Zone To Win

Zone To Win Plot Summary

Introduction

In today's rapidly evolving business landscape, established enterprises face a profound challenge: how to respond effectively to waves of disruptive innovation that threaten existing business models while simultaneously pursuing new growth opportunities. This challenge creates what Geoffrey Moore calls a "crisis of prioritization" - a situation where companies must make difficult resource allocation decisions between maintaining current businesses and investing in future ones. Traditional approaches to portfolio management have proven inadequate, with the sobering reality that 56 once-dominant companies completely failed to catch the next wave of innovation in their industries. The framework presented offers a practical solution to this crisis through "zone management" - a system that divides enterprise activities into four distinct operational zones, each with its own management approach, metrics, and objectives. By separating disruptive innovation from sustaining innovation, and revenue performance from enabling investments, companies can effectively play both offense (proactively disrupting others) and defense (responding to disruption). This structured approach enables established organizations to leverage their considerable assets - global distribution, brand recognition, customer relationships, and financial resources - while overcoming the inertial forces that typically prevent them from successfully navigating category disruptions.

Chapter 1: The Crisis of Prioritization in the Age of Disruption

The modern business environment is characterized by two defining elements: speed and disruption. Wave after wave of next-generation technology continually transforms business landscapes, creating a critical imperative for established enterprises. Companies must either play offense by catching the next wave as a disruptor or play defense when their core franchise comes under attack. Either scenario triggers a crisis of prioritization that has proven exceptionally difficult to resolve. Disruptive innovations create secular expansions in spending, typically generating growth rates exceeding 20% for five to seven years. For established companies, successfully catching these waves can dramatically increase market valuations. Consider how Apple's valuation increased 2,378% over a decade by catching three new waves (digital music, smartphones, and tablets), or how Amazon's grew 1,197% largely from cloud computing. These returns dwarf the modest growth seen in mature categories, where valuations typically oscillate around a mean regardless of operational excellence. The paradox confronting established enterprises is that adding a net new line of business to an existing portfolio creates intense resource competition. The battle centers particularly on go-to-market functions - sales, marketing, professional services, and partner development. Marketing and selling disruptive innovations are radically inefficient compared to established lines of business. They require creating new customer budgets, developing new relationships, and employing different selling motions. This inefficiency means that scaling a disruptive innovation can easily consume 10% or more of an enterprise's go-to-market resources before reaching a tipping point. Herein lies the fundamental prioritization crisis: established companies must deliver on two conflicting objectives simultaneously. They must maintain established franchises while optimizing for earnings growth, while also periodically adding a high-growth, net new line of business. Most companies attempt to solve this by "peanut-buttering" their resources across multiple innovation initiatives while favoring established businesses. This approach guarantees failure. The key insight is counterintuitive but essential: choose one disruptive innovation to pursue, not two or three. As the author states, "If your company could catch a new wave just once in a decade, it would be world-class." Playing defense presents an equally challenging prioritization crisis. When disruption threatens a core business, companies must decide whether to modernize their operating model, change their business model, or attempt both simultaneously. The essential insight is that established enterprises cannot reasonably expect to change their core business model entirely. There is simply too much inertial momentum in internal systems, customer relationships, partner ecosystems, and investor expectations. Instead, companies must race to modernize their existing operating model while simultaneously accelerating efforts to catch a different wave of disruption in another category.

Chapter 2: The Four Zones Framework: Performance, Productivity, Incubation, Transformation

The Four Zones framework provides a structured approach to managing the crisis of prioritization that occurs during disruptive innovation. This framework divides enterprise management into four distinct operational zones, each with its own governance model, operating cadence, and success metrics. The zones are designed to prevent the methods and culture of one area from contaminating the effectiveness of another. At its core, the framework separates along two critical dimensions. First, it distinguishes between sustaining innovation (improving existing business models) and disruptive innovation (creating new business models). Second, it separates revenue performance (delivering financial commitments) from enabling investments (building future capabilities). These two divisions create four zones that align with different investment horizons: Performance (Horizon 1), Productivity (Horizon 1), Incubation (Horizon 3), and Transformation (Horizon 2). The power of this framework lies in its ability to disentangle conflicting priorities. Each zone operates according to its own local playbook rather than being subjected to a one-size-fits-all approach that invariably favors established businesses. This separation allows companies to pursue multiple objectives simultaneously without forcing them to compete directly for the same resources. For example, the performance metrics appropriate for an established product line (margin, market share) would suffocate a disruptive innovation, which requires different measures (adoption rate, ecosystem development). This zoning approach creates clarity about resource allocation decisions. During stable periods, the performance zone funds the entire operation, the productivity zone improves efficiency, and the incubation zone develops future options. During transformation, whether offensive or defensive, priorities shift dramatically. On offense, the transformation zone takes precedence, followed by performance, productivity, and incubation in that order. On defense, when repelling a disruptive attack, the same priorities apply but with focus on modernizing an existing business rather than scaling a new one. The framework addresses common management errors that doom transformation efforts. These include overrotating to the performance zone (prioritizing quarterly results above all else), coasting in the productivity zone (failing to extract enough resources from non-core activities), mistaking incubation for transformation (spreading resources too thin across multiple options), failing to implement a transformation zone (attempting multiple transformations simultaneously), and falling prey to denial when faced with disruption (continuing business as usual until it's too late).

Chapter 3: Performance Zone: Managing Established Businesses for Operational Excellence

The performance zone serves as the engine room for operating established franchises on proven business models. It generates virtually all the revenue and more than 100% of the profits for the enterprise. This zone focuses on material revenue performance derived from established businesses with cyclical rather than secular growth, typically oscillating around 3-4% annually in mature categories. At the heart of this zone lies the performance matrix - an organizational model optimized for managing a portfolio of established businesses across a shared go-to-market structure. This matrix segments execution into rows (business lines operating at scale) and columns (go-to-market channels), with each cell representing the intersection of a product line and sales channel. The rule of scale requires both rows and columns to represent at least 10% of total enterprise revenue, creating a manageable matrix of typically 3-6 rows intersecting with 3-6 columns. The governance model of the performance zone centers on joint accountability. Every cell in the performance matrix has two owners - a row owner and a column owner - who are jointly responsible for achieving that cell's metrics. These metrics primarily focus on bookings, revenues, and contribution margins, with additional attention to customer satisfaction and market share as warranted. This joint accountability is formalized during the annual planning process, where both owners must sign off on a single set of metrics, which are then reviewed and approved by senior leadership. The operating cadence of the performance zone follows a disciplined execution rhythm. It begins with the annual operating plan, subdivided by quarters for quarterly business reviews. These reviews focus on areas significantly behind plan, asking whether to double down on current efforts or change course. Monthly status checks help detect and address problems quickly, while weekly commits ensure nothing slips for more than a week without escalation. This disciplined approach helps maintain momentum even when individual cells face challenges. When playing offense - adding a net new line of business to the performance matrix - this zone faces enormous pressure. The fledgling business must scale to material size within a finite window while the zone simultaneously delivers on annual targets for established businesses. The correct but counterintuitive response is to prioritize the transformation above making the number. This requires reallocating resources, adjusting success metrics, and providing air cover for the new initiative. The professional analogy is how a sports league supports an expansion team - every existing team sacrifices resources to launch the new effort, recognizing that eventually everyone will profit from the addition. When playing defense - responding to a disruptive attack on an established business - the performance zone must follow three key principles. First, never attempt to disrupt yourself; your greatest asset is the inertial momentum of your installed base. Second, focus innovation on neutralization rather than differentiation; you need to co-opt enough of the disruptive technology to remain viable, not lead with it. Third, appropriate whatever assets you have in the incubation zone that pertain to the new technology and put them directly in service to the established business under attack. Microsoft's response to Netscape Navigator with Internet Explorer exemplifies this approach - integrating a browser into Windows at no extra charge to blunt Netscape's disruption.

Chapter 4: Productivity Zone: Enabling Efficiency and Effectiveness through Shared Services

The productivity zone encompasses all enterprise resources that do not have direct accountability for revenue. Organized as shared services provided by discipline experts, this zone includes core corporate functions (Finance, Legal, IT), market-facing functions (Marketing, Customer Service), and supply chain functions (Engineering, Manufacturing). If the performance zone's job is to win the war at the top line, the productivity zone's job is to win the peace at the bottom line. This zone delivers value through three distinct propositions: regulatory compliance, improved efficiency ("doing things right"), and improved effectiveness ("doing the right things"). While most management teams understand that regulatory compliance warrants separate treatment, few recognize the importance of separating efficiency from effectiveness. This distinction is crucial because they require fundamentally different approaches. Efficiency is properly the province of systems - standardized services providing ongoing operational infrastructure like budgeting processes, payroll, and order processing. These systems should be standard, stable, and persistent - essentially public utilities where everyone follows the same rules to ensure an efficient platform. They should be centrally funded, and requests for exceptions should generally be declined since efficiency trumps effectiveness in a systems regime. Effectiveness, by contrast, is achieved through programs - services delivering specific outcomes to targeted users at specific times. These include promotional campaigns, lead generation activities, and training programs. Programs apply focused energy to change the inertial momentum of a target process. Unlike systems, programs should be funded by the organizations consuming their services through "controllable indirect expenses." This creates market dynamics where service providers must earn their keep by delivering value that service consumers are willing to pay for. A particularly valuable productivity service is the End of Life (EOL) program - essentially a hospice for expiring offerings. By transferring all revenues, responsibilities, and resources from performance zone owners to dedicated EOL managers, companies can free themselves from the drag of maintaining legacy products. This program eliminates sales compensation, develops clear sunset timelines, and manages customer transitions, releasing staff for reassignment according to a predetermined schedule. When playing offense in the productivity zone, the focus shifts dramatically to supporting transformation. Programs take precedence over systems as organizations race to meet urgent needs in hiring, acquisition integration, marketing to new audiences, and adapting operations. The challenge is that resources for these efforts cannot come from within the functions most directly involved - they must be reallocated across functions, requiring exceptional trust and collaboration among productivity zone leaders. When playing defense, the productivity zone must extract resources from traditional workflows to repurpose for modernization efforts. This requires applying the "Six Levers" framework: centralize governance under a single authority, standardize processes that have accumulated variations, modularize functions into component elements, optimize to eliminate waste, instrument with control systems to maintain quality, and only then consider outsourcing. The key insight is that resources must be extracted from talent-rich, mission-critical processes to have meaningful impact, even though this entails greater risk.

Chapter 5: Incubation Zone: Cultivating Disruptive Innovation for Future Growth

The incubation zone houses Horizon 3 investments - businesses built around disruptive innovations that are not yet producing material revenue but have the potential to do so in the future. This zone serves as a staging area for substantial ventures, allowing them to scale to roughly 1-2% of total corporate revenue (typically $100M+ for a $10B enterprise) before transitioning to the transformation zone for further scaling. For an offering to warrant investment in this zone, it must meet three stringent criteria: embody a disruptive innovation driving a 10X improvement in a critical performance metric; represent an opportunity with potential to scale to material size (10% of enterprise revenue); and constitute a net new line of business rather than an adjacency to an existing one. These criteria set a high bar, ensuring scarce resources go only to ventures with potential to create step-change increases in enterprise valuation. The governance model for this zone differs markedly from traditional corporate structures. Each venture operates as an Independent Operating Unit (IOU) with its own general manager and dedicated resources for product development, sales, and marketing. These IOUs are funded outboard of the annual planning calendar, based on milestone-driven venture funding rounds rather than fiscal year timelines. The overall zone is governed by a "venture board" that determines investment areas, approves business plans, allocates funding, and evaluates performance. Playing offense in the incubation zone closely resembles running a venture-backed startup. IOUs progress through defined milestones: validating technology, building minimum viable products, targeting beachhead markets, and scaling into adjacent segments. Success requires entrepreneurial leadership, typically from executives with startup experience rather than corporate careerists. The goal is to develop a sufficiently viable business to warrant transition to the transformation zone for full-scale deployment. Since the transformation zone can only process one business at a time and transformations take 2-3 years to complete, most incubated businesses must pursue alternative exits. These include assimilation into existing product lines (providing a "midlife kicker" to established businesses), postponement for a future transformation opportunity, spin-out with external private capital, sale to another company, or shutdown. The key insight is that space in the incubation zone is precious, and all startups have a sell-by date - keeping underperforming ventures alive too long leaves the enterprise with a second-rate innovation portfolio. When playing defense, the incubation zone must realign with new priorities focused on neutralizing disruption to an established franchise. Any technology that can help modernize the threatened operating model must be made immediately available, regardless of impact on the incubating business. This often means revamping roadmaps, reassigning technical talent, and potentially derailing promising ventures. While not the outcome anyone envisioned, disruption creates collateral damage that cannot be avoided. Common mistakes in managing this zone include separating technology development from market development, sharing resources between IOUs and the performance matrix, burdening incubating businesses with enterprise obligations, assigning the wrong leadership, failing to shut down unqualified projects, and funding through the annual operating plan. Each error undermines the zone's ability to develop viable candidates for transformation. The key takeaway is that openings in the incubation zone should be treated as scarce resources and reserved only for A-players pursuing A-opportunities.

Chapter 6: Transformation Zone: Scaling New Businesses to Material Size

The transformation zone exists to free an enterprise's future from the pull of its past. Unlike the other three zones, it is a transitory institution that activates only when needed to respond to category disruption. Its purpose is to scale a disruptive business to material size (on offense) or modernize an established business under attack (on defense). In either scenario, this zone creates the classic Horizon 2 dilemma: resources must be reallocated to initiatives that dramatically underdeliver on short-term performance metrics before turning the corner to superior returns. The governance of this zone centers directly on the CEO and executive staff. During periods of transformation, the CEO's role shifts dramatically from senior manager to extraordinary leader. Rather than delegating transformation responsibility, the CEO must personally lead the effort, making it the first topic on virtually every executive staff agenda. The operative question becomes: "What can any of us do right now to further accelerate progress?" When playing offense, the goal is to add a new row to the performance matrix by scaling a business from the incubation zone to material size (10% or more of total enterprise revenue). This process requires dramatic resource reallocation - promoting the general manager to performance matrix row owner, charging sales channels with delivering nonlinear growth, prioritizing professional services for the new business, and potentially pursuing high-multiple acquisitions to accelerate scaling. These changes create substantial challenges: scarce domain expertise, out-of-band expense ratios, misaligned compensation systems, and account management resistance. To overcome these challenges, the CEO must pull specific levers: making the new business the headline in corporate messaging, doubling sales coverage in key vertical markets, granting special terms for marquee customers, adding professional services capacity, funding additional engineering, and supporting special deals with supply chain partners. In parallel, all three other zones must make significant sacrifices. The performance zone must allocate up to 10% of go-to-market capacity while still achieving other metrics; the productivity zone must reengineer processes to free resources; and the incubation zone must accept that access to transformation is closed for the foreseeable future. When playing defense, the transformation zone implements a three-step strategy: neutralize first, optimize second, differentiate third. Neutralization involves co-opting the disruptor's most visible features and bolting them onto current offerings - a kludge, perhaps, but the goal is to get to "good enough, fast enough." Optimization follows by extracting costs from the infrastructure model to maintain viable margins despite price pressure. Differentiation comes last, focusing on revitalizing the business model while reaffirming the core value proposition. This sequence is critical - organizations that continue business as usual or race to differentiate without neutralizing first invariably fail. Common transformation failures include undertaking multiple transformations simultaneously, delegating leadership responsibility, attempting to play both offense and defense at the same time, allowing competing priorities, and permitting incomplete executive alignment. The most important principles to remember are: transformation takes precedence over making the number; attempting two transformations simultaneously guarantees failure for both; and every leader and function must make transformation success their top priority - without exception. The transformation zone represents the CEO zone - the domain where leadership, not management, determines outcomes. On offense, it offers the opportunity to springboard the enterprise into a new dimension, as cloud computing did for Amazon or smartphones did for Apple. On defense, it provides the chance to reposition a franchise for a new lease on life, as committing to software-as-a-service did for Adobe or web content management did for Documentum.

Chapter 7: Playing Zone Offense and Defense: Strategic Applications

Implementing zone management successfully requires careful integration into the annual planning process. This installation begins with "zoning your orgs" - assigning every organization and major initiative to one and only one zone. This choice defines the contract between the entity and the enterprise, establishing which playbook applies to its operations. While leaders can create mini-zone structures within their domains, they must present a unified interface to the rest of the enterprise. The next step involves locking in the performance matrix - clarifying and formalizing the structure of rows (product lines) and columns (sales channels) that form the foundation of the enterprise. The budgeting process begins with senior leadership publishing a pro forma matrix with targets already set, followed by row and column owners allocating these targets to individual cells. The resulting negotiations establish joint accountability for each cell's metrics, creating a dashboard that guides quarterly business reviews and performance compensation. Activating the productivity zone requires fighting the "battle of the bulge" through zero-based budgeting. Each organizational unit identifies the programs it will conduct, negotiating deliverables and funding with program sponsors. Everything else becomes corporate overhead, divided between compliance obligations and enterprise systems. Annual reengineering goals should focus on doing more with less by leveraging technology and innovation, rather than simply cutting budgets arbitrarily. The incubation zone must be fenced off from the annual planning process. While the size of the incubation fund and composition of the venture board are established during planning, actual IOU funding follows a milestone-based venture cadence rather than the calendar. This separation protects emerging businesses from being evaluated by inappropriate metrics or subjected to unnecessary budget cycles. Finally, the planning process must determine the status of the transformation zone as either inactive (no disruption currently engaged), proactive (playing offense), or reactive (playing defense). This declaration dramatically affects how the remainder of planning unfolds. If inactive, the process simply iterates the performance and productivity zones to closure. If playing offense, planning adds a new row to the performance matrix, sets pro forma numbers, determines required resources, and ring-fences this investment. If playing defense, planning identifies which rows are being disrupted, determines neutralization objectives, resources these efforts, resets performance metrics, and iterates the remaining matrix to closure. The case studies of Salesforce and Microsoft illustrate how these principles apply in practice. Salesforce, playing offense, activated its transformation zone to scale its Marketing Cloud business while maintaining discipline in its performance matrix of Sales Cloud, Service Cloud, Platform, and geographical theaters. Microsoft, playing defense, implemented the "neutralize first, optimize second, differentiate third" strategy to counter disruptions to Windows, Office, and server businesses from mobile computing, cloud services, and collaborative applications. Both companies demonstrate that while zone management provides valuable frameworks, success ultimately depends on leadership, culture, and execution. The four zones approach provides a structured way to manage the inherent tensions between sustaining existing businesses and pursuing disruptive innovation. By segregating activities into appropriate zones, enterprises can finally overcome the crisis of prioritization that has derailed so many transformation efforts. Whether playing offense to catch the next wave or defense to repel a disruptive attack, this playbook offers a path forward that leverages the considerable assets of established enterprises while freeing them from the inertial forces that typically prevent successful transformation.

Summary

The essence of zone management lies in a single powerful insight: established enterprises can overcome the crisis of prioritization by creating independent but interoperating zones that separate disruptive from sustaining innovation, and revenue performance from enabling investments. This framework allows companies to fulfill their dual imperative - maintaining existing businesses while periodically adding new ones - without falling into the trap of trying to do everything at once. The zone to win approach represents a fundamental shift in how enterprises respond to disruption. Rather than attempting the impossible task of changing core business models or spreading resources too thinly across multiple initiatives, companies can focus their transformation efforts where they matter most - either scaling one new business to material size or modernizing one existing business under attack. This disciplined approach turns disruption from an existential threat into a strategic opportunity, allowing established enterprises to leverage their considerable assets - global reach, brand recognition, financial resources - to outperform startups in the long run. By implementing this playbook, even the largest organizations can regain the focus and agility needed to not merely survive but thrive in an age of continuous disruption.

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Geoffrey A. Moore

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