Strategy and Category—In Pursuit of Growth

The Art of Managing series is dedicated to exploring the critical issues we face in guiding our firms and teams to success in today’s volatile world.

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I reference Geoffrey Moore’s 2011 book, Escape Velocity regularly in my management writing because it is in my opinion the most relevant and useful book on strategy in the past few years. (I hold Rumelt’s Good Strategy, Bad Strategy in high regard as well.)

Moore takes on THE major strategy issue faced by almost every successful organization with a bit of history behind it…dealing with the need to escape the gravitational pull of the past in search of new sources of growth.

It turns out, most of us aren’t much good at pulling this off…thus the tremendous volume of once good and now gone organizations. (One only has to look at the news to see the fortunes of category creators…the struggle of emerging firms and the painful struggle of once successful organizations to survive. For the latter, think Radio Shack, which did a remarkable job lampooning its irrelevance in a Super Bowl commercial last week.)

Chances are your organization has plans to “change” and as part of your strategy, you have the challenge to identify and capitalize on new sources of growth. Those concepts make for pretty slides and create head-nodding executive and boardroom presentations. Actually doing the work is as I’m sure you know, far from simple.

Enter Moore. He offers some priceless assistance in turning those inside-out strategy discussions and budget-driven investment plans into outside-in, investor and future focused discussions and actions.

Along the way, he proposes a Hierarchy of Powers (HOP), a framework of frameworks that articulates where firms can build or leverage “power.” The framework is quite simple and quite sophisticated all at the same time. The hierarchy is: category power, company power, market (customer segment) power, offer power and execution power. Category power is the focal point initially, and the subject of Chapter 2, which is frankly an MBA course in strategy all alone.

A Few Key Takeaways on Category Power:

1. Category power is the number one predictor of financial performance. Participating in growth categories harnesses secular growth that once gone is not easily replaced. The rest of us are left with cyclical growth (mature markets) or low or no growth created through consolidation and cost cutting (declining markets).

2. Helping our firms move successfully into growth categories is one of our core tasks as managers and executives, yet much of how we manage, plan, budget and commit gets in the way of moving from mature categories into newer and foreign growth categories. This gravitational pull is the enemy of finding new growth.

3. In support of the prior point, how we shepherd (measure, manage, structure, account for) growth categories is different than how we manage mature or declining businesses. It takes extraordinary effort and a different set of rules to enter and succeed in a growth category

4. Categories should be viewed and managed like a portfolio and most of our portfolios are out of balance, with too much emphasis in slow-growth, mature or worse yet, declining markets and no credible source of emerging or growth businesses. We’ve got to balance the portfolio or suffer the consequences.

5. Leveraging Category Power is the number one way to achieve Escape Velocity from the shackles of our past.

The Bottom-Line for Now:

The words around change and new and growth are always easy, but once we blend people, culture, and operating practices into the mix, everything about change becomes very, very difficult. This simple concept of shifting into newer and higher growth categories as legacy businesses sustain or decline is in fact profoundly difficult for most every firm and management team, yet this is a key task. The dominant logic that delivered success in the past no longer hunts in this foreign land. We need new ways, new people with new skills and agreement on the right measures for the right situation.

This task of helping your firm find and move into new categories defines the essence of your role as a senior manager. The task will draw upon all of your skills to promote vision, motivate change and foment learning. It’s hard, good and essential work. And there are no books with the answers, but Moore certainly helps us with the questions.

Big topic, small post. I’ll be back with more.

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Additional Resources:

Geoffrey Moore speaking on Escape Velocity at Stanford (55 minutes well invested!)

My Leadership Caffeine podcast interview with Geoffrey.

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