BizThoughts

Book: Built to Last: Successful Habits of Visionary Companies
Author: Jim Collins

The Best of the Best

Visionary Companies

"Visionary companies are premier institutions… in their industries, widely admired by their peers and having a long track record of making a significant impact on the world around them. The key point is that a visionary company is an organization", not an individual or product.

Despite facing setbacks and mistakes, "visionary companies display a remarkable resiliency, an ability to bounce back from adversity. As a result, visionary companies attain extraordinary long-term performance."

Twelve Shattered Myths

• Myth 1: It takes a great idea to start a great company.

  "Few of the visionary companies began life with a great idea. In fact, some began life without any specific idea and a few even began with outright failures."

• Myth 2: Visionary companies require great and charismatic visionary leaders.

  "A charismatic visionary leader is absolutely not required for a visionary company… They concentrated more on architecting an enduring institution than on being a great individual leader."

• Myth 3: The most successful companies exist first and foremost to maximize profits.

  "Visionary companies pursue a cluster of objectives, of which making money is only one—and not necessarily the primary one. …They're equally guided by a core ideology."

• Myth 4: Visionary companies share a common subset of "correct" core values.

  "There is no 'right' set of core values for being a visionary company. … The crucial variable is not the content of a company's ideology, but how deeply it believes its ideology."

• Myth 5: The only constant is change.

  "A visionary company almost religiously preserves its core ideology. … [However, they] display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideals."

• Myth 6: Blue-chip companies play it safe.

  "Visionary companies may appear straitlaced and conservative to outsiders, but they're not afraid to make bold commitments to 'Big Hairy Audacious Goals' (BHAGs)."

• Myth 7: Visionary companies are great places to work, for everyone.

  "Only those who 'fit' extremely well with the core ideology and demanding standards of a visionary company will find it a great place to work."

• Myth 8: Highly successful companies make their best moves by brilliant and complex strategic planning.

  "Visionary companies make some of their best moves by experimentation, trial and error, opportunism, and—quite literally—accident."

• Myth 9: Companies should hire outside CEOs to stimulate fundamental change.

  "Home-grown management rules at the visionary companies to a far greater degree than at comparison companies."

• Myth 10: The most successful companies focus primarily on beating the competition.

  "Visionary companies focus primarily on beating themselves."

• Myth 11: You can't have your cake and eat it too.

  "Visionary companies do not [believe in the] purely rational view that says you can have either A OR B, but not both. …They embrace the… paradoxical view that allows them to pursue both A AND B at the same time."

• Myth 12: Companies become visionary primarily through "vision statements."

  "Creating a statement can be a helpful step… but it is only one of thousands of steps in a never-ending process."

Clock Building, Not Time Telling

"Having a great idea or being a charismatic visionary leader is 'time telling'; building a company that can prosper far beyond the presence of any single leader and through multiple product life cycles is 'clock building'."

The Myth of the "Great Idea"

"Few of the visionary companies in our study can trace their roots to a great idea or fabulous initial product." Some began "with outright failures."

Waiting for "The Great Idea" Might Be a Bad Idea

If you want to start "a visionary company but have not yet taken the plunge because you don't have a 'great idea,' we encourage you to lift from your shoulders the burden of the great-idea myth."

The Company Itself is the Ultimate Creation

"Never, never, never give up. But what to persist with? Their answer: The company. Be prepared to kill, revise, or evolve an idea… but never give up on the company."

The Myth of the Great and Charismatic Leader

"A high-profile, charismatic style is absolutely not required… Perhaps the continuity of superb individuals atop visionary companies stems from the companies being outstanding organizations, not the other way around."

An Architectural Approach: Clock Builders at Work

"The evidence suggests to us that the key people at formative stages of the visionary companies had a stronger organizational orientation than in the comparison companies, regardless of their personal leadership style."

The Message for CEOs, Managers, and Entrepreneurs

"If you're involved in building and managing a company… think less in terms of being a brilliant product visionary or seeking the personality characteristics of charismatic leadership, and to think more in terms of being an organizational visionary and building the characteristics of a visionary company."

"Bill Hewlett and Dave Packard's ultimate creation wasn't the audio oscilloscope or the pocket calculator. It was the Hewlett-Packard Company and the HP Way."

"If you're a high-profile charismatic leader, fine. But if you're not, then that's fine, too, for you're in good company right along with those that built companies like 3M, P&G, Sony, Boeing, HP, and Merck. Not a bad crowd."

No "Tyranny of the OR"

"The 'Tyranny of the OR' pushes people to believe that things must be either A OR B, but not both. …Highly visionary companies liberate themselves with the 'Genius of the AND'—the ability to embrace both… at the same time."

More Than Profits

"A fundamental element… of a visionary company is a core ideology—core values and sense of purpose beyond just making money—that guides and inspires people throughout the organization and remains relatively fixed for long periods of time."

Pragmatic Idealism (No "Tyranny of the OR")

Visionary companies aim for "both high ideals and pragmatic self-interest."

Core Ideology: Exploding the Profit Myth

"We did not find 'maximizing shareholder wealth' or 'profit maximization' as the dominant driving force or primary objective through the history of most of the visionary companies."

Is There a "Right" Ideology?

"No single [value] shows up consistently across all the visionary companies. …The critical issue is… whether it [even] has a core ideology."

Words or Deeds?

"Visionary companies don't merely declare an ideology; they also take steps to make the ideology pervasive throughout the organization and transcend any individual leader."

Guidelines for CEOs, Managers, and Entrepreneurs

Core Ideology = Core Values + Purpose

Core Values

"The organization's essential and enduring tenets—a small set of general guiding principles; not to be confused with specific cultural or operating practices; not to be compromised for financial gain or short-term expediency."

Purpose

"The organization's fundamental reasons for existence beyond just making money—a perpetual guiding star on the horizon; not to be confused with specific goals or business strategies."

"Profitability is a necessary condition for existence and a means to more important ends, but it is not the end in itself for many of the visionary companies. Profit is like oxygen, food, water, and blood for the body; they are not the point of life, but without them, there is no life."

"Visionary companies like Motorola don't see it as a choice between living their values or being pragmatic; they see it as a challenge to find pragmatic solutions and behave consistent with their core values."

"In short, we did not find any specific ideological content essential to being a visionary company. Our research indicates that the authenticity of the ideology and the extent to which a company attains consistent alignment with the ideology counts more than the content of the ideology."

"In a visionary company, the core values need no rational or external justification. Nor do they sway with the trends and fads of the day. Nor even do they shift in response to changing market conditions."

Preserve the Core/Stimulate Progress

"A visionary company carefully preserves and protects its core ideology, yet all the specific manifestations of its core ideology must be open for change and evolution. … It is absolutely essential not to confuse core ideology with culture, strategy, tactics, operations, policies, or other noncore practices."

Drive for Progress

"Core ideology… works hand in hand with a relentless drive for progress that impels change and forward movement in all that is not part of the core ideology."

An Internal Drive

"The drive to go further, to do better, to create new possibilities needs no external justification. …The drive for progress is never satisfied with the status quo, even when the status quo is working well."

Preserve the Core and Stimulate Progress

"A visionary company does not seek mere balance between core and progress; it seeks to be both highly ideological and highly progressive at the same time, all the time."

Key Concepts for CEOs, Managers, and Entrepreneurs

This framework has two layers. "You can think of the top layer as a set of guiding intangibles that are necessary requirements. … To become a visionary company requires translating these intangibles down into the second layer."

"Intentions are all fine and good, but it is the translation of those intentions into concrete items—mechanisms with teeth—that can make the difference between becoming a visionary company or forever remaining a wannabe."

"If you are involved in building and managing an organization, the single most important point to take away from this book is the critical importance of creating tangible mechanisms aligned to preserve the core and stimulate progress. This is the essence of clock building."

Big Hairy Audacious Goals

Visionary companies have a "commitment to challenging, audacious—and often risky—goals and projects toward which a visionary company channels its efforts."

BHAGs: A Powerful Mechanism to Stimulate Progress

"There is a difference between merely having a goal and becoming committed to a huge, daunting challenge."

A Clear—and Compelling—Goal

"A true BHAG is clear and compelling and serves as a unifying focal point of effort—often creating immense team spirit. It [also] has a clear finish line."

Commitment and Risk

"A goal cannot be classified as a BHAG without a high level of commitment to the goal."

The "Hubris Factor"

"Highly visionary companies seem to have self-confidence bordering on hubris."

The Goal, Not the Leader (Clock Building, Not Time Telling)

"The key mechanism at work here is not charismatic leadership. … The goal itself [is] the [key] motivating mechanism."

BHAGs and the "Postheroic Leader Stall"

"Corporations regularly face the dilemma of how to maintain momentum after the departure of highly energetic leaders (often founders)."

Guidelines for CEOs, Managers, and Entrepreneurs

A BHAG should be:

• "So clear and compelling that it requires little or no explanation."
• "Fall well outside your comfort zone."
• "So bold and exciting… that it would continue… even if the organization's leaders disappeared."
• Inherently dangerous enough "that, once achieved, an organization can stall and drift into the 'we've arrived' syndrome."
• "Consistent with a company's core ideology."

"A BHAG engages people—it reaches out and grabs them in the gut. It is tangible, energizing, highly focused. People 'get it' right away; it takes little or no explanation."

"As in the Philip Morris case, BHAGs are bold, falling in the gray area where reason and prudence might say 'This is unreasonable,' but the drive for progress says, 'We believe we can do it nonetheless.' Again, these aren't just 'goals'; they are Big Hairy Audacious Goals."

"The BHAGs looked more audacious to outsiders than to insiders. The visionary companies didn't see their audacity as taunting the gods. It simply never occurred to them that they couldn't do what they set out to do."

Cult-Like Cultures

Visionary companies are "great places to work for only those who buy in to the core ideology; those who don't fit with the ideology are ejected like a virus." This also helps to preserve the core.

"Ejected Like a Virus!"

"Visionary companies tend to be more demanding of their people than other companies, both in terms of performance and congruence with the ideology. … Joining these companies [is like] joining an extremely tight-knit group or society. And if you don't fit, you'd better not join."

The Message for CEOs, Managers, and Entrepreneurs

"Unlike many religious sects or social movements which often revolve around a charismatic cult leader (a 'cult of personality'), visionary companies tend to be cult-like around their ideologies. …Creating an environment that reinforces dedication to an enduring core ideology is clock building."

"A cult-like culture can be dangerous and limiting if not complemented with the other side of the yin-yang. Cult-like cultures, which preserve the core, must be counterweighted with a huge dose of stimulating progress."

"Ideological control preserves the core while operational autonomy stimulates progress."

"'Visionary,' we learned, does not mean soft and undisciplined. Quite the contrary. Because the visionary companies have such clarity about who they are, what they're all about, and what they're trying to achieve, they tend to not have much room for people unwilling or unsuited to their demanding standards."

"IBM attained its greatest success—and displayed its greatest ability to adapt to a changing world—during the same era that it displayed its strongest cult-like culture."

"The point of this chapter is not that you should set out to create a cult of personality. That's the last thing you should do."

Try a Lot of Stuff and Keep What Works

Visionary companies practice "high levels of action and experimentation—often unplanned and undirected—that produce new and unexpected paths of progress and enable visionary companies to mimic the biological evolution of species." This also helps to stimulate progress.

Corporations as Evolving Species

Visionary companies are stimulated by evolutionary progress, which is an "unplanned progress."

Darwin's Theory of Evolution Applied to Visionary Companies

"The central concept of evolutionary theory… is that species evolve by a process of undirected variation ('random genetic mutation') and natural selection. … Of course, all companies evolve to some degree. … [However,] visionary companies more aggressively harness the power of evolution."

Lessons for CEOs, Managers, and Entrepreneurs

"Here are five basic lessons for stimulating evolutionary progress in a visionary company:"

Give it a try—and quick!

"Do something. If one thing fails, try another. Fix. Try. Do. Adjust. Move. Act. No matter what, don't sit still."

Accept that mistakes will be made

"In order to have healthy evolution, you have to try enough experiments (multiply) of different types (vary), keep the ones that work (let the strongest live), and discard the ones that don't (let the weakest die)."

Take small steps

"If you want to create a major strategic shift in a company, you might try becoming an 'incremental revolutionary' and harnessing the power of small, visible successes to influence overall corporate strategy."

Give people the room they need

"When you give people a lot of room to act, you can't predict precisely what they'll do—and this is good. … [Also,] allow people to be persistent."

Mechanisms—build that ticking clock!

"Send a consistent set of reinforcing signals. … Good intentions alone simply won't cut it." You also need to provide incentives to reinforce their evolutionary progress.

"We like to describe the evolutionary process as 'branching and pruning.' The idea is simple: If you add enough branches to a tree (variation) and intelligently prune the deadwood (selection), then you'll likely evolve into a collection of healthy branches well positioned to prosper in an ever-changing environment."

"If well understood and consciously harnessed, evolutionary processes can be a powerful way to stimulate progress. And that's exactly what the visionary companies have done to a greater degree than the comparison companies."

"Although the invention of the Post-it note might have been somewhat accidental, the creation of the 3M environment that allowed it was anything but an accident."

"If we mapped 3M's portfolio of business units on a strategic planning matrix, we could easily see why the company is so successful ('Look at all those cash cows and strategic stars!'), but the matrix would utterly fail to capture how this portfolio came to be in the first place."

Home-Grown Management

Visionary companies practice "promotion from within, bringing to senior levels only those who've spent significant time steeped in the core ideology of the company." This also helps to preserve the core.

Promote From Within to Preserve the Core

"Visionary companies develop, promote, and carefully select managerial talent grown from inside the company… [They also] had better management development and succession planning."

The Message for CEOs, Managers, and Entrepreneurs

"Your company should have management development processes and long-range succession planning in place to ensure a smooth transition from one generation to the next."

"To have a Welch-caliber CEO is impressive. To have a century of Welch-caliber CEOs all grown from inside—well, that is one key reason why GE is a visionary company."

"Put another way, across seventeen hundred years of combined history in the visionary companies, we found only four individual cases of an outsider coming directly into the role of chief executive."

"As companies like GE, Motorola, P&G, Boeing, Nordstrom, 3M, and HP have shown time and again, a visionary company absolutely does not need to hire top management from the outside in order to get change and fresh ideas."

Good Enough Never Is

Visionary companies practice "a continual process of relentless self-improvement with the aim of doing better and better, forever into the future." This also helps to stimulate progress.

Mechanisms of Discontent

"Visionary companies thrive on discontent. They understand that contentment leads to complacency, which inevitably leads to decline."

Build for the Future (And Do Well Today)

"Visionary companies habitually invest, build, and manage for the long term", meaning multiple decades out.

Greater Long-Term Investment in the Visionary Companies

"Visionary companies invested for the future to a greater degree than the comparison companies." This includes investments in equipment, R&D, human resources, new technologies, and innovative management practices.

The Message for CEOs, Managers, and Entrepreneurs

"If you're involved in building and managing a company, we urge you to consider the following questions:"

• "What 'mechanisms of discontent' can you create that would obliterate complacency and bring about change and improvement from within, yet are consistent with your core ideology?"
• "What are you doing to invest for the future while doing well today?"
• "Does your company continue to build for the long-term even during difficult times?"
• "Do people in your company understand that comfort is not the objective—that life in a visionary company is not supposed to be easy?"

"Comfort is not the objective in a visionary company. Indeed, visionary companies install powerful mechanisms to create discomfort—to obliterate complacency—and thereby stimulate change and improvement before the external world demands it."

"Managers at visionary companies simply do not accept the proposition that they must choose between short-term performance or long-term success. They build first and foremost for the long term while simultaneously holding themselves to highly demanding short-term standards."

The End of the Beginning

"The essence of a visionary company comes in the translation of its core ideology and its own unique drive for progress into the very fabric of the organization—into goals, strategies, tactics, policies, processes, cultural practices, management behaviors, building layouts, pay systems, accounting systems, job design—into everything that the company does."

"Just because a company has a 'vision statement' (or something like it) in no way guarantees that it will become a visionary company! … A statement might be a good first step, but it is only a first step."

Lessons of Alignment for CEOs, Managers, and Entrepreneurs

1. Paint the Whole Picture

   "It's the nearly overwhelming set of signals and actions—signals to continually reinforce the core ideology and to stimulate progress—that lead to a visionary company."

2. Sweat the Small Stuff

   "Social cognition research shows that individuals pick up on all the signals in their work environment—big and small—as cues for how they should behave."

3. Cluster, Don't Shotgun

   Visionary companies "put in place pieces that reinforce each other, clustered together to deliver a powerful combined punch."

4. Swim in Your Own Current, Even if You Swim Against the Tide

   "Alignment means being guided first and foremost by one's own internal compass, not the [trends and buzzwords] of the outer world. Not that you should ignore reality [either, but your] ideology and ambitions should [be the] guide."

5. Obliterate Misalignments

   "Attaining alignment… is also a never-ending process of identifying and doggedly correcting misalignments."

6. Keep the Universal Requirements While Inventing New Methods

   "You should be working to implement as many methods as you can think of to preserve a cherished core ideology [as well as] to invent mechanisms that create dissatisfaction with the status quo and stimulate change, improvement, innovation, and renewal."

"Visionary companies do not rely on any one program, strategy, tactic, mechanism, cultural norm, symbolic gesture, or CEO speech to preserve the core and stimulate progress. It's the whole ball of wax that counts."

"The real question to ask is not 'Is this practice good?' but 'Is this practice appropriate for us—does it fit with our ideology and ambitions?"

Building the Vision

This is "a conceptual framework that defines vision, adds clarity and rigor to the vague and fuzzy set of concepts swirling around that trendy term, and gives practical guidance for articulating a coherent vision within an organization."

The Vision Framework



"A well-conceived vision consists of two major components—core ideology and an envisioned future. …It defines 'what we stand for and why we exist' that does not change (the core ideology) and sets forth 'what we aspire to become, to achieve, to create' that will require significant change and progress to attain (the envisioned future)."

Core Ideology

"Core ideology provides the bonding glue that holds an organization together as it grows, decentralizes, diversifies, expands globally, and attains diversity within."

Core Values

"The organization's essential and enduring tenets."

Core Purpose

"The organization's fundamental reason for being."

A Few Key Points on Core Ideology

"You cannot 'install' new core values or purpose into people. [They] are not something people 'buy in' to. People must already have a predisposition to holding them."

Envisioned Future

"Envisioned future… consists of two parts: a ten- to thirty-year 'Big Hairy Audacious Goal' and vivid descriptions of what it will be like when the organization achieves the BHAG."

Vision-level BHAG

"Setting the BHAG ten to thirty years into the future requires thinking beyond the current capabilities of the organization and current environmental trends, forces, and conditions. In creating such a vision-level BHAG we suggest thinking about the following four categories:"

• Target BHAGs can be quantitative or qualitative.
• Common-enemy BHAGs involve focusing on beating a common enemy—a David versus Goliath BHAG.
• Role-model BHAGs are particularly effective for up-and-coming organizations with bright prospects.
• Internal Transformation BHAGs tend to be effective in old or large organizations in need of internal transformation.

Vivid Descriptions

"Vivid description… is a vibrant, engaging, and specific description of what it will be like to achieve the BHAG. … Passion, emotion, and conviction are essential parts of" this.

A Few Key Points on Envisioned Future

"Don't confuse core ideology and envisioned future… We've found, therefore, that some executives make more progress by starting first with the vivid description and backing from there into the BHAG." Also, "beware the 'we've arrived' syndrome'—complacent lethargy that arises once an organization has achieved a BHAG and fails to replace it with another."

Putting It All Together

"Keep in mind that this dynamic[, preserving the core/stimulating progress], not vision or mission statements, is the primary engine of enduring great companies… If you do it right, you shouldn't have to do it again for at least a decade, and you can get on with the most important work: creating alignment."

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Book: The Tipping Point: How Little Things Can Make a Big Difference
Author: Malcolm Gladwell

The Three Rules of Epidemics

"Epidemics are a function of the people who transmit infectious agents, the infectious agent itself, and the environment in which the infectious agent is operating. And when an epidemic tips, when it is jolted out of equilibrium, it tips because something has happened, some change has occurred in one (or two or three) of those areas:"

• The Law of the Few
• The Stickiness Factor
• The Power of Context

The Law of the Few

"The success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts." These people can be classfied into:

• Connectors
• Mavens
• Salesmen

Connectors

• They are "people specialists".
• "They are the kinds of people who know everyone" and have a "knack [for] making friends and acquaintances."
• They cultivate and master "the 'weak tie,' a friendly yet casual social connection" while most people don't maintain acquaintance relationships.
• "…By having a foot in so many different worlds, they have the effect of bringing them all together."

Mavens

• They are "information specialists".
• They are active accumulators of information and knowledge experts.
• "They want to tell you about [their information] too. … They are socially motivated."
• "They know things that the rest of us don't. They read more magazines than the rest of us, more newspapers," etc.

Salesmen

• They are persuasion specialists.
• They have "the skills to persuade us when we are unconvinced of what we are hearing."
• They have mastered "non-verbal cues", "interactional synchrony", and "emotional contagion", all of which are subtle communication interactions shown to be strong in persuasion.

The Stickiness Factor

Simply: "in order to be capable of sparking epidemics, ideas have to be memorable and move us to action."

"If you paid careful attention to the structure and format of your material, you could dramatically enhance stickiness. … All you have to do is find it" through careful research and analysis. "Those who are successful at creating social epidemics do not just do what they think is right. They deliberately test their intuitions."

The Power of Context

"Epidemics are sensitive to the conditions and circumstances of the times and places in which they occur. … We are actually powerfully influenced by our surroundings, our immediate context, and the personalities of those around us. … With the slightest push—in just the right place—it can be tipped."

The Broken Windows Theory

"If a window is broken and left unrepaired, people walking by will conclude that no one cares and no one is in charge. Soon, more windows will be broken, and the sense of anarchy will spread from the building to the street on which it faces, sending a signal that anything goes. …Crime is contagious… it can start with a broken window and spread to an entire community."

Fundamental Attribution Error

"There are specific situations so powerful that they can overwhelm our inherent dispositions. …When it comes to interpreting other people's behavior, human beings invariably make the mistake of overestimating the importance of fundamental character traits and underestimating the importance of the situation and context." Basically, a person can act very differently, almost contradictory, from situation to situation.

Channel Capacity

"The amount of space in our brain for certain kinds of information. …We can only handle so much information at once. Once we pass a certain boundary, we become overwhelmed."

Social Channel Capacity

The amount of space in our brain for social information, like relationships, personal dynamics, group dynamics, etc.

Rule of 150

150 people is the average optimal size of a human community. "Keeping [groups] under 150 just seems to be the best and most efficient way to manage a group of people." Any larger, and communities tend to split apart naturally. This has happened throughout human history.

Transactive Memory

"When people know each other well, they create an implicit joint memory system… which is based on an understanding about who is best suited to remember what kinds of things." Members of a group tend to fall into roles and gain expertise in certain areas.

Book: Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers
Author: Geoffrey Moore

High-Tech Marketing Illusion

The Technology Adoption Life Cycle

Innovators

They "pursue new technology products aggressively. They sometimes seek them out even before a formal marketing program has been launched. This is because technology is a central interest in their life, regardless of what function it is performing. …Winning them over at the outset of a marketing campaign is key… because their endorsement reassures the other players in the marketplace that the product does in fact work."

Early Adopters

They "buy into new product concepts very early in their life cycle, but unlike innovators, they are not technologists. Rather they are people who find it easy to imagine, understand, and appreciate the benefits of a new technology, and to relate these potential benefits to their other concerns. Because [they] rely on their own intuition and vision, they are key to opening up any high-tech market segment."

Early Majority

They "share some of the early adopter's ability to relate to technology, but ultimately they are driven by a strong sense of practicality. … They want to see well-established references before investing substantially. Because there are so many people in this segment—roughly one-third of the whole adoption life cycle—winning their business is key to any substantial profits and growth."

Late Majority

They share "all the concerns of the early majority, plus one major additional one: Whereas people in the early majority are comfortable with their ability to handle a technology product… members of the late majority are not. …They wait until something has become an established standard… and tend to buy [from] large, well-established companies. Like the early majority, this group comprises about one-third of the total buying population…"

Laggards

They "simply don't want anything to do with new technology, for any variety of reasons, some personal and some economic. … Laggards are generally regarded as not worth pursuing…"

The High-Tech Marketing Model

"The way to develop a high-tech market is to work the curve left to right, focusing first on the innovators, growing that market, then moving on to the early majority, growing that market, and so on… In this effort, companies must use each 'captured' group as a reference base for going on to market to the next group. Thus, the endorsement of innovators becomes an important tool for developing a credible pitch to the early adopters, that of the early adopters to the early majority, and so on."

Illusion and Disillusion: Cracks in the Bell Curve

However, the High-Tech Marketing Model is not accurate. A more accurate model is this revised Technology Adoption Life Cycle. "Between any two psychographic groups [are] gaps [that] symbolize the… difficulty any group will have in accepting a new product if it is presented in the same way as it was to the group to its immediate left."

• The First Crack

  This is the gap between the innovators and early adopters. It "occurs when a hot technology product cannot be readily translated into a major new benefit."

• The Other Crack

  This is the gap between the early majority and the late majority. "When a product reaches this point in the market development, it must be made increasingly easier to adopt in order to continue being successful."

• Discovering the Chasm

  This is a wide chasm between the early adopters and the early majority. It often goes unnoticed because "the customer list and size of the order can look the same", though "the basis for the sale… is radically different."

  • Change Agent

    "What the early adopter is buying [is a] change agent. By being the first to implement this change in their industry, the early adopters expect to get a jump on the competition… They are also prepared to bear with the inevitable bugs and glitches."

  • Productivity Improvement

    "By contrast, the early majority want to buy a productivity improvement for existing operations. … They want technology to enhance, not overthrow, the established ways of doing business." And "they do not want to debug somebody else's product."

  Also, "early adopters do not make good references for the early majority. And because of the early majority's concern not to disrupt their organizations, good references are critical to their buying decisions."

High-Tech Marketing Enlightenment

First Principles

Marketing

Definition, in the context of this book: "Taking actions to create, grow, maintain, or defend markets."

Markets

Definition, in the context of this book:

• "A set of actual or potential customers"
• "for a given set of products or services"
• "who have a common set of needs or wants, and"
• "who reference each other when making a buying decision."

Early Markets

• Innovators: The Technology Enthusiasts

  They are "the first people to adopt any new technology [and] appreciate the technology for its own sake."

  • "First, and most crucially, they want the truth, and without any tricks."
  • "Second, wherever possible, whenever they have a technical problem, they want access to the most technically knowledgeable person to answer it."
  • "Third, they want to be first to get new stuff."
  • "Finally, they want everything cheap."
• Early Adopters: The Visionaries

  They are "that rare breed of people who have the insight to match an emerging technology to a strategic opportunity, the temperament to translate that insight into a high-visibility, high-risk project, and the charisma to get the rest of their organization to buy into that project."

  • "Visionaries are not looking for an improvement, they are looking for a fundamental breakthrough."
  • They "see the potential for an 'order-of-magnitude' return on investment and willingly take high [and potentially expensive] risks to pursue that goal."
  • They "are also effective at alerting the business community to pertinent technology advances."
  • They "are easy to sell but very hard to please. This is because they are buying a dream—which, to some degree, will always be a dream."
  • They want to "stay very close to the development train to make sure it is going in [their] direction", which can sometimes be "at odds with the entrepreneurial vendors who are trying to create a more universally applicable product."
  • They "are in a hurry. … As a result, they tend to exert deadline pressures… to drive the project faster."

The Dynamics of Early Markets

"To get an early market started requires:"

• "An entrepreneurial company with a breakthrough technology product that enables a new and compelling application,"
• "a technology enthusiast who can evaluate and appreciate the superiority of the product over current alternatives,"
• "and a well-heeled visionary who can foresee an order-of-magnitude improvement from implementing the new application."

"There are [also] numerous other scenarios where the early market does not… get a proper start."

• "The company simply has no expertise in bringing a product to the market." (i.e. insufficient capital, inexperienced sales & marketing, inappropriate distribution channels & positioning, etc.)
• "The company sells the visionary before it has the product." (i.e. vaporware)
• "Marketing falls prey to the crack between the technology enthusiast and the visionary by failing to discover" or articulate the compelling benefits.

Mainstream Markets

• Early Majority: The Pragmatists

  They are "the bulk of the market volume for any technology product."

  • They "are hard to characterize because they do not have the visionary's penchant for drawing attention to themselves."
  • They dislike risk. It connotes a "waste [of] money and time."
  • They "are loyal once won" and will make your product the company standard.
  • They "care about [the reputation of] the company", "the quality of the product", "the infrastructure of supporting products", "and the reliability of the service."
  • They tend to "communicate more with others like themselves within their own industry" instead of those outside their industry.
  • They "want to keep the sum total of their distribution relationships [and channels] to a minimum."
  • They "like to see competition" in the product's industry. They "want to buy from proven market leaders."
  • They "are reasonably price-sensitive. …In absence of any special differentiation, they want the best deal."
• Late Majority: The Conservatives

  They "represent approximately one-third of the total available customers [and] are rarely developed as profitably as they could be, largely because high-tech companies are not… in sympathy with them."

  • They "are against discontinuous innovations. …When they find something that works for them, they like to stick with it."
  • They purchase only "when products are extremely mature, market-share competition is driving low prices, and the products themselves can be treated as commodities."
  • They "like to buy preassembled packages, with everything bundled, at a heavily discounted price."
  • They prefer products that are "dedicated to a single function." They don't always like all-in-one products.
  • They "have enormous value to [the] high-tech industry [because they] extend the market for [non-cutting-edge] high-tech components."
  • They want a product package that provides a comprehensive, "whole solution" for their needs.
  • They prefer "a low-overhead distribution channel."

The Dynamics of Mainstream Markets

"To maintain leadership in a mainstream market, you must:"

• "At least keep pace with the competition. It is no longer necessary to be the technology leader, nor… have the very best product. But the product must be good enough."
• "Make at least a catch-up response [if] a competitor [makes] a major breakthrough."

There are also scenarios where you can "lose a mainstream market" such as:

• "Stop investing in the market [and] cease funding R&D to match the competition."
• Release an undesirable product. "Mainstream customers truly abhor discontinuous innovations."
• Be "overly focused on what [is] going on in early markets and [ignore] the underdeveloped elements in the mainstream."

Laggards: The Skeptics

• They make up "the last one-sixth of the Technology Adoption Life Cycle [and] do not participate in the high-tech marketplace, except to block purchases."
• They claim "that new systems, for the most part, don't deliver on the promises that were made at the time of their purchase."
• They usually attack individual products, so delivering a "whole product solution" is key.
• The "primary function of high-tech marketing in relation to skeptics is to neutralize their influence."

Back to the Chasm

"If we look deep into [the chasm between visionaries and pragmatists], we see four fundamental characteristics of visionaries that alienate pragmatists:"

• Visionaries tend to lack "respect for the value of colleagues' experiences. …They see themselves as smarter than their opposite numbers in competitive companies."
• Visionaries fail "to recognize the importance of existing product infrastructure." They would rather build "systems from the ground up."
• Visionaries take "greater interest in technology than in their industry."
• Pragmatists "tend to invest their… time in industry-specific forums discussing industry-specific issues."
• Pragmatists see visionaries as "people who come in and soak up all the budget for their pet projects."

The D-Day Analogy

Fighting Your Way into the Mainstream

Look back to "the Allied invasion of Normandy on D Day, June 6, 1944":

• "Our long-term goal is to enter and take control of a mainstream market (Eisenhower's Europe)"
• "that is currently dominated by an entrenched competitor (the Axis)."
• "We must assemble an invasion force comprising other products and companies (the Allies)."
• "Our immediate goal is to transition from an early market base (England)"
• "to a strategic target market segment in the mainstream (the beaches at Normandy)."
• "Separating us from our goal is the chasm (the English Channel)."
• "We are going to cross that chasm as fast as we can [and focus] directly and exclusively on the point of attack (D Day)."
• "Once we force the competitor out of our targeted niche markets (secure the beachhead),"
• "then we will move out to take over additional market segments (districts of France),"
• "on the way toward overall market domination (the liberation of Europe)."

In other words:

• Target "a very specific niche market… where you can dominate from the outset."
• "Force your competitors out of that market niche."
• "Use it as a base for" expanding your market offerings to the mainstream.

How to Start a Fire

To cross the chasm, the goal "is to create a pragmatist customer base that is referenceable," so they can "provide us access to other mainstream prospects," since pragmatists use references in their buying decisions. They "want to buy from market leaders." Therefore, "the only right strategy is to take a 'big fish, small pond' approach." Aiming for a niche market can lead "directly to you 'owning' a market."

Target the Point of Attack

A High-Risk, Low-Data Decision

"Crossing the chasm is a high-risk endeavor… with little or no useful hard information" because it is a new market. We should "acknowledge the lack of data as a condition of the process [and] understand that informed intuition, rather than analytical reason, is the most trustworthy decision-making tool to use."

Informed Intuition

This "involves conclusions based on isolating a few high-quality images—really, data fragments—that it takes to be archetypes of a broader and more complex reality." These are known as "characterizations" or personas.

Target-Customer Characterization: The Use of Scenarios

This is the process of creating characterizations and putting them in buying scenarios. "The idea is to create as many characterizations as possible, one for each different type of customer and application for the product." They should include relevant demographic and psychographic information.

Processing the Scenario: The Market Development Strategy Checklist

This "consists of rating each scenario against each of these issues" in two stages:

• In stage 1, "all scenarios are rated against four 'show-stopper' issues. Low scores in any one of these typically eliminates" as a potential target niche.
  • "Target customer"
  • "Compelling reason to buy"
  • "Whole product"
  • "Competition"
• In stage 2, all scenarios are rated against the nice-to-have issues. "Low scores can usually be overcome, given investment and time."
  • "Partners and allies"
  • "Distribution"
  • "Pricing"
  • "Positioning"
  • "Next target customer"

Committing to the Point of Attack

Scenarios that score high on the checklist make good candidates for a target niche. "You do not have to pick the optimal beachhead to be successful. What you must do is win the beachhead you have picked."

And Yes, Size Matters

Too large of a market can spread your sales resources too thin. "If you find the target segment is too big, subsegment it. … If the target segment is too small… augment it."

Assemble the Invasion Force

The Whole Product Concept

This solves the "gap between the marketing promise made to the customer… and the ability of the shipped product to fulfill that promise", by augmenting it with ancillary products & services.

Generic product

"This is what is shipped in the box and what is covered by the purchasing contract."

Expected product

"This is the product that the consumer thought she was buying when she brought the generic product."

Augmented product

"This is the product fleshed out to provide the maximum chance of achieving the buying objective."

Potential product

"This represents the product's room for growth as more and more ancillary products come on the market."

The Whole Product and the Technology Adoption Life Cycle

As the market moves from left to right of the technology adoption life cycle, the product must move from the inner to the outer circles. "Pragmatists evaluate and buy whole products."

Whole Product Planning

This is the simplified whole product model. In this model, there are only two categories:

• "What we ship" (the generic product)
• "Whatever else the customer needs in order to" arrive to a buying decision (the generic product + additions = the whole product)

Define the Battle

Creating the Competition

In early markets

• Competition comes from "alternative modes of operation."
• Competition also comes from "pragmatists who are vying with visionaries for dollars to fund projects."

In mainstream markets

• Competition is "defined by comparative evaluations of products and vendors within a common category."
• Competition, for pragmatists, are "a fundamental condition for purchase."
• Competition should be credible comparative products.

The Competitive-Positioning Compass

This diagram "is designed to create a value profile of target customers" to help you position your product with respect to your competitors.

"The horizontal dimension shows the range of buyer interest in and understanding of high-technology issues."

"The early market is dominated by specialists who… are more interested in technology… than in market standing. …The mainstream is dominated by generalists who are more interested in market leadership" than technology.

"The vertical dimension [shows] the buyer's attitude toward the proposed value proposition, ranging from skepticism to support."

In early markets, "the technology enthusiasts are the skeptical gatekeepers." In mainstream markets, "it is the pragmatists."

"The model also points to the fact that people who are supportive of your value proposition take an interest in your products and in your company."

In early markets, "basing communications on product or company strengths is a mistake."

"Even the most skeptical specialists are always on the lookout for new technology breakthroughs."

Win over skeptics by getting "them involved in understanding [your product's] technology."

"Skeptical generalists may not take an interest in an unproven company but are always interested in new market developments."

Win over generalists by showing them "that there is an emerging unmet market requirement" that your product covers.

The two "natural" marketing rhythms in high-tech are "developing the early market and developing the mainstream market."

"You develop an early market by demonstrating a strong technology advantage [and] product credibility, and you develop a mainstream market by demonstrating a market leadership advantage [and] company credibility."

"The 'chasm transition' represents an unnatural rhythm."

This "means moving from the familiar ground of product-oriented issues [and like-minded specialists] to the unfamiliar ground of market-oriented ones [and uninterested generalists]."

Positioning

What is positioning?

• It is "an attribute associated with a company or a product, and not as the marketing contortions that people go through to set up that association."
• It "is the single largest influence on the buying decision."
• It "exists in people's heads, not in your words."
• It is difficult to change once it's been established.

These are the "four fundamental stages in this process, corresponding to the four primary psychographic types":

Name it and frame it

"Potential customers cannot buy what they cannot name, nor can they seek out the product unless they know what category to look under."

Who for and what for

"Customers will not buy something until they know who is going to use it and for what purpose."

Competition and differentiation

"Customers cannot know what to expect or what to pay for a product until they can place it in some sort of comparative context."

Financials and futures

"Customers cannot be completely secure in buying a product until they know it comes from a vendor with staying power who will continue to invest in this product category."

The Positioning Process

This process has four components:

The claim

"Reduce the fundamental position statement… to a two-sentence format"

The evidence

"Develop sufficient evidence as to make any such disputation unreasonable."

Communications

"Identify and address the right audiences in the right sequence with the right versions of the message."

Feedback and adjustment

Make adjustments to your positioning as the competition responds to you.

The Claim: Passing the Elevator Test

"Can you explain your product in the time it takes to ride up an elevator? Venture capitalists use this all the time as a test of investment potential. If you cannot pass the test, they don't invest. … Here is a proven formula for getting all this down into two short sentences.":

• For (target customers, beachhead segment only)
• who are dissatisfied with (the current market alternatives)
• our product is a (new product category)
• that provides (key problem-solving capability).
• Unlike (the product alternative)
• we have assembled (key whole product features for your specific application).

The Shifting Burden of Proof

"By working your way up the left and then up the right of the compass, you can trace the evolution of desired evidence as the market evolves from the technology enthusiast to the visionary to the pragmatist and conservative."

Whole Product Launches

When marketing to the mainstream, the message is not "Look at my hot new product" but "Look at this hot new market."

"The message typically consists of a description of the emerging new market, fed by an emerging set of partners and allies, each supplying a part of the whole product puzzle, to the satisfaction of an increasingly visible and growing set of customers."

Launch the Invasion

The Structure of High-Tech Distribution

"There are currently a wide variety of distribution channels" for the high-tech market:

Direct sales

This "consists of a dedicated sales force in the direct employ of the vendor."

Two-tier retail

This consists of vendors shipping to "the first tier which stages inventory and manages credit for the second tier."

One-tier retail

This consists of superstores "that for the bulk of goods sold fulfill both the wholesale and retail functions."

Internet retail

This consists of one or two tiers with sales occuring on the Internet.

Two-tier value-added reselling

This consists of "products that are too complex for retail [where the companies] specialize in a particular technology [or] vertical market."

National roll-ups

This consists of local VARs (value-added resellers) rolled-up into national chains.

OEMs (original equipment manufacturers)

This consists of at least a two-tier (and can be up to four-tier) transaction where manufacturers integrate purchased products into their own systems.

System integrators

This "is not a channel per se… Rather, it is a project-oriented institution for managing very large or very complex computer projects."

"Channels are optimized for different purposes":

Demand creators versus demand fulfillers

"Direct sales forces, for example, are optimized for creating demand, while retail superstores are optimized for fulfilling it."

Role in providing the whole product

"System integrators and VARs are optimized for playing a very large role in providing or developing the whole product…" Retail and Internet channels are the opposite.

Potential for high volume

"Channels optimized for whole product development are not effective for high volume delivery. … The low-cost, low-service channels are just the opposite."

Direct Sales

The direct sales channel is "the best channel for crossing the chasm [because] it gives us maximum control over our own destiny." Important principles to consider:

• "For the customer, the key condition is that the vendor supply a broadly comprehensive and reasonably competitive set of offerings."
• "For the vendor, the key condition is both the volume and the predictability of revenues."
• "There is a price point below which this method of distribution cannot work."
• "There has to be a fundamentally uncompetitive agenda" between a company and its vendors.

Factors hurting direct sales are:

• Vendors who "exploit the [uncompetitive-agenda] relationship through unfairly expensive maintenance agreements [and] new releases."
• Dropping retail prices and rising overhead costs and margins.
• The increasing "complexity of total solutions… to the point where no single vendor can cover" it all alone.

Retail Sales

"The retail system works optimally when its job is to fulfill demand rather than to create it. … Because it does not create demand [or] help develop whole products, retail distribution is structurally unsuited to solving the chasm problem."

"Once [our product] is established in the mainstream market [it] will be a natural candidate for retail distribution." These approaches can be an intermediary step to prepare the product for this channel:

Direct response advertising

These are trial versions of the product that can be directly sent to potential customers.

Telesales (and teleservice)

These are well-trained customer service personnel that offer better-than-retail services for all of the pragmatists' questions.

Value-added resellers

These are resellers that tend "to be dominated by problem solvers rather than salespeople" who promote your products.

VAR-Land or No-Man's Land?

"VARs are problematic as mainstream distribution channels. They are best used to support product lines that are forever dedicated to niche markets." The factors that limit their effectiveness in mainstream markets are:

• "Developing this market requires marketing, and few VARs have either the resources or the inclination to do any marketing."
• "There are not enough VARs to go around."
• "Because its best margins come from labor, not product, it tends to sell enough to fill its plate and then stops selling."

Adaptations and Alternatives

"From a chasm perspective, [these are] either inappropriate or too specialized to warrant a lot of attention."

System Integrators

They "focus on servicing early market opportunities sponsored by visionary customers."

Super-VARs

They focus on "pragmatist buyers in medium to large-scale companies."

OEMs

They focus on "big-ticket products that come out of the company's own R&D labs, not the add-on product coming in from another vendor."

Selling Partnerships

This involves coselling "with a whole product partner." Unfortunately, this is an expensive method.

Outbound Retail

This involves delivery to the customers. Unfortunately, this is a demand fulfillment tactic.

The Internet

"For direct sales of chasm-crossing" high technology, this channel is ineffective because "crossing the chasm requires face-to-face meetings with the target customer." The Internet should still be part of your overall marketing mix, however.

So What's the Right Choice?

• First, "use direct sales and support as a demand-creation channel to penetrate the initial target segment"
• Then, "transition to the most efficient fulfillment channel for your offer"

Distribution-Oriented Pricing

"Set pricing at the market leader price point… and build a disproportionately high reward for the channel into the price margin, a reward that will be phased out as the product becomes truly established in the mainstream, and competition for the right to distribute it increases."

Pricing models:

Customer-Oriented Pricing

• Visionaries "are relatively price-insensitive." For them, use "value-based pricing."
• Pragmatists "expect to pay a premium price for the market leader." For them, use "competition-based pricing."
• Conservatives are price-sensitive. For them, use "cost-based pricing."

Vendor-Oriented Pricing

This "is a function of internal issues" such as costs of goods, sales, overhead, etc. However, this "represents the worst basis for pricing decisions during the chasm period [because] we must be entirely [externally] focused" on gaining new customers and new relationships.

Distribution-Oriented Pricing

• "Is it priced to sell?" The price shouldn't "become a major issue during the sales cycle."
• "Is it worthwhile to sell?" The price should incorporate "a sufficient margin to reward the channel" for selling this new product.

Getting Beyond the Chasm

"Prechasm commitments… are all too frequently simply unmaintainable in the [postchasm period]. That is, they promise a level of performance or reward that, if delivered, would simply destroy the enterprise. This means that [we'll need to] manage our way out of the contradictions imposed by prechasm agreements."

"The first and best solution [is] to avoid making the wrong kind of commitments during the prechasm period."

Financial Decisions: Breaking the Hockey Stick

"The purpose of the postchasm enterprise is to make money. …We need to recognize that this is not the purpose of the prechasm organization." The purpose then, is to prove there is customer demand.

Hockey stick forecast of revenue growth

This is where revenue first grow slowly, then shoot upwards. It is the most common model currently, and is "traditionally endorsed by the venture capital community." It is also flawed.

Staircase forecast of revenue growth

This is where revenue grows in spurts, then flattens, like a staircase. The flat/slow periods are where the company is entering new markets.

The Role of the Venture-Financing Community

"The call to action to the investment community is, Make your client companies incorporate crossing the chasm into their business planning."

The Role of the Venture-Managing Community

"Once early market leadership has been established… this is when you want to spend your money—not before." Also, profitability may not be possible from the outset because:

• "The price of entry [and product development] is too great", especially with manufacturing-intensive products.
• "The market is expected to develop so rapidly that you cannot afford to" be a small player.
• It is more expensive to cross the chasm to the mainstream than to build the early market with technology enthusiasts and visionaries.

Organizational Decisions: From Pioneers to Settlers

Crossing the chasm "involves a transformation in the enterprise… from being pioneers to becoming settlers." The people that helped you win the early market can now be a liability in the mainstream market.

Two New Job Descriptions

"To initiate the transition" from being pioneers to settlers, introduce these two new and temporary roles:

• Target market segment manager
  • "Transform a visionary customer relationship into a potential beachhead for entry into the mainstream vertical market" of that customer.
  • "Expedite the implementation of the first installation of the system."
  • "During the implementation of the first installation, introduce into the account his own replacement, a true account manager."
  • "Leverage the ongoing project to create one or more whole product extensions that solve some industrywide problem."
• Whole product manager
  • This role's goal is to ultimately be a product marketing manager (in the marketing department, responsible for bringing the product to market).
  • Manage the growing list of bug reports and product enhancements.

Coping with Compensation

Pioneering salespeople

Reward them immediately, for winning new accounts

Settler account managers

Reward them for longevity of the account, customer satisfaction, and predictability of revenue stream.

Pioneering developers

Reward them for early market penetration. Since early market returns are usually small, equity is used instead. However, equity should be used to reward settlers, not pioneers.

R&D Decisions: From Products to Whole Products

"Whole product R&D is driven not by the laboratory but by the marketplace. It begins not with creative technology but with creative market segmentation."

• Focus groups are effective for whole product R&D in mainstream markets.
• Packaging studies help "ensure a successful experience right out of the box."

"Engineering must be a direct partner in" these efforts, not just marketing alone.

This is the first of a new series of book summaries on BizThoughts. I read a lot. For really good books, I'll occasionally take notes and write up book summaries to help me remember them (yes, I'm such a geek). Sort of like book reports in grade school, though these summaries are more like outlines. I hope the authors don't mind my publishing these.

These aren't a substitute to reading the books, of course; authors include many examples, stories, and anecdotes that support their conclusions. Reading the full book will often help with the absorption of those conclusions. Every book I summarize, I wholeheartedly encourage you to go out, buy the book, and read it yourself.

And even if you read these summaries and books, it's not like they'll truly sink in. As the old adage goes: "You will remember some of what you hear, much of what you read, more of what you see, and almost all of what you experience and fully understand." (Anyone know who originally made that quote?) So after you read the book, go out and do it for yourself.

Book: The World is Flat: A Brief History of the Twenty-first Century
Author: Thomas L. Friedman

The Ten Forces That Flattened the World

These are the ten factors describing how the world is becoming "flat" or globally interconnected, thereby allowing businesses all over the world to compete on a more equal playing field.

1. The New Age of Creativity (the fall of the Berlin Wall)

   This event "tipped the balance of power across the world toward those advocating democratic, consensual, free-market-oriented governance, and away from those advocating authoritarian rule with centrally planned economies."

2. The New Age of Connectivity (the rise of the Web)

   This event "enabled more people to communicate and interact with more other people anywhere on the planet than ever before."

3. Work Flow Software

   This force "enabled more people in more places to design, display, manage, and collaborate on business data previously handled manually," resulting in more work to be able to flow "between companies and continents faster than ever."

4. Uploading (open online collaboration and communities)

   This force gave "newfound power [to] individuals and communities to send up, out, and around their own products and ideas, often for free, rather than just passively downloading them from commercial enterprises or traditional hierarchies," thereby "reshaping the flow of creativity, innovation, political mobilization, and information gathering and dissemination."

5. Outsourcing

   This force meant "taking some specific, but limited, function that your company is doing in-house… and having another company perform that exact same function for you and then reintegrating their work back into your overall operation."

6. Offshoring

   This force meant being able to manufacture "the very same product in the very same way, only with cheaper labor, lower taxes, subsidized energy, and lower health-care costs" in another country, "then integrating it into [your] global supply chains."

7. Supply-Chaining

   This force allowed "[horizontal collaboration]—among suppliers, retailers, and customers—to create value," resulting in "the adoption of common standards between companies" and more efficient "global collaboration."

8. Insourcing

   This force allowed "small companies could suddenly see around the world" and sell their products and services globally, while large companies could "act really small" and "customize products at the last minute."

9. In-forming

   This force gave "all the world's knowledge, or even just a big chunk of it… to anyone and everyone, anytime, anywhere," resulting in "becoming your own self-directed and self-empowered researcher, editor, and selector of entertainment, without having to go to the library or the movie theater or through network television."

10. The Steriods (computers, the Internet, wireless, and personalization)

    This force, made up of specific technologies, supercharged all the other flatteners.

The Triple Convergence

These are the three factors that came together to set off the flattening of the world.

1. Convergence I

   This is the "convergence of the ten flatteners [into] a whole new platform. It is a global, Web-enabled platform for multiple forms of collaboration [that] enables individuals, groups, companies, and universities anywhere in the world to collaborate… without regard to geography, distance, time, and, in the near future, even language… —for the purposes of innovation, production, education, research, entertainment, and, alas, war-making—like no creative platform ever before."

2. Convergence II

   This is the "emergence of a large cadre of managers, innovators, business consultants, business schools, designers, IT specialists, CEOs, and workers."

3. Convergence III

   This is the creation of "horizontal collaboration and value-creation processes and habits that could take advantage of this new, flatter playing field."

The Great Sorting Out

These are the issues that will need to be resolved in the flat world.

1. Offshoring: Who is Exploiting Who?

   This is where "the world starts to flatten out and value increasingly gets created horizontally… who is on the top and who is on the bottom, who is the exploiter and who is the exploited, gets very complicated." The US workers who are out of jobs? The US customers and citizens who pay lower prices and less taxes? The Indian workers who are paid comparably low wages? The Indian workers who's comparably low wages raises their standard of living?

2. Where Do Companies Stop and Start?

   This is where "businesses define their interests and labor opportunities more globally than domestically [and than where they are headquartered]," and "the whole shareholding process demands more and more that these companies perform against global standards, opportunities, and resources."

3. From Command and Control to Collaborate and Connect

   This is where "hierarchies are not being leveled just by little people being able to act big. They are also being leveled by big people being able to act really small—in the sense that they are enabled to do many more things on their own."

4. Multiple Identity Disorder

   This is where "the tensions among our identities as consumers, employees, citizens, taxpayers, and shareholders are going to come into sharper and sharper conflict." For instance, "the Wal-Mart shareholder and shopper in us wans Wal-Mart to be [keep company profits high] and prices low." "But the Wal-Mart worker in us hates the limited benefits and low pay packages." "And the Wal-Mart citizen in us knows that because [Wal-Mart doesn't fully cover employee health care costs], the taxpayers will end up picking up the tab."

5. Who Owns What?

   This is where we need to decide whether we "build legal barriers to protect an innovator's intellectual property so he or she can reap its financial benefits and plow those profits into a new invention, [or] keep [the] walls low enough so that we encourage the sharing of intellectual property, which is required more and more to do cutting-edge innovation."

6. Death of the Salesmen

   This is where efficiency and automation is replacing human beings. "It's hard to create a human bond with e-mail and streaming Internet."

America and Free Trade

This is the idea that "even as the world gets flat, America as a whole will benefit more by sticking to the general principles of free trade, as it always has, than by trying to erect walls, which will only provoke others to do the same and impoverish us all." And "while protectionism would be counter-productive, a policy of free trade, while necessary, is not enough by itself. It must be accompanied by a focused domestic strategy aimed at upgrading the education of every American, so that he or she will be able to compete for the new jobs in the flat world."

The New Middlers

These are the job categories that will make up the new middle-class in the flat world.

1. Great Collaborators and Orchestrators

   These are jobs that "involve collaborating with others or orchestrating collaboration within and between companies, especially those employing diverse workforces from around the world."

2. The Great Synthesizers

   These are jobs that involve "putting together disparate things that you would not think of as going together."

3. The Great Explainers

   These are jobs that involve "[seeing] the complexity but [explaining] it with simplicity."

4. The Great Leveragers

   These are jobs that involve "combining the best of what computers can do with the best of what humans can do, and then constantly reintegrating the new best practices the humans are innovating back into the system to make the whole… that much more productive."

5. The Great Adapters

   These are jobs that involve being "adaptable and versatile" and "are capable not only of constantly adapting but also of constantly learning and growing."

6. The Green People

   These are jobs that involve designing and building "renewable energies and environmentally sustainable systems."

7. The Passionate Personalizers

   These are jobs that involve "pure passion… pure entertainment… [and] a creative touch that no one else thought of adding."

8. The Great Localizers

   These are jobs that involve "[understanding] the emerging global infrastructure, and then [adapting] all the new tools it offers to local needs and demands."

The Right Stuff

These are the abilities that will help individuals compete effectively in the flat world.

1. Learn How to Learn

   This is the ability to "constantly absorb, and teach yourself, new ways of doing old things or new ways of doing new things."

2. Passion and Curiosity

   This is the ability to be passionate and curious "for a job, for success, for a subject area or even a hobby," because "nobody works harder at learning than a curious kid."

3. Play Well With Others

   This is the ability to "be good at managing or interacting with other people."

4. The Right-Brain Stuff

   This is the ability to "nurture more of your right brain [(creative thought)] as well as your left [(analytical thought)]."

The Quiet Crisis

These are the six "dirty little secrets" of the US that are preventing this country from properly preparing for the flat world.

1. The Numbers Gap

   "The generation of scientists and engineers who were motivated to go into science… are reaching their retirement years and are not being replaced in the numbers that they must be if an advanced economy like that of the United States is to remain at the head of the pack."

2. The Education Gap at the Top

   "We simply are not educating, or even interesting, enough of our own young people in advanced math, science, and engineering."

3. The Ambition Gap

   "Not only is [outsourcing] cheaper and efficient, but the quality and productivity [boost] is huge" because of "our love of television and video and online games."

4. The Education Gap at the Bottom

   "If you went to an elite private school or public school in a wealthy neighborhood, you got an education that reinforced innovation and creativity, while the worst public high schools focused on just getting the kids through with the bread-and-butter basics."

5. The Funding Gap

   "Federal funding for research in physical and mathematical sciences and engineering, as a share of GDP, actually declined," and "the effects are starting to show," as other nations surpass the US in scientific research and innovations.

6. The Infrastructure Gap

   "In the first three years of the Bush Administration, the United States dropped from 4th to 13th place in the global rankings of broadband Internet usage [and] most U.S. homes can access only 'basic' broadband, among the slowest, most expensive, and least reliable in the developed world." Even worse is the US's standing in the mobile market.

What the US Should Do

These are the five actions the US should take to remain competitive in the flat world.

1. Leadership

   This is where "we need politicians who are able and willing to" "help educate and explain to people what world they are living in and what they need to do if they want to thrive in it." 'Summoning all our [nation's] strengths and skills to produce a twenty-first-century renewable energy source is George W. Bush's opportunity to be both Nison going to China and JFK going to the moon in one move."

2. Muscles

   This is where the government and companies "can guarantee you that [they] will concentrate on giving you the tools to make yourself more lifetime employable—more able to acquire the knowledge or the experience needed to be a good adapter, synthesizer, collaborator, etc."

3. Cushioning

   This is the concept of wage insurance that "would compensate you for your old specific skills, for a set period of time, while you take a new job and learn new specific skills."

4. Social Activism

   This is where global corporations must develop moral consciences because they "are going to command more power, not only to create value but also to transmit values, than any transnational institutions on the planet."

5. Parenting

   This is where "we need a new generation of parents ready to administer tough love: There comes a time when you've got to put away the Game Boys, turn off the television, shut off the iPod, and get your kids down to work."

What Developing Countries Should Do

These are the actions a developing country should take to remain competitive in the flat world.

1. Introspection

   This is where a country asks itself "to what extent is my country advancing or being left behind by the flattening of the world, and to what extent is it adapting to and taking advantage of all the new platforms for collaboration and competition?"

2. Reform Wholesale

   This is where a country "[focuses] on improving education and infrastructure and, in particular, adopting better governance [and] market-friendly macroeconomic policies [on a strategic, high level]."

3. Reform Retail

   This is where a country "[looks] at infrastructure, education, and governance and [upgrades] each one [on a tactical, detailed level], so more of your people have the tools and legal framework to innovate and collaborate at the highest levels."

4. Culture and Glocalization

   This is where a country asks itself "how outward your culture is: To what degree is it open to foreign influence and ideas? How well does it 'glocalize' [(adopt foreign ideas)]?" as well as "how inward your culture is:" "To what degree is there a sense of national solidarity and a focus on development, to what degree is there trust within the society for strangers to collaborate together, and to what degree are the elites in the country concerned with the masses and ready to invest at home?"

5. The Intangible Things

   This is where a society increases its "ability and willingness to pull together and sacrifice for the sake of economic development" as well as has "leaders with the vision to see what needs to be done in terms of development and the willingness to use power to push for change rather than to enrich themselves and preserve the status quo."

How Companies Cope

These are ways companies can remain competitive in the flat world.

1. Be Unique

   This is where companies "[dig] inside themselves to locate [their] real core competency" to avoid commoditization, which is "happening faster and faster across a whole range of industries" in the flat world.

2. And The Small Shall Act Big

   This is where companies "[take] advantage of several new forms of collaboration—supply-chaining, outsourcing, insourcing, and all the steriods—to make [their small companies] very big."

3. And The Big Shall Act Small

   This is where companies "create a platform that allows individual customers to serve themselves in their own way, at their own pace, in their own time, according to their own tastes."

4. Be Collaborative

   This is where companies "take advantage of the triple convergence to collaborate with the smartest, most efficient people you can find anywhere in the world."

5. Get Regular X-rays

   This is where companies "constantly identify and strengthen their niches and outsource the stuff that is not very differentiating."

6. Outsource to Win

   This is where companies "[outsource] to acquire knowledge talent to grow their business faster, not simply to cut costs and cut back."

7. Be Socially Responsible

   This is where companies "pioneer socially responsible outsourcing [where it's not just about] saving money they can invest somewhere else, [it's about] creating better lives for some of the poor citizens of the world."

The Unflat World

These are the issues holding the world back from becoming truly flat.

1. Too Sick

   These are people "who are too sick… whose lives are stalked everyday by HIV-AIDS, malaria, TB, and polio, and who do not even enjoy steady electricity or potable water."

2. Too Disempowered

   These are people "who don't have the tools or the skills or the infrastructure to participate in any meaningful or sustained way" with the flat world.

3. Too Frustrated

   These are people who "are threatened, frustrated, and even humiliated by this close contact [with the flat world], which, among other things, makes it very easy for people to see where they stand in the world vis-a-vis everyone else."

4. Too Many Toyotas

   This is where the flattening of the world will "set off a global struggle for natural resources and junk up, heat up, garbage up, smoke up, and devour up our little planet faster than at any time in the history of the world."

The Globalization of the Local

This is the "phenomenon that allows diaspora communities around the world to use today's global media networks to cling to their local mores, news, traditions, and friends—no matter where they are living." "It is not the global which comes and envelops us. It is the local which goes global."

The Dell Theory of Conflict Prevention

This is the theory that "no two countries that are both part of a major global supply chain, like Dell's, will ever fight a war against each other as long as both are part of the same global supply chain."