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Escape Velocity by Geoffrey Moore
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Escape Velocity by Geoffrey Moore
Escape Velocity by Geoffrey Moore

The hierarchy of corporate strategy terminology - 5 powers:
* Category Power - n. of competitors on market
* Company Power - recognized brand, admired organization, best & smartest experts
* Market Power - n. of customers/clients, % market-share
* Offer Power - Wikipedia is an example, most desired * most affordable product on the market
* Execution Power - capability to make superior product, market it and sell it successfully

CaCoMa OfEx -- Metals ExportOffice -mnemonic association
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other valid parameters to be considered:
Market size - what is total number of sold products in that category per annum?
Market saturation in opposition to Market demand - what is demand trend for that product, is it out of season, or is it desired?
Market capitalization total value in Euro/annum

The powers are:
Category Power – the demand for a class of products, for example smart phones, fuel-efficient cars, or energy bars.
How many competitive products are present in that market category?
How many companies are in competition in that market category?

Company Power – the relative status and prospect for your company compared with peers.
For example here are enlisted some categories and leading competitors for that category:
- smartphones........ Apple iPhone vs. Samsug Galaxy Android,
- family automobile.. Toyota vs. Ford vs. VW,
- web browsers...... Micrisoft InternetExplorer vs. Google Chrome vs. Mozilla Firefox

Do you need to catch up (neutralize) or surpass (differentiate) your competitor?
What is your current ranking status in a market race, and what is the growth prospect for your company compared with peers (competition)?

Market Power – the company’s power relative to a market segment, for example Lamborghini in sport-car market over €200k, i.e. what is percentage, market-share in that segment
How many customers/clients do you have?
What is the total number of customers for that type of product/service?
• a set of actual or potential customers for a given set of products or services


Offer Power – the demand for a product or service relative to reference competitors. The classic here is Wikipedia vs. Encarta vs. Britannica - Wikipedia is killer application.
How much more is that your product desired than the competitive one?
Do customers want to abandon their old provider and switch to your products/services?

Execution Power – the ability to outperform competitors under equal conditions.

In Crossing the Chasm, Geoffrey A. Moore shows that in the Technology Adoption Life Cycle—which begins with innovators and moves to early adopters, early majority, late majority, and laggards—there is a vast chasm between the early adopters and the early majority. While early adopters are willing to sacrifice for the advantage of being first, the early majority waits until they know that the technology actually offers improvements in productivity. The challenge for innovators and marketers is to narrow this chasm and ultimately accelerate adoption across every segment.

"Market transitions wait for no one" - John Chambers, Cisco CEO. Moore opens by stating that the book is about freeing a company's future from the pull of the past. He contends that executives are often trapped by short-term performance-based compensation schemes that overweight legacy commitments and lead to a low success rate in new product launches.

He suggests using mergers/acquisitions as well as organic innovation, being swift to neutralize competitors' innovations and laser-focused on driving in-house innovations to make a business impervious to competitors, and reducing the time period from innovation to broad deployment. Success also requires that an organization recognize not-to-be-repeated market changes (secular growth) for the opportunities they present - whenever a new category or class of customers becomes available.

Example: Opening up the Asian market to art auctions. Not to be confused with cyclical growth which refers to an established market in which the customers remain the same. His key point is that one can miss out on cyclical growth and still get back into the game, not the case with secular change (eg. Microsoft vs. the mobile phone market).

There is a hierarchy of strategy, beginning with Category, Company, Market, Offer, and ending with Execution. Being able to enter new categories and exit old ones is fundamental to freeing a company from the pull of the past. Category power is a function of the demand for a given class of products or services - those in high demand (eg. smart phones, cloud computing) grow faster and typically enjoy better profit margins, while those in a low-power category (eg. desktop computers, e-mail) involve small margins. Company power reflects that status of a specific vendor relative to its competitors, generally signalled by its market share.

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company power
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The same company can have different levels of company power in different categories.
Tier 1 companies include top brands: G.M., IBM, HP, Microsoft, Dell, Apple, Google, Amazon, and Facebook.
Tier 2 companies have good brand recognition - Volvo, Sony, eg. LG, while
Tier 3 companies are the 'unbranded' with no company power.
The focus should be on advantages ('crown jewels') that can be leveraged in the present to change one's state. Competing in secular growth markets requires differentiation such that one's offers are unmatchable, and that in turn requires radical changes such as outsourcing or partnering that involve high-visibility and potentially career-limiting risks. Leaders persist in doing such because they're more externally than internally focused and want to make a difference; the 'lead' first and 'manage' second. Managing first is the result of focusing internally - eg. HP missed the Internet during the 1990s because it was focused on expanding successes in high-margin/low-growth client-server computing. Similarly with Xerox and its PARC Palo Alto Research Center innovations, and Motorola's failure to put out a smart-phone prior to Apple.

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Market power
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Market power is company power within a single market segment category. Market segment leaders are perceived to be the safe buy within the targeted segment. Examples: Cisco is the clear leader in switching and routing, while Juniper has the lead in the telecommunications segment, SAP dominates the ERP category while Lawson Software has the #1 position in U.S. health care.

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Offer power
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Offer power is a function of the demand for a given product/service relative to its reference competitors. Examples include Apple's iPhone, Google search, and Facebook.
Microsoft Office one had what was thought to be insurmountable competitive separation, but now is being commoditized by 'good enough' alternatives like Google Docs or LibreOffice Suite of products.

Offer power:
- Retain present model or innovate (disruptively)
- Six levers model
- Price/Benefit model - value for money
- Core/context model

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Execution power
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Execution power is the ability to outperform your competitive set under conditions that favor no vendor in particular.

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Category Power
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Category Power has a life cycle - emerging (childhood), growth (adulthood), mature, declining (senior age), and end-of-life (death).

TALC position of the market - Where is positioned the product within TALC (Technology Adoption Life Cycle)?
Emerging categories are a challenge for established enterprises - entailing high risks with highly variable rewards and demand a lot of top-flight resources - counter to the expectations investors have for current-quarter performance gains. For start-ups, on the other hand, emerging categories are a godsend - putting incumbents in their weakest possible position and creating openings for non-name disrupters and offering investors a great return from a handful of winners. Once early adopters have accepted a new product category, sales growth becomes secular one-time-only affair and a market share land grab is underway. Since it is not yet certain who will be the winner, all participants get a valuation bonus based on the possibility of their becoming the winner. Price-earnings ratios are highest during this phase of the category life cycle. However, established enterprises now have powerful competitive advantages - global sales and service footprints and brand credibility. Venture-backed enterprises are increasingly glad to get acquired during this stage. On the other hand, if incumbents persist in the status quo they risk being left out. There is no time to optimize - go ugly early. (The latter is also advantageous to start-ups because they have no brand reputation to protect.) The mature stage is where the overwhelming bulk of economic returns are generated. They offer stability and predictability - market leadership position changes very slowly and established enterprises dominate. Optimize now. Decline is a secular change - it's only going to get worse. Established enterprises are the only players of merit at this stage. There can be a converge of high value, low risk, and low need for investment. Public-market investors discount the prospects of businesses in this stage; private-equity buyout firms love these businesses because they can take them over, shut down all investments in the future, and play out present assets as profitably as possible. End-of-life is the end of commercial viability - telegrams, rotary phones, slide rules, etc. Staying too long can be tragic - eg. Kodak's last foray into next-generation film, Blockbuster Video's brick-and-mortar-only expansion are examples.
CategoryPower == How many competitive products (companies) are present on that market category?

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Companies who have achieved CategoryPower:
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Oracle in relational databases,
Microsoft in PC operating systems,
Hewlett-Packard in PC laser and inkjet printers,
Google in Search-Market Advertising
Cisco has in routers, and
Intel has in microprocessors

Each of these companies holds market share in excess of 50% percent in its prime market. All of them have been able to establish strongholds in the early majority segment, if not beyond, and to look forward from that position to continued growth, wondrously strong profit margins, and increasingly preferred relationships as suppliers to their customers.

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portfolio matrix
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Moore then constructs a portfolio matrix: High-growth (30% or more) vs. low-growth (single-digits) on the horizontal axis, with 'material to current financials' (5-10% of total revenue or total profit) and 'not material' on the vertical. Microsoft, Intel, IBM, Oracle, HP, SAP, and Dell have world-class franchises in the mature stage and can renew growth via next-generation product releases in the same categories. None, however, in the past decade or more have been able to organically produce a major franchise in the growth stage - they've been predominantly stuck in 'low-growth' + 'mature.' Apple, Google, Cisco, etc. have introduced at least one category into its portfolio in the past decade that has become both high growth and significantly material. Moore then introduces the 'Three Horizons Model' from McKinsey/The Alchemy of Growth. Horizon 1 investments are expected to contribute to material returns in the same fiscal year they are brought to market, Horizon 2 are expected to pay back in a subsequent year, and Horizon 3 are investments that will pay off beyond the current planning horizon. Horizon 1 managers jealously guard their resources (encouraged per the compensation plan), to the disadvantage of Horizon 2 market-developing managers. It takes more resources to generate added revenue in Horizon 2 than Horizon 1. (Horizon 3 is exempt - it is not yet in need of resources for market-facing teams.)

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Technology Adoption Life Cycle (TALC)
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Moore's descriptions of the phases of the Technology Adoption Life Cycle (TALC) is very useful:
o Early Market: time of great excitement when customers are technology enthusiasts
o Chasm: early-market interest wanes
o Bowling Alley: Niche-based adoption in advance of general marketplace
o Tornado: mass-market adoption
o Main Street: aftermarket development
o End of Life: leaders are supplanted by new paradigms/technology


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Clayton M. Christensen - The Innovator's Dilemma
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The Innovator's Dilemma explores how the creation of new technologies can cause companies to lose market share or their markets entirely, even companies that do everything right such as listening to their customers, watching the marketplace, and investing in research and development.

innovation expert Clayton M. Christensen says outstanding companies can do everything right and still lose their market leadership—or worse, disappear altogether. And not only does he prove what he says, but he tells others how to avoid a similar fate.
Focusing on “disruptive technology,” Christensen shows why most companies miss out on new waves of innovation. Whether in electronics or retailing, a successful company with established products will get pushed aside unless managers know when to abandon traditional business practices. Using the lessons of successes and failures from leading companies, The Innovator’s Dilemma presents a set of rules for capitalizing on the phenomenon of disruptive innovation.
Find out:
When it is right not to listen to customers.
When to invest in developing lower-performance products that promise lower margins.
When to pursue small markets at the expense of seemingly larger and more lucrative ones.

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Example - Fiscal payment solutions in Croatia
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* Category Power - n. of competitors - 20+, 4 big
* Company Power - recognized brand, admired organization, best & smartest experts - HT/Etr.
* Market Power - n. of customers/clients - 7000 terminals, 15 % market share
* Offer Power - Wikipedia is an example - mobile, compact, saas cloud
* Execution Power - capability to make superior product, market it and sell it successfully

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A category killer
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A category killer is a product, service, brand, or company that has such a distinct sustainable competitive advantage that competing firms find it almost impossible to operate (profitably) in that industry. The existence of a category killer eliminates almost all market entities, whether real or virtual. Many existing firms leave the industry, thereby increasing the industry's concentration ratio.

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Killer application
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In other words, consumers would buy the (usually expensive) hardware just to run that application. A killer app can substantially increase sales of the platform on which it runs. One of the first examples of a killer application is generally agreed to be the VisiCalc spreadsheet for the Apple II Computer in the early 1980's. VisiCalc was single "reason enough for owning a computer". It was a great sales booster for Apple II in the early 1980s'. The first generally agreed example of a "killer app" in gaming is Space Invaders, released for arcades in 1978.



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Innovation is anything that creates favourable separation between you and your competitirs.

Separation..
Differentiate & Neutralise & Optimise your products and company


This list consists of a set of issues around which go-to-market plans are built, each of which incorporates a chasm-crossing factor, as follows:
• Target customer/market
• Compelling reason to buy Whole product/service
• Partners and allies
• Distribution
• Pricing
• Competition
• Positioning
• Next target customer


The game is not over, of course.