sort of said you know what it kind

of when we came back from the.com Bust

Tech looked a lot more like an

industrial than it had ever before which

means yes there's still technology

adoption life cycles and yes those lead

to growth markets and those growth

markets you can be through a technology

adoption life cycle and you can still

grow like a weed uh uh going forward so

there's a in fact if you want to be a

successful executive in a large

corporation you want to join it just as

it's going into the B section and then

leave just as it goes into the c section

right and then you can say well you know

when I was at Oracle we took it from 50

million to 500 million and about 4 years

and yeah that was on my watch and yeah

of course if you had just stood there

doing nothing it would have gone from 50

to 500 but then you don't they don't put

the F on the resume just you know I was

there right so B markets are fabulous

for corporate careers Okay C markets is

where corporate Executives earn their

living C markets are cyclical markets

whereas B markets are what they call

secular a secular Market is a market

that is making a one-time shift from A

to B like media is right now going

through a one-time shift from analog

paper to digital okay once it's done

it's going to be kind of done but in

during the process of doing it there's

an enormous amount of infrastructure

that has to be put in place etc etc so

that's the B markets CA markets are you

got to maintain that

infrastructure do we have a train coming

oh yes we do have a train excuse me okay

um the uh uh I love it the C markets

those are cyclical growth market so they

kind of go up and they go down and they

go up the PC industry probably for the

last 15 years has sort of been a CA

market right and so we had to learn in

Tech about how to manage in a C Market

because we didn't know that and in fact

we then had to start learning about

declining markets we we'd seen the kind

of the minicomputer folks go through

this but we you know you didn't think

the workstation guys were going to go

through it and then our friends at Sun

sort of kind of had a very strong D

experience leading to becoming an O

company right they they were bought by

Oracle uh the other year ago and and and

and then you can even have a end of life

experience sort of like a Kodak moment

where where basically your technology is

done we're done you you you can join the

slide rule in a in a museum somewhere

because we're not we don't do film

anymore right and so for the first time

Tech had to kind of grow up and and sort

of take responsibility for the entire

curve because the Enterprise customers

said to us basically in 2002 we've spent

we think on the order of a trillion

dollars with you guys hope you enjoyed

it we have used maybe one tenth of what

we bought from you and we're not going

to buy much for a while and by the way

all that maintenance we're paying you

well we don't want to pay very much of

that maintenance to you either and you

guys better learn how to act like an

adult

industrial uh sector or or we we'll find

somebody who can okay so that was a big

a big learning for us and in that world

we started saying okay we need to

rethink Innovation and so the book that

David referenced called dealing with

Darwin what it said is it said look

we've had lots of innovation we've known

about this disruptive innovation that's

kind of how you know I was dining out on

that Kay Christensen with the innovators

dilemma doing a lot of work with in

disruptive innovation this solution kind

of innovation you know a product

Innovation platform Innovation platforms

became a very important idea we saw

Windows become a platform we saw Intel

become a platform Oracle became a

platform um big issue and they were all

kind of growth Market ideas and they

were all around product

leadership then you kind of went into

the more cyclical places and the problem

with cyclical markets is that that kind

of innovation it's too expensive and too

high risk to do in a cyclical Market

cyclical markets don't change enough

market share fast enough to reward the

kind of risk that those kinds of

innovation implies and so what you see

in cyclical industrial markets is either

a customer intimacy strategy or an

operational excellence strategy so

customer intimacy and you think of

things like we we have line extensions

we have enhancement or or design

Innovations marketing Innovations uh

experiential Innovations you know think

about markets and and more and more it's

about what is the experience as opposed

to did you do something really

disruptive okay and on the operational

excellence side value engineering

integration Engineering Process

engineering business model reformulation

just again these are the ways in which

cycal Industries can continually find

new ways to create value going forward

they were not familiar to the Tech

Community in Silicon Valley but in

certainly in the last 10 years they've

been huge Mark herd's whole career at HP

was essentially a value an exercise in

value engineering right just essentially

taking out all the fat he could find

probably a lot of the muscle as well

okay so I mean the new CEO Leo apitech

was trying to figure out you know what

he's got left in the cupboard if

anything but the point is you can do

that in a cyclical Market okay you kind

of sell out the future but you make the

present and then and then you also have

to take responsibility for the fact that

some of your portfolio is really is

sliding off the other side of things and

so you're either going to have to do

organic Innovation to replace it or

you're going to have to acquire

companies structural Innovation or you

maybe just Harvest and leave and you

know this is a very very kind of busy

slide but that was the point that was

the whole point of dealing with Darwin

there's lots of forms of innovation it's

not just disruptive in the Tech

Community the only Innovation that we

said was real Innovation was disruptive

innovation but that's not true that's

not true Innovation is anything that

creates separation between you and a

competitor that and causes customers to

prefer your offer to theirs every one of

those things can do that okay so that

was that was

now uh up into that this has all been

the Enterprise experience uh of of of of

the last two decades but the thing the

big thing that happened of course was

after the Y2K and the the Enterprise it

kind of went into the tank consumer it

took off and it took off at a speed that

people you know people you know that

nice Jeffrey Mo and his Chasm idea too

bad it's irrelevant now right which felt

a little threatening frankly so so it's

like well what did happen you know what

was going because there was no what casm

Facebook has 600 million subscribers

right it's the second or third largest

country the third largest country in the

World Behind China and India right it's

huge so km schazam dude I mean what are

you talking about so what we what we

realized was that what happened with the

the consumer Tech things in particularly

Google and Facebook and Twitter and and

YouTube and the things that we are

probably most familiar with is adoption

option became

disconnected from

monetization and so it was the adoption

there was no technology disruption for

the adoption it was just there and it

was delightful and when you offer

something that is delightful and free

over broadband that's not expensive

don't be shocked when it gets consumed

until you know the last drop of

broadband has been exhausted right but

what we did realize is that monetization

still was casm problem so these models

definitely work better or well let's be

put this way these model models always

work in my view in a B2B scenario in a b

Toc scenario you can still see the

patterns emerging Facebook didn't wasn't

an overnight success it was first a

success at Harvard so that was its first

Visionary kind of account and then it

spread to the other IV leagues and you

could argue that something akin to

crossing the chasm bowling alley and

then it went went forward but it having

said that it wasn't the kind of tough

Chasm crossings that we've been dealing

with in the '90s it was a much more

viral much more contagious situation and

so if you're going to be successful in

consumer um uh it you have to be a

master of viral creating viral effects

and it's not we call it viral marketing

but the truth is it's actually just a

viral product and our friends at Apple

have shown us three times in one decade

how a spectacularly viral product can

set in entire Industries on their ear I

mean you know the last decade is just

it's it's unbelievable the music

industry the cellular telephony industry

and now the media industry are are are

literally being completely overturned by

the introduction of a single product a

sing single consumer product which then

creates this massive leverage which is

cing all creating all this

reorganization so there's stuff if

you're going to play in the consumer

business you have to be cool you have to

figure out this viral cool thing don't

look at me okay cool is not my strong

suit okay so but I but I can at least

recognize it when I see it sort of like

the Supreme Court with pornography I'm I

can't Define it but I can recognize it

when I see it okay I can recognize cool

but I can't I'm not cool and I couldn't

tell you how to be cool I just know you

have to be cool to make this stuff work

so that that's sort of a kind of a if

you will a sort of a retrospective of

the models and if you're if you're not

familiar with them you probably do need

to internalize these models and and

there's Bunches of books to help you do

that because it's a little bit like

raising kids you know when you raise

little kids you you had the terrible

twos and the trying Threes And The

Fearsome fours and the fabulous fives or

whatever it was those books were

incredibly valuable as a firsttime

parent CU you'd go oh my God my kid

they're okay it's all right that they're

wetting the bed or it's all right that

they're you know teething on their

brother uh you

know or or whatever and similarly these

models are I think are pretty good to

help not just you get oriented but to

help you get your team on the same page

because they help the whole team realize

what forces are acting on us going

forward okay so that's sort of a kind of

a retrospective view of sort of models

thinking uh largely Silicon Valley

Centric kind of growing up a bit over

the last couple of

decades that's all fine you know old

people can talk about it and that that

would be me now but the question really

is what's coming and where are we going

and what is the opportunity for the

startups in the back of this Hall and

the startups that are kind of implicit

in every table in this

room so I think the big thing of this

last decade as I just said because of

the Wu bubble Dynamic Enterprise it for

all of this decade this last decade was

essentially an exercise in optimizing

and economizing largely through

virtualization potentially going to

Cloud but not going to Cloud to grow

going to Cloud to economize right uh

getting you trying to find ways to store

things more cheaply or compute more

cheaply meanwhile while Enterprise it

was on hold of course consumer it was on

fire and and this this transformation I

mean that you could you could do you

know huge presentations about I'll just

I just want to make the point that there

were four technologies that converged in

this past decade any one of which

probably would have been transformative

but when you take the four of them

together it it just it created a world

in which our entire culture excuse me

I'm just our entire

culture has become digitized we there

used to be a time where you could talk

about my digital life it's very hard to

do that now because you we are leading

digitally mediated

lives it's it's and so all and the and

if the the older folks in the room with

me not too digitally mediated but just

you just go down a gradient of age and

you get down to a

14-year-old and the cell phone is the

center of their emotional and physical

and psychological development right and

that's why they have those little funny

little thumbs you know they can do all

that stuff so so so so we we know that

there's been a transformation and of

course you you look at what's going on

in the Middle East right now that's a

direct consequence of these Technologies

in this digitally mediated world we we

meet people uh digitally we fall in love

digitally we make War digitally we

financi we do Finance digitally we do

Commerce digitally everything is

becoming digital so as consumers we have

this unbelievable digital experience and

and and it's just it's well it's

revolutionary in a way that I just don't

think I don't think it's it's it's just

hard to figure out even how to stay this

uh State the scope of that but anyway

that Genie is well and truly out of the

bottle and we're on our way and we don't

know where we're going but it it's it's

a heck of a ride okay so what it's led

to however is this thing we call the

Millennials

lament which is how can I be so powerful

as a consumer

and so lame as an employee I mean Sunday

night the world is at my command and

Monday morning I can't figure out you

know what my latest my best customer

really wants from me okay so what what's

going on and why can't we have this

stuff together and this is the this is

the the forcing function or the the

impedance mismatch that's going to

create an enormous amount of wealth

creation in this coming decade which is

we need to bring

the

consumer um capabilities into the

Enterprise and so if you look at that

and you say well the Enterprise by the

way if you talk to cios about this they

know it's coming but oh man they'd like

it to come on the next guy's watch

because because it's it's just there's

so much you have to do in order to make

this thing actually work so the first

question we ought to ask ourselves as

well you know Jeffrey futurist blah blah

blah you know they always think things

are coming really soon what would make

make it come really this decade why

can't we wait really another decade and

have crappy systems at work we've had

them for years already it's a tradition

you know why why would why couldn't we

just stay with that and I think the

answer is we we started changing the

world the the B2B World in particular

about 20 years ago with this Outsourcing

of manufacturing to China followed very

quickly by Outsourcing of a lot of

services to India and the effect of that

Outsourcing was just remarkable I mean

we as was the most effective foreign aid

program in the history of the planet I

mean just by far by wildly I mean it's

for somebody growing up in my generation

to have to witness China being the

number two economy in the world you say

how is that possible right and it's

because of this and so there's lots and

lots of good things that have happened

from that it's been hard on the

developed economy why is it been so hard

on us well because the goods that come

back from that globalized world into our

economy are priced at a very very

different point now that's great for

consumers but for those of us who make a

living in a developed economy and have

to support the infrastructure and the

wage scale and the cost of living of a

developed economy commoditization is a

very very scary enemy because it does

not go away and and and you can try to

protect yourself from it for a while and

some some some countries have been very

protectionist but sooner or later you

have you have to pay the piper and most

people believe I don't believe in just

in just ripping off the skin and

immediately exposing yourself to the

worst of everything but you have we have

to have a systematic way for coping with

this and you say well how do you do that

you say well we we have to create offers

that are sufficiently differentiated

from the commodity offer that people

will pay me the the difference so I can

keep my the thing you have to keep

constant is your margin model this is

true of a company this is true of a

country you have to maintain M your

profit margins at whatever that's the

constant in your business you can change

categories you can change people you can

change customers you can change offers

you can't change your margin model so

that means we have to differentiate to a

level to sustain our our margin model

well how do you do that and and the

answer is actually pretty clear you have

to specialize we no longer can be the

general purpose everybody does

everything kind of company that my

father grew up in and that frankly I

entered when I was first coming into the

workforce where companies essentially

did you know everything so so you know

you you you built the Chip And you built

the storage device and you built the

software and you built the hardware and

you did the services and and the whole

thing and and in Tech obviously we've

completely deconstructed that so that we

can specialize Cisco builds networking

equipment now it's moving up now but for

a long time that was all it did right

EMC for a long time all it did was

storage you know uh Microsoft just

software operating systems then then

applications that kind of stuff so you

specialize well when you specialize what

you have to say is well where do I get

the resources to specialize well I've

got to economize and the economizing

increasingly says I'm going to do it for

cheaper and then eventually you go you

know the problem is if I try to do it

too cheaply I'll do it badly I'm

probably better off if I give this to

another company we Outsource it so that

leads to more Outsourcing and now you

start seeing that this thing is a cycle

right and it's just not going to stop

it's you keep going around and around

this circle

and and and and the globalization

stronger the commoditization stronger so

we have to differentiate even more this

is a kind of a a darwinian rat race and

this world is getting flatter and

flatter okay now that's just not for us

that's for everybody in every developed

economy so now how why would

it make a difference in this world okay

because it is one of the few assets we

have in the developed world where we're

much better at it than the developing

World much better so if we can figure

out a way to leverage this it's a great

idea idea so if you start looking at

this world from the point of view of the

developed economies here's what's going

on the the structure business has

changed we've gone from the old middle

managers were the people that stood

between top management and bottom and

the bottom of the pyramid to Middle

managers are the people that live and

they're the connective tissue along a

value chain that goes across three four

five six different companies in order to

deliver the final result to the Final

End customer so all of a sudden there's

a a need to negotiate a whole lot of

things across company boundaries across

country boundaries language barriers

culture barriers that we never had

before and the middle manager instead of

being a cog in a great corporate machine

has become sort of the middle linebacker

or or the you the midfielder in soccer

they have to run all over the field and

they have to perform at high speed so

you look at that thing and you say what

are they doing with this stuff and and

and and the the business networks are

are saying look we need to communicate

we need to coordinate we need to we need

to collaborate we didn't have to do that

as much anymore and so how do we get

that stuff done how do we build these

relationships and they have got to be

built virtually digitally across the

world and so how do we engage with peers

to solve problems and the problem is

it's not in the Erp system the answers

are not there there are some facts in

the Erp system we need like where is the

shipment or what was the order amount or

how much did we release on allocation or

what was the you know the the the uh uh

the lot number of the contaminated lot

there's information in there but you

can't turn to the system to get the

answer much of the answer is in people's

heads and it has to be negotiated out so

this is where I think the opportunity is

is going to hit it's going to hit the

middle management the interesting thing

about middle management is we've never

invested in it for the middle of our

organizations we invested in huge

amounts of Erp but that was primarily to

automate the front line and then we

invested in huge amounts of business

intelligence we used to call it decision

support executive information systems

and that was to make our Executive Suite

smarter but if you were somebody in the

middle there only really two things we

ever did for anybody in the middle we

got him a laptop and then we got him a

Blackberry that was it that was it I

mean after that it's like you no manager

in the world says hey I've got a tough

problem I want to log on to

sap is just not what happens okay so so

the issue then becomes so so so so what

do we want to do well what we want to do

is we want to take these design

principles and these power principles

that we've seen unfold in the consumer

world and we want to bring them into the

Enterprise

world and when you look at that you say

well what would that really be the

answer is you you don't have to look

very far because many of the facilities

we want already exist in the consumer

world but they don't have the word

Enterprise in front of them and and and

and putting the word Enterprise ready in

front of these things is something that

none of these companies will do

themselves there is no chance that

Facebook will make an Enterprise ready

Facebook or Google and Enterprise ready

Google or YouTube or Twitter it won't

happen because the bit the way the

business models work the way the margin

models work the way the partnership

models work they're just antithetical

it's not going to happen so they'll have

divisions that'll sort of try to nod

nicely toward the Enterprise but that's

that's about as far as it's going to go

which means there's a huge vacuum to be

filled because this stuff if if you buy

in this argument about the the way in

which the world is is going if we we

have to arm our middle managers if we're

going to be able to maintain our margin

models this stuff would do it let me let

me show the kind of things that we have

in mind you know you could say look you

know uh Facebook well I need to know

somebody you know I'm filling a project

in China right or or uh on demand

conferencing let's get everybody

together right now global presence

detection I need to talk to Harry where

is Harry Harry Harry may not even know

where Harry is but his cell phone knows

where Harry is right so we can find

Harry you know can can you take YouTube

I want to do a demo I don't want to get

in another plane search you know it just

it goes on and on and okay so so it's

not that there aren't use cases for all

of these things in the Enterprise

because there are plenty of use cases

for the problem is that it's just really

really hard to make consumer technology

Enterprise ready you know look at the

kinds of stuff that that you know that

you you you got to worry about so so the

first thing is the great thing the the

asset you have is don't

redesign the capability Mark Benny when

he designed the first salesforce.com he

had asked himself the question why isn't

enterprise software as easy to use as

amazon.com so when he wrote the first

salesforce.com app and he did the

interface he copied Amazon

exactly when two years ago he wanted to

say why can't we have Twitter Enterprise

Twitter he said Enterprise chatter like

Facebook he copied the Facebook

interface exactly why did he do that if

you copy Facebook exactly you don't need

a manual right you don't need training

you don't need support people do it see

as soon as you make a change to make it

quote better you screw everything up

okay so and this is Engineers like

famous for doing this right I can do it

smarter yes you can shoot that man

right because because they'll completely

disrupt the entire point of the process

which is we want to leverage a a a a

complete cultural phenomenon already

exists but here's the heavy lifting

right so it's got to be secure we have

to worry about data leakage we have to

worry about liability we have to worry

about discoverability because especially

not maybe so much on your side of the

Border but we have more lawyers than we

have football player we have more

lawyers than anything on our side of the

border and discoverability is a big

issue for it and the interfaces to the

systems of record because none of this

stuff works if you can't talk to sap

it's not that sap is irrelevant it's

just just the sap has to be on demand

not on a pull basis not on a push basis

right and it's got to be very ad hoc in

the moment very mobile global social

virtual all that kind of stuff

reliability scalability maintainability

all the stuff that people worry about

and so I think the great thing about

being here is Rim this is this is a

Playbook that Rim taught the world about

okay when you when you talk to Jim Bley

and those and those guys when I was

talking with him at at the world

economic those years that we were going

there together You' you'd see the the

thought processes that that Rim put into

well how does the service provider's

business model got to work and what has

to happen there okay now what do the CIO

got to do and how does the Blackberry

you know Bez server have to work with

that and then what does the end user

want and and and where where can we go

from there and you know you guys are

going to have a raffle for a torch I

have a torch by the way this is a hell

of a product okay and and and it's a

business product and and it's been a

very successful business product so it's

not that this this is not a magic Art

and it's certainly not a magic Art for

this community but it's a lot of work

now the good news is that creates

barriers to entry and it also creates

margin model right because this is

extremely valuable work so I really want

to encourage you to figure out a way to

tap into this capability if it's if it's

in the environment of your business

model so I just want to close with with

one last set of thoughts and it's just

four or five slides it's around this

notion of how do you innovate to compete

in this new world and you know Silicon

Valley gets a lot of credit for

Innovation and the thing that that that

uh we began to sort out is we we began

to feel there's kind of a kind of

there's kind of a dark side to to

Innovation which is probably most

Innovation is

waste and that was a we challenged

ourselves to figure out where do you get

the return on Innovation and how does

that work and we learned we learned a

key lesson which I want to close with

okay so the the key the lesson starts by

saying look if you look at Innovation

there's three ways you can make money if

you spend a dollar on Innovation you can

differentiate which will mean you'll

you'll get the you know a better margin

you'll get more sales because customers

prefer your offer to the other guys you

can neutralize which means you can catch

up to an innovation that a competitor

made and so therefore kind of get back

into the game and you can optimize and

in in optimizing requires Innovation and

you if you can take money take cost out

of your system and that also improves

your margin model so if you look at

those three things you know your claim

to fame and and then you know take table

stakes and and making money let me kind

of walk you through the key things we've

learned on each one of those and then

and then the final lesson about keeping

them separate so this is the

differentiation idea now every company

has a set of competitors the customers

put you in that set the analysts put you

in that set and the idea is those

companies are all different their offers

are all differentiated from each other

but they're inside a yellow circle

because at the margin the customer is

not willing to pay an extraordinary

premium for any one of those offers so

they have a preference but it's within

an envelope where best price is going to

have quite a lot of influence if you can

differentiate in a way that takes you

outside the yellow circle you're able to

we call this creating an unmatchable

offer okay you create enormous power

enormous bargaining power that's what

that's why everybody's talking about

Apple for the last decade and by the way

it's why people are learning to hate

Apple now because what with enormous

power typically comes abuse of enormous

power right and you're just watching

Apple starting down the tra the the the

trail of abuse uh you watched it with

their media negotiations you're seeing

it in the App Stores you you're going to

and it's going to generate a reaction

the same way that that Microsoft created

a reaction the same way that Google

created a reaction the same way that

Facebook creates a reaction but but the

point about it is it's because they have

enormous power and why do they have

enormous power because they have an

unmatchable offer okay and and and and

that unmatchable offer is something you

should aspire to now we shouldn't aspire

to be Global revolutionaries at every

table because there's only one globe and

there's like 25 tables here but but what

we can do is say but in our target

market we can do this in our Target

market and we just you you focus the

market to where the market has to be big

enough to matter to your company and

small enough for you to dominate so you

have to sort of figure out where you are

but you can do this okay if you don't do

it by the way it's not you're out of

business it's just that you don't have

this kind of bargaining power so your

margin model is continually being

threatened by commoditization and and

you're going to experience a

deterioration in your margin model which

is not not pleasant so kind of cools to

doing this stuff goals to be keys to

differentiate goals to be uh unmatchable

that means you have to make a very

asymmetrical bat you end up taking one

of your offers or one dimension of your

offers and wildly over resourcing it and

then kind of figuring out how to make do

every everywhere else okay and it's a

it's a big betat so I mean you know we

talk about the iPad anybody remember the

Newton right the Macintosh the Lisa

right so so these there I me there are

some spectacular sort of pancake Falls

uh around this play the the razor was

great but it was followed by the craer

right many of you probably don't

remember the Crazer okay but Motorola

does they remember both products

okay in innovating for neutralization is

the opposite problem somebody got

outside the yellow circle the yellow

circle's catching up to it you got to

get back inside the yellow circle what

you what you're trying to do now is all

you're trying to do is get something

that's good enough so that you can take

the other guys un supposedly unmatchable

capability and say no no no no no we

have one of those two

okay now nobody thinks yours is better

than theirs but it's good enough okay

this is what Nokia has failed to do okay

this is what Google did with Android and

this is why Steven elop who just came

from Microsoft and went to Nokia shot

the Symbian operating system and said

we're going with Microsoft which is

clearly an inferior choice to either

Android or iOS but the problem was you

say why couldn't Nokia in three 4 and A2

years 2007 let's give them three benefit

that four years from 2007 2011 why

couldn't they come up with something

that neutralized the Apple iPhone answer

they were too

proud the engineers at Nokia would not

do neutralization they wanted to out

differentiate and so they spent three

and a half years trying to out

differentiate this is a this is a huge

huge cause of grief in high-tech this is

why Carol Barts had to sell the search

business at Yahoo to Microsoft because

the search business at Yahoo could not

let go of trying to out differentiate

Google because Google had taken their

search business from them there are

times in where you just have to cut your

losses and get back into the game the

best company who's ever been at

neutralization by far Microsoft right

Microsoft if you think about it invented

very little but neutralized and then

caught up and then went went ahead so it

neutralized Lotus 123 it neutralized

ashant Tate it neutralized wordstar and

then word perfect okay it neutralized

Noel okay it neutralized

Netscape it's trying to neutralize

Google may not get there this time

they're not as Nimble but but that was

an unbelievable performance around

neutralization so

neutralization is probably a scarcer

skill in Tech than

differentiation and being a fast

neutralizer is a critical part you need

to have this capability in your company

if you're going forward so it just it's

about being good enough

fast fast Microsoft would got that first

Internet Explorer into the Market within

a year of Netscape Navigator it sucked

right it wasn't really good enough but

it was a placeholder for good enough and

Internet Explorer too still wasn't

probably good enough but Internet

Explorer 3 was better than Navigator

okay so that's how they played that game

and and so emulate Microsoft when it

comes to neutralization and then finally

this issue around optimization you know

we're talking about all this price

deflation and what's going on and again

if you don't optimize you you you you

can't get the the the profits necessary

to to fund The Innovation going forward

so we tend to think about innovators and

optimizers because psychologically

they're very different but it's all part

of one ecosystem you got to optimize on

one end of the life cycle in order to

invest in Innovation and neutralization

earlier in the life cycle so this

optimization stuff it's it's really

important okay and again the goal is to

self fund now the thing that's

interesting about this self-funding

thing is well let me let me let me I'll

make that the last point I want to make

one point before I go there so those are

the three forms of getting a return on

Innovation and the thing we've learned

about them is they're very very

different the the the the values that

we're trying to uh do are different and

the way you kind of the question you

challenge yourself with is different and

here's the key learning don't mix

modes if you set up a team to do a

project or a program or an initiative

you give them one of these three

challenges and you take the other two

off the table if you have a problem that

you say well Jeffrey I'm sorry this this

a we have this product line and we

definitely have to differentiate but we

also have to neutralize fine break the

release in two do not have the

neutralization effort held captive by

the differentiation effort because

you'll delay the release for three and a

half years right you've got to get the

neutralization on a fast track and let

the differentiation because

differentiation isn't done until it's

done but neutralization needs to be done

now or before Christmas right that kind

of stuff so each one of these has it has

has its own Rhythm its own leadership

its own Cadence when you design

initiatives and you're you're running

your company make sure you separate them

out now the final thing I just want to

close with is where do you get the money

for this stuff and the answer is you've

already got the

money most of the money that people

spend on Innovation and on making their

company made uh better is wasted now

that's a I mean and not just at other

people's

companies okay Ian obviously other

people are not as smart as you are but

even at your company okay you say well

how is that possible because honest to

God I really don't believe this is true

I really don't believe this so you say

okay here here's where it comes from if

you initiate a project to really be

differentiation this is this is going to

be our claim to fame this is our better

than better better than best kind of

thing and you bring it to Market and

it's good and people give you lots of

credit for it it's even maybe best in

class but it's still inside the yellow

circle you're not going to get the

payback customers do not pay much more

for best-in class than for good enough

they'll pay a little bit more but not a

lot more okay you have to be Beyond

class to to get that return so all the

R&D about being better not good that's

waste you either are going to be

unmatchable or good enough and between

good enough and unmatchable there is a

huge huge spectrum of possibilities most

of which are well all of which are

seriously under rewarded good enough is

gets a huge reward because you're you're

in the game and and Beyond class gets a

huge reward because you're dictating

terms but everything in between no so

that's the first place the waste com so

you're probably spending too much money

on differentiation particularly if

you're funding differentiation in many

different products in many different

states of the life cycle most of them

probably shouldn't get funded okay you

should say no I'm sorry you're you're in

a neutralization phase of your life

we're going to differentiate with only a

few of our products the next one is um

excuse me um the next one's

neutralization that doesn't that that

tries to differentiate at the same time

that and therefore goes too slowly is

way too expensive and isn't fast enough

this is the this is the disease that

that yahu and Nokia both suffered from

and they're going to try to get

themselves out of sorry and then the

third one is optimization that really

doesn't go after the tough stuff doesn't

really try to get the real resources

freed up in your company so good news

about waste you already have the money

in your budget right if you stop wasting

it there is no downside trust me if you

spend it someplace else there is an

upside so frankly what the hell are you

waiting for right that's sort of I

really I mean it's just like come on

people this is right here this is fuel

go get the fuel right so the recap here

just to kind of close and I want to turn

it back over to uh to Ian and team is um

the models that I shared with you at the

beginning of the talk still apply

they're they need to be continually

updated and matured as the industry

matures but they still create Frameworks

and their purpose is really to create a

framework for you and your colleagues to

uh to to have tough conversations around

what's going on around you the new

markets to serve you know this last

decade was not a particularly good

decade for to be a B2B technology

company unless you were VMware or in

that kind of optimization world this

coming decade with this consumerization

of Enterprise it and all of the

implications of that means it's a huge

decade you this is absolutely where you

want to be for the coming decade going

forward

and then this new RAC is to run as

you're playing this new game this

business about differentiate neutralize

and optimize and how important those

three tracks are and they have to be

done in parallel they're not serial you

can't say well I'll optimize this year

and I'll neutralize next year and I'll

differentiate the next year no no no you

got to do all three in parallel right

but the key thing is don't try to Mel

them they they they do not mix well with

each other so that I want to say thank

you very much I'm going to have a chance

to be on a panel a bit later today see

you at lunch also but thanks a lot

appreciate

[Applause]

[Music]

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