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1-Page Summary of Escape Velocity
Why You Need to Escape
Don’t rely on the past to predict what the future will be like. The past can hold you back, and it’s important to keep moving forward. For example, companies base their budgets on what they did last year. However, if your market is stable or declining, that doesn’t work well because you need a new way of doing things in order to grow. You must find energy and motivation to move forward with your ideas if you want them realized. To do this, look for five sources of power:
1. “Category Power”
The demand for your product or service in relation to competitive categories is the primary source of power. For example, smartphones have higher demand than landlines and therefore experience more growth. Moving from a shrinking category to a growing category can transform your business, but this shift isn’t easy because each category has its own dynamics with distinct demands.
To identify new growth opportunities, analyze your activities to determine where category growth helps your company and where it limits you. To do this, look at how many categories you fit in and the mix of those categories that works best for you. This data will help you decide whether or not to leave old categories or enter new ones. It may force your company to transform or admit that it can’t grow any further in certain areas.
Emerging businesses are risky because the payoff isn’t always predictable. Start-ups flourish in this phase of the business cycle.
“Growth” – This stage generates category advances. Every company benefits from this stage.
“Mature” businesses generate most of their revenue when they are stable and can predict what they need to do. Established companies benefit the most.
Categories that are shrinking and have no growth potential are in the declining phase. The companies within these categories must write off their assets to zero. Categories that have reached the end of life stage will not survive.
To evaluate your category power, you should review your company’s investments and see how they are using their resources. You should balance the items in terms of their growth and financial contribution to each other. As you manage your portfolio, plan, organize, budget and manage each area; hire people for it; handle any potential mergers or acquisitions.
To build brand power, make decisions in light of three different investment horizons: short-term investments that help you meet your current financial goals, long-term investments that require considerable expenditures for research and development but don’t provide a substantial return now, and investments to develop new products. The most difficult planning and execution challenges will emerge from the clash between these three types of investment. Proper category evaluation and resource allocation will enable your company to find the necessary balance between these three types of investment.
2. “Company Power”
The power of a company is determined by its strength and status in the market. A company can be divided into levels, such as tier 1, 2 or 3. Tier 1 companies are leaders within their category while tier 2 companies are followers who try to catch up with the leaders. To move from one level to another requires identifying your company’s strengths and capitalizing on them while avoiding wasting money on other things that don’t help you achieve your goals.
The key to creating power within a company is making asymmetrical bets. This means that the company should invest in things that others will not or cannot do, and then leaders must be able to convince people who complain about it to follow along with them.
