Chapter Eight:
Zoning to Win at Salesforce and Microsoft

The prescriptions outlined in the preceding chapters present zone management in an idealized form. They have emerged from a handful of client engagements conducted over the past several years, the two most impactful being with Salesforce, sponsored by Marc Benioff, CEO, and Microsoft, sponsored by Qi Lu, the executive vice-president who heads up the Applications and Services Group that includes Office, SharePoint, and Outlook, among other properties, with strong support from Satya Nadella, CEO. Each enterprise is adopting these methods in its own way, Salesforce playing the role of disruptor, Microsoft, the disruptee. Together they make bookend case examples for everything we have been talking about to this point. Let’s see what each can teach us about how to zone to win.

Playing Zone Offense: The Example of Salesforce

In the spring of 2013 I had a chance to reconnect with Marc Benioff in conjunction with writing a third revision to Crossing the Chasm. It needed a whole new set of examples from the twenty-first century, and I could think of none better than Salesforce. After we had that discussion, he asked me what I was working on lately, and I told him about my latest book, Escape Velocity, which had the subtitle Free Your Company’s Future from the Pull of the Past. Marc said he thought that might apply to Salesforce, but I was skeptical. The book was really about much older companies that had settled down into established market positions and now needed to catch their next wave or be overtaken by one crashing over them. That was not Salesforce.

Nonetheless, Marc said Salesforce had its issues, and after some discussion, I agreed to interview his direct reports and give a chalk talk at his next staff meeting. Well, the interview list grew a bit, and then a bit more, and I ended up interviewing thirty-eight people, including three board members, and two outside advisors from McKinsey and Accenture, respectively. And what was going to be a chalk talk at the next staff meeting turned out to be a full-on presentation at the next executive offsite. That presentation was well received and has subsequently resulted in me working with the team over these subsequent two years. What follows are some of the highlights of that relationship.

Initial State

“At Salesforce we do not grow and plateau—we are always high growth,” was the way one person put it. Another said, “We are kind of a mix between a startup and a large successful company, and we are still learning how to control the combo.” This is what we like to call a high-class problem. But a problem it was nonetheless. Here’s how it looked through the lenses of the four zones:

• Performance Zone. There was a performance matrix of sorts, functioning best at the intersection of Sales Cloud and Service Cloud meeting the Commercial Business Unit (CBU) sales channel. But even here the row owners for the two clouds were in matrix hell, not heaven. One row owner estimated that it took twenty-seven different agreements to get anything done end to end. People called it the “daisy chain,” and the only way to navigate was to follow this advice from a long-term veteran: “The way to get things done here is to find the person who owns it directly. Not on any org chart anywhere. I have a personal network. I know who to go to in order to ask the right question.”
       In the case of the performance zone, all the development resources reported into engineering, all the marketing into marketing, and the row owners had product managers and not much else. Such a structure can actually work if the row owners have power of the purse—that’s how Microsoft does it—but at Salesforce they did not. That meant that staffing commitments could be redirected for any number of reasons, with the row owner left holding the bag.
       And the column owners weren’t much better off, particularly if they were out in the regions. Sales, professional services, customer support, field marketing, and sales engineering all reported up functionally. As one very senior regional sales executive explained, “We don’t work well across functions or business units. Everything is siloed and quota driven. I cannot decide anything—I am more of a sales manager than a GM.” That all said, revenue that year was up 33 percent, which suggests that the company was doing some things right!
• Productivity Zone. This zone was overwhelmed by the challenges of continuous high growth combined with a programs-to-systems ratio that was wildly overrotated to programs. With respect to programs, marketing was trying to get a grip on things by reorganizing around an agency model at a time when sales needed better lead generation systems for pipeline coverage. Technical operations kept control on things by gating all changes to the platform through its own ranks, but that made life tough on any product team looking for fast cycle time. Data centers were managed to custom standards that needed expert attention, something that was not going to scale easily or cost effectively. HR was onboarding people in record numbers and realizing that the company’s charisma—a very real asset—did not extend well beyond San Francisco. Everywhere there was a need for systems, systems, systems, which was being met (with only marginal success) by programs, programs, programs. (The one great exception to this was Dreamforce itself, which you would think is the world’s largest program on steroids, but in fact is an amazing system that delivers outstanding results year after year.)
• Incubation Zone. Here things were a bit chaotic, but largely in ways one would expect. The big concern was that there were a lot of little things cooking that did not look like they would scale. And there was a lot of flak from executives in the performance zone about how much of the available resources these fledgling efforts were getting while their load-bearing efforts got by with much less. It was a classic innovator’s dilemma problem put best by a technical executive who said, “We are pretty good at letting acquisitions run independently at the start, but then we either integrate them into the core too soon or we let them languish and underperform their potential.” (If that doesn’t sound familiar to you by now, you have been reading some other book.)
       The immediate problem was that all these acquisitions were at one point heralded as the next big thing, and once it became clear that they were not, it was not obvious what to do with them. There was no governance vehicle for making these calls other than appealing to Marc himself. It was pretty clear that things needed to get rationalized, and even reasonably clear on what terms, but there was no way to get it done.
       There was also an underlying problem of cycle-time mismatch. All the new entrepreneurial organizations wanted to go to a very short release cycle—say, every week or two—but enterprise customers cannot abide that. Salesforce was releasing its major clouds every four months, which is unheard-of velocity in enterprise software but was way too slow for incubation. Again, as long as they could operate independently, each group could live and let live, but the whole purpose of the exercise was to integrate eventually, and there was neither a system nor a program for how that would get done.
• Transformation Zone. Ironically, this was the zone that worked best. Marc drives transformations. He is simply world-class at doing so. He has the charm and charisma to get people to sign up to do the impossible, and he has the market instincts and technical savvy to pick the right things to champion at the right time.
       At the time, the transformation he was championing was called Salesforce 1, the replatforming of the core applications around social and mobile capabilities. This called for deep sacrifices from the performance zone, which had to forego a whole raft of promised features in order to get this effort over the finish line. But this is where the company showed its best colors. The entire executive team was aligned in supporting the effort. Frankly, I had never seen anything like it.

What Changed

A lot changed in a very short amount of time, but interestingly, I was not there to witness it. After I did my presentation, I moved on to other things, and it was not until late in the fall of 2013 that Marc reached out again. He said he thought they were making some good progress on the recommendations I had made and that it would be valuable for me to come in and do a reality check. So I pulled out the prior work and went off to interview a list of twenty-seven executives, many for the second time. Almost a year to the day, I gave my readout to the team at another executive offsite. Here is what I had learned, again seen through the lenses of the zones:

• Performance Zone. Just days after my first presentation Keith Block had joined Salesforce as president and vice-chairman, heading up all customer-facing operations. Basically, he, along with Alex Dayon, head of products, led the installation of a much better-structured performance matrix. Today Salesforce has unique row owners for each of its four material lines of business—Sales Cloud, Service Cloud, Marketing Cloud, and Platform—and unique column owners for its material sources of revenue, organized around three global theaters and two major sales channels, Commercial and Enterprise. The row owners are empowered as GMs, the column owners as theater leads, and both report out at the quarterly business reviews, and there is no question as to their authority in driving results for their row or column.
       In addition there are two currently subscale rows in the performance matrix for Communities and Analytics and two subscale theaters in Asia Pacific and Japan. For all of my emphasis on no subscale entities in the matrix, this has proven to be a manageable mix, showing that imperfect adherence to the 10 percent model is not a showstopper, provided it is done in moderation. Subscale rows and columns compete for attention with variable results, but there is a collaborative spirit in the culture that is biased to offer the helping hand provided the effort is on the right track.
       Cell-level accountability, on the other hand, is still weak; subtotals garner the bulk of the attention, and how those numbers are achieved is less of a concern. This works all right in high-growth categories where new segments often light up at unpredictable times and getting overly specific could actually bog you down. But as categories mature—and this applies to Sales Cloud and Service Cloud in particular—it is becoming more and more important to enforce the cell-level accountability discipline.
• Productivity Zone. Again, newly hired executives have helped change the landscape dramatically. Lynn Vojvodich took the reins in marketing, and her team helped put in place a system for lead generation that hums. Randy Kerns came in from running data centers for Microsoft Azure and is leading the standardization of the same for Salesforce. Mark Hawkins has come over from Autodesk as CFO and teamed up with Burke Norton, who joined from Expedia, to run the general and administrative functions, again with a focus on systems.
       The point of these and other changes is that systems are beginning to get their due attention at Salesforce. This has not led to any lack of enthusiasm for programs, just an acknowledgment that each has its place, and neither substitutes for the other.
       In seeking the right balance between programs and systems, two factors play a big role—business model and rate of growth. Lines of business competing in mature categories with a B2C volume operations business model are best served by leaning more toward systems; by contrast, companies competing in emerging categories with a B2B complex systems business model are best served by leaning more toward programs. Programs apply a burst of energy at a particular point in time to change the inertial momentum of a target process or practice. It is much easier for programs than systems to adapt both to the frequent changes of emerging categories and to the specific demands of very important customers. And that describes Salesforce very well.
• Incubation Zone. Here the changes have been remarkable indeed. Marc embraced the notion that when it becomes clear that an incubation effort is not going to scale on its own to become a new row in the performance matrix, it can still make a material contribution by integrating with an existing line of business there. In this context, Data.com became connected to the Sales Cloud, as did Pardot, which was a company ExactTarget acquired prior to the Salesforce acquisition. Desk.com, bought to compete at the low end of the service market, was brought into alignment with the Service Cloud. BuddyMedia and Radian6 were connected into ExactTarget to form the Social Studio in the Marketing Cloud. Other ventures were simply shut down. The result has been to create new space in the zone for Communities and Analytics, followed by the acquisition of RelateIQ. These are all still incubational in the sense that they could become independent rows in the performance matrix or take one of the other exit paths. That is for the future to decide.
• Transformation Zone. The big change here was pulling Marketing Cloud into the transformation zone and driving it to scale. By consolidating the assets of three acquisitions, Marc had created enough mass for scale, but would the parts stick together to make a coherent row in the performance matrix, and would the sales team be able to absorb this new set of customers and offers? While it is still a work in progress, the answer appears to be yes.
       On the row side, the challenge for GM Scott McCorkle is to creatively apply the four zones model inside his Marketing Cloud while fulfilling its external commitments to the performance zone. To do so, he must integrate and optimize social media assets that were developed on independent architectures (productivity zone), leverage his core email marketing business that is still riding a wave of secular growth (performance zone), continue to nurture and grow JourneyBuilder, a crown jewel that unlocks the power of automated marketing (incubation zone), and bring it to scale as rapidly as possible (transformation zone), all while still meeting his performance zone commitments to Salesforce at large.
       On the column side, the challenge is for Keith Block and his team to expand sales capacity beyond the original ExactTarget sales force to leverage the full power of the performance matrix. This means taking on a new target customer, the CMO in a B2C company, a new set of use cases more tuned more to volume operations than complex systems, and a new basis for value creation focused more on campaign effectiveness than on organizational efficiency. The good news is the customer budget is already there; the challenge is for the new arrivals to go get it.

Looking back over this period, the most striking thing was the speed and depth of the changes Marc and his team implemented in just one year. Yes, the four zones framework was a catalyst, but there were at least three other powerful forces at work, ones we should take note of and learn from.

The first is Salesforce’s V2MOM management system, the acronym standing for Vision, Values, Methods, Obstacles, and Metrics. This system was installed by Marc and his cofounder Parker Harris at the company’s inception, and it has been the backbone of its execution success from the start. At its core is the discipline of methods, in which each leader distills what he or she will commit to making sure gets done in the coming year. This starts with Marc. His V2MOM sets the table for the whole company. His direct reports then chain their V2MOMs off of his, taking some portion of what he promised to see get done and making that their promise. Then their direct reports do the same, and so on, all the way down, such that everyone at Salesforce publishes his or her own V2MOM and all chain all the way back up to the CEO’s.

What further strengthens this approach is that each person’s list of methods is presented in priority order, the prioritization being established after vigorous dialog with their peers and their bosses. Again, this starts at the top, with Marc socializing an early draft of his V2MOM for input and criticism. Once its methods are clarified and prioritized, then everyone else’s prioritization chains off of it. This prioritization works in large part because the process is open, authentic, and humble (not in its aspirations but in everyone’s willingness to serve). The resulting alignment is extraordinary.

The second of Salesforce’s core strengths is generosity of spirit. This is manifest in many things the company does but nowhere more so than in its 1-1-1 integrated philanthropy system for giving back. Under this system Salesforce as a company has given 1 percent of its equity and every year gives 1 percent of its product and 1 percent of its employees’ time to charitable causes. By building generosity into its core structure the company is redefining the role of the corporation in philanthropy, but just as important, it is attracting and retaining people who genuinely care and want to serve. That spirit spills over into everything they do and gets amplified many times over by events like Dreamforce, where it can inspire tens of thousands of people to lean in all at the same time. This is why the company can punch so far above its weight class. In a tech landscape anchored by far larger enterprises, it is Salesforce who leads. They are the company all of enterprise computing is looking to for guidance and direction.

Finally, from the combination of disciplined execution and generosity of spirit arises the company’s third great strength, a culture that marries collaboration to competitiveness. The former helps remove roadblocks to success—V2MOM’s obstacles—while the latter enforces strict accountability for results—V2MOM’s metrics. The result is business played as a team sport, the very thing that has brought world championships in both baseball and basketball to the Bay Area of late. This sort of performance is all about tone at the top. If the leadership truly exemplifies these values, the rest of the organization will too. And here I would be remiss if I did not give a shout-out to Parker Harris, Marc’s cofounder and head of product strategy and service delivery. I have never met anyone who embodies this synthesis of collaboration and competition better than he does, and it has been an honor to work with him and his team.

At the end of the day, while I am proud that zone management frameworks are making a contribution to the company’s current success, in actuality they are only vocabulary. Yes, they help sharpen the focus on what needs to get done and how, but they do not substitute for actually doing it. They do not substitute for team.

Playing Zone Defense: The Example of Microsoft

As challenging as it is to play zone offense, it is even more challenging to play zone defense. You still have all the challenges of managing across three horizons, and you still have to work through the nasty dynamics of Horizon 2, but in addition you have just taken a hit to your core business in Horizon 1. This is deeply destabilizing to all four zones of management, and you must act swiftly to rectify the situation. At the same time, regaining your footing is no more than an urgent first step on a longer journey to reclaim your identity. In the tech sector at present no company is more directly under attack than Microsoft. It is a testimony to its current leadership, as well as to its heritage, that it is rising to the occasion so well.

I was first introduced to the current team at Microsoft through a meeting with Qi Lu, back in 2012 when he was head of the Online Services Division, which had responsibility for its online property MSN and its newly launched search engine Bing. I got to work with his team shortly thereafter as he pioneered the application of the four zones model inside his own organization. Through Qi, I met Satya Nadella, then president of the Server and Tools Division, the group that was shepherding cloud computing into the Microsoft portfolio via the Azure offer set. Subsequently, these two men have risen in prominence dramatically, Satya as the new CEO, Qi as the executive vice-president of the Applications and Services Group (ASG), a group that includes all of the Office products and services and is responsible for close to a third of the company’s revenues, and the majority of its profit.

Both men exemplify a style of leadership that is new to Microsoft. As much as the prior regime was characterized by proud, relentless competitiveness, this new one is marked by a spirit of humility and open collaboration. Everything they say and do communicates a new tone, one that is much more focused on finding new ways for Microsoft to serve its customers than on putting down its competitors, one that values partners as strategic allies rather than tactical stepping-stones. This is a much-needed breath of fresh air as Microsoft’s imperial legacy has left a lot of bad feelings in its wake. Transformations cannot be accomplished without others helping voluntarily, and people don’t help unless you engage and enlist them first. The new team is showing it has this gift.

With that in mind, let us look at the hand they were dealt through the lenses of the four zones and then see how they are going about playing it.

The Trouble Microsoft Finds Itself In

• Performance Zone. Microsoft’s performance matrix has traditionally been driven by three core business engines—the Windows operating system, the Office suite of end-user applications, and the server suite of back office applications and systems software. Each has sustained a direct hit in the first decade of this century:
  • Windows has been disrupted by the rise of smartphones led by Apple and Google, driving the proliferation of two new on-device operating systems, iOS and Android. Together, they dominate the landscape of mobile computing to the virtual exclusion of Windows. Moreover, because smartphones and tablets are now broadly adopted in both consumer and business contexts and continuing to proliferate at a rapid rate, they have become the number-one target platform for software developers, thus taking even more attention away from Windows. For the first time in its history, Windows can no longer claim to be the default operating system for end-user computing in client-server applications, something that has profound implications for enterprise IT and represents a huge fall from grace.
  • Office has come under direct attack by Google Apps and on two fronts. In the consumer space Google gives away its competing software for free, monetizing it directly through advertising and indirectly through data mining. On the enterprise front, Google Apps has flanked Office’s stronghold in personal computing with a thrust into collaborative computing. That is, instead of focusing on individuals producing documents to be presented in finished form, it has focused on teams developing plans, designs, and intellectual property that are continually evolving. This aligns them with the rise of a collaborative work style that is spreading throughout the tech sector and beyond. In particular, collaborative computing is especially well suited to both education and small business applications, two areas where Google Apps is making strong inroads, thereby eroding Office’s position with the next generation.
  • On-premise servers have been a workhorse row in the performance matrix for a very long time, anchoring Microsoft’s position in enterprise computing. Here the company has been targeted by Amazon with its web services approach to cloud computing. This has revolutionized the entire IT sector, bringing in a whole new business model (subscription services displacing licensed products), a whole new operating model (self service displacing installation and maintenance), and a whole new infrastructure model (automated computer farms displacing uniquely configured computer clusters). The whole world of on-premise computing has been stood on its ear, and growth here is as challenged as it is in the company’s other two lines of business.
  Suffice it to say, the rows in the performance matrix have their hands full, but so too do the columns. The OEM sales channel for Windows, long the pacesetter for all things Microsoft, has fallen onto hard times as growth migrates away from the PC to smartphones and tablets. With Dell taking itself private and HP spinning off its PC and printer businesses, neither can be expected to be engines of growth anytime soon. Office is less challenged in the short term, but it needs a freemium go-to-market motion to compete with Google, something that is wholly new to the Microsoft playbook. And cloud computing, where Microsoft Azure has to its credit already made a strong play, requires the company to reengineer a whole raft of enterprise license agreements. In the meantime, the strategy that every three years new versions of Windows and Office would drive worldwide upgrades, the flywheel that has driven Microsoft returns for two decades, has proven less and less viable. In sum, all the company’s best go-to plays have run out of steam, and it is not obvious what is going to replace them.
• Productivity Zone. Microsoft has been one of the most productive companies on the planet for decades. Having established its effectiveness long ago, it has over the years honed its efficiency by converting more and more programs to systems. This has allowed the company to generate hoards of cash, allowing it to dividend billions back to shareholders. All this was goodness until disruptions hit the core business. Now the company needs to use programs to reengineer its systems in order to free its future from the pull of the past, and frankly, its program muscles have grown a bit weak from atrophy.
       Specifically, here are some of the challenges it must embrace in the productivity zone:
  • Migrate its consumer marketing from brand advertising, imposed from the outside in, to viral engagement emerging inside out organically from the user experience.
  • Migrate its enterprise marketing from high-volume horizontal use cases driving tiered pricing bundles to high-value vertical use cases driving usage-based pricing based on consumption.
  • Reengineer its software release cadence from a product-centric three-year cycle to a service-centric six-month cycle.
  • Apply the Six Levers to both its engineering and its sales organizations to unlock talent frozen in place by legacy systems and out-of-data entitlements.
  • Realign its offshore development capabilities in China and India from a task-based outsourcing model to an offer-based development model, both to leverage global talent and to open up two high-potential emerging markets.
  • Revitalize its developer ecosystem, once the envy of the entire industry, now fallen into disrepair.
  When you consider the sheer size of these organizations and the amount of inertia that must be overcome to achieve these ends, the challenges of the productivity zone are daunting indeed.
• Incubation Zone. Microsoft has never been much of an incubator. Its classic market triumphs are based on a fast-follower strategy that overtakes an early market leader. In the 1990s Windows took over the GUI market from Macintosh, NT the local area network market from Novell, Word the word-processing market from WordPerfect, Excel the spreadsheet market from Lotus, and Internet Explorer the browser market from Netscape. However, as the company continued to grow in scale, it became harder and harder for any new line of business to even aspire to the size needed to compete against the big guns for resources in the performance matrix. Even the success of xBox, a multibillion-dollar franchise, does not really move the needle in a company the size of Microsoft.
       We’ve seen this before with hypersuccessful franchises. It happened to Xerox, which was never able to profit from its amazing R&D engine at the Palo Alto Research Center. Ditto for Kodak, which actually invented digital photography. Ditto for Intel, where its flagship product, the x86 microprocessor, was once dubbed a creosote bush by its CEO because nothing could grow underneath it. What happens in cases such as these is that R&D becomes increasingly futuristic and fanciful, just to give itself some breathing room, but in so doing it loses all claim to any Horizon 2 commitment in the near-to-medium term. And when it does come time to test fly any of these options, the crucial foundational elements of the Independent Operating Unit with an entrepreneurial GM are glaringly absent.
       As a consequence of these dynamics, when Microsoft came under attack in the past decade, it looked to outside acquisitions to help mount a counterattack. Thus it acquired aQuantive to fight Google in the digital advertising space and Nokia to fight Apple and Google in the mobile device arena. Both of these acquisitions came up short and resulted in painful write-downs. You just can’t bolt an external entity onto an existing performance matrix without there being an inside entity to help hold it in place. M&A can scale organic incubation, but it cannot substitute for it. Microsoft found itself way out of position.
• Transformation Zone. Like many of the tech sector giants that rose to global dominance in the dot-com era, Microsoft has not led a successful transformation zone initiative in this century. Neither has IBM, Cisco, HP, Dell, or Intel. They didn’t need to. Well, now they do. Here’s what their CEOs are up against:
  • Deeply entrenched legacy franchises that are unable or unwilling to embrace the new realities and make the sacrifices necessary to adapt.
  • Sullen customer bases resentful of the high maintenance fees that have been extracted from them because they had no viable alternative but to pay up.
  • Tired partner ecosystems that have been bled to the bone by draconian price negotiations and are now fighting over the scraps in a market with lackluster growth.
  • Unsympathetic investors who demand continually improving performance from an increasingly decaying base.
  • An internal culture that is rife with entitlement, politics, and cynicism, and has seen many of its best players leave.
  These are the kinds of things that brought down the fifty-six companies cited in our first chapter. This is why playing defense is so much harder than playing offense. It just seems obvious that there is no way to win.
       So if that is the case, how can Microsoft be so optimistic about its future?

Microsoft Knows How to Play Defense

Recall the principles of using the transformation zone to play defense. The CEO galvanizes the entire company around a three-point plan: Neutralize first, optimize second, differentiate third. Galvanizing, however, requires a new burst of energy, and for that Microsoft needed a new leadership style. Satya and his team are supplying that. Let’s see how they are making use of it.

• Neutralize first. Right from the outset Satya declared Microsoft’s top two priorities unequivocally: Mobile first, Cloud first! This is exactly the kind of neutralize first response that zone defense requires. To paraphrase Marshal Foch, the World War I general, “Apple and Google are crushing my center in mobile while Amazon and Google are driving me back in the cloud—situation excellent, I am attacking!”
       On the cloud front, Microsoft has already made considerable headway with its Azure set of offerings, an effort that Satya himself led when he was heading up that side of the business and is now headed up by his then-lieutenant, Scott Guthrie. While both Amazon and Google have a big head start, both are essentially consumer-first, developer-oriented franchises, and this gives Microsoft a big opening. Most enterprise CIOs, the ones who will be directing a huge amount of cloud computing expenditures in the coming decade, would much prefer to work with a more enterprise-oriented provider that they already know, one that is familiar with the complexities of their systems and their regulatory and security concerns. There are still plenty of battles to be fought, but Microsoft has put itself in a good position to win them.
       On the mobile front, by contrast, the landscape is more daunting. There is no realistic prospect of taking material market share at the device level any time soon. That means Microsoft’s classic go-to play of leading with Windows and following with Office is not viable here. So instead the mobile first, cloud first strategy is being spearheaded by the Office side of the house with ASG delivering a one-two punch. This is the effort being headed by Qi Lu.
       On the mobile side, coincident with Satya being appointed CEO, ASG released Office on both iOS and Android, making it available for download from the Apple and Google app stores free of charge. This is allowing Microsoft to keep connection with professionals who use Office on their desktop but need access to it on their mobile devices. And on the cloud side, Qi has made ASG’s number-one priority migrating as much of the customer base as possible as fast as possible to Office 365, Microsoft’s cloud-based version of the Office suite. This is aligning well with the priorities of enterprise CIOs, most of whom are under pressure to reduce their support costs, in part by getting out of the desktop maintenance business as much as they can. One of the beauties of cloud computing is that you update once centrally and deploy everywhere else basically instantaneously.
       Finally, Qi and his team have targeted a third threat to neutralize, this one specific to ASG itself, focused on blunting the challenge directed squarely at Office by Google Apps. As noted, Google’s approach to knowledge worker productivity has been to relocate the productivity focus on collaboration. This reflects fundamental changes under way both in the structure of work and in the culture of the workforce. Personal computing products like Word, Excel, and PowerPoint still get a ton of work done, but now they need to be supplemented with new communications and messaging platforms like Skype, new file-sharing options like OneDrive, new content creation applications like Sway, new content discovery engines like Delve, and new user interaction modalities like OneNote, all of which have been prioritized under the new regime, even though the anchor products are still the prime revenue generators.
       What has allowed the new leadership team to make such rapid progress on the neutralize first front is their willingness to confront a challenging reality forcefully yet humbly. Their messaging is clear. We are behind. This is what we must do to catch up. This is what our customers want us to do. Let’s just get it done. And let us also understand there is a price to pay. When you invest in your future power, your present performance takes a hit. Market share in the near term will likely go down. So too will gross margins. Microsoft no longer enjoys the position of dominance it once did. Its investors understand this and will support the new directions up to a point, but only so far. That is why optimization is the second part of the zone defense playbook.
• Optimize second. This is the weakest link in Microsoft’s defense. Its imperial heritage has never required it to optimize in the past, that role being passed on to its OEMs while it continued to extract premium rents. Moreover, its longtime emphasis on achieving productivity through systems has created a legacy that is hard to modify at a time when flexibility and agility are required. Perhaps most importantly, its culture has always been about fierce competition for resources, the goal always being to keep whatever you have and get as much more as you can.
       In the near term, therefore, optimization is primarily taking the form of downsizing and divestiture. The company has announced that it will be making a series of tough choices, all aimed at focusing the company more directly on its mission to deliver productivity, first at work, then extending to the home. It has attractive properties to sell, and this capital can be used to fund work streams targeting high-growth market opportunities. And that is a beginning.
       But much of what Microsoft is getting done today is being achieved by following its old ways, and that is not sustainable. The company must learn how to extract resources from context to repurpose for core. It must learn how to field programs that amplify its effectiveness in new development and go-to-market motions. And with its legacy systems, it must learn to use Six Sigma and the Six Levers creatively, not as techniques for grudgingly capitulating to changes it cannot compete with, but rather for creating fitness to meet those new challenges. The road ahead is clear—it just needs to have more cars on it.
• Differentiate third. In contrast to its challenges with optimization, Microsoft’s prospects for incubation have never been greater. In ASG, in particular, they are legion. Begin with Bing. Its core job is to be a search engine that competes with Google, and through rigorous neutralization and optimization it has achieved a profitable sustainable business in so doing. Beyond that, however, Bing is now embedded in Windows, giving the latter not only device-based but also enterprise-based search capabilities as well as giving it a mechanism for monetizing freemium offers. And most importantly, Bing’s daily logs of millions of queries and answers provides a rich feed for Microsoft’s machine learning engines. These engines in turn are developing maps and algorithms to better understand and predict, well, anything—from a graph of work that shows where the nodes of knowledge are and who are their critical contributors to a graph of the world that can enable smarter roads, smarter buildings, smarter cities, and—dare we say—a smarter planet.
       And that is just Bing. There are also Sway and Planner and Delve and Lockbox and Skype and Cortana. What makes these nascent offers much more strategic than their predecessors is that they are organically connected to the mobile first, cloud first mission. Their first-generation instances fit right into the performance matrix. At the same time, however, the underlying platform of machine learning upon which they are based is itself a disruptive innovation that will fundamentally change the basis of productivity software across the sector. By building this fabric into Office itself, by making it available across device platforms and open to both customer and third-party developers, Microsoft can redefine the landscape of end-user computing once again. It is a very heady time indeed.

Concluding Remarks

It is time to bring this book to a close. Let’s recap the journey we have been on. In chapter one we surveyed the impact of disruptive innovation on established enterprises and called attention to the crisis of prioritization it triggers. In chapter two we described a management system we called zone management, one specifically designed to cope with this crisis. It is built around four zones—the performance zone, the productivity zone, the incubation zone, and the transformation zone—each with unique methods, obstacles, and metrics. The essence of the model is that each of these zones must be managed separately from the other three, and to that end, chapters three through six described the approaches needed by each zone. In chapter seven we distilled all this down to an installation procedure that aligns zone management with the annual planning process, and in this final chapter we have looked at Salesforce and Microsoft as two case examples of these models in action.

So where might you go from here? Basically, what you have is a set of frameworks. They are intended to describe the state of enterprises operating in business categories that are being fundamentally disrupted. The question is: is your business one of them, and if so, do these models indeed shed light on your current situation? If the answer is yes, then at minimum you want to engage your management team with this vocabulary in order to have a common language for dealing with the raft of changes coming your way. If that vocabulary resonates, then a follow-on step would be to commit to applying these frameworks to creating your next annual plan, following the outline in chapter seven, and to use them in the following year during quarterly business reviews to track your progress. For any given company, that involves more variables than this author can envision. All I can say by way of farewell is that I have done my best to provide a vehicle for the journey, and I wish you the very best of outcomes should you choose to undertake it.