Crossing the chasm


Published on

Published in: Marketing, Business, Technology

Crossing the chasm

  1. 1. Crossing the Chasm By Muhamad SHABAREK Damascus, 28/11/2013
  2. 2. Crossing the Chasm (1991, revised 1999) A marketing book by Geoffrey A. Moore that focuses on the specifics of marketing high tech products during the early start up period. Moore's exploration and expansion of the diffusions of innovations model has had a significant and lasting impact on high tech entrepreneurship. In 2006, Tom Byers, Faculty Director of Stanford Technology Ventures Program, described it as "still the bible for entrepreneurial marketing 15 years later". The book's success has led to a series of follow-up books and a consulting company, The Chasm Group.
  3. 3. The Adventure Trip
  4. 4. Preparing for the Trip Who is here & expectations
  5. 5. The Purpose of this Presentation • Contemporary Concepts in Marketing • We will go over • • • • • Technology Adoption Life Cycle (TALC) Marketing Strategies: Beachhead, Bowling Alley Value Proposition Compelling reason to buy Whole Product
  6. 6. Why did this topic come up? • Imagine you have your startup and you get funding, you build product and you start selling • • • • • • • First few customers show up Lots of enthusiasm for your product Sales start growing faster before you build a real sales force You invest in a sales team and a SVP of Sales Marketing prepares material Sales start growing, and all seems well… The sales stop! First a slow down, then no more sales • • You fire the SVP of sales You are yelling at sales people daily…
  7. 7. Welcome to the Chasm (pronounced: Kazm) • You have entered a nightmare • Your expenses are high • Revenues dry up • Team is demoralized • Life becomes depressing • You will most likely never survive this…
  8. 8. Tech Marketing – Few Claims! Yes/No? • Marketing technology is not the same as marketing consumer goods. • • Participation in ICT Exhibitions • • • does it increase sales? Is it a public relations and a communication means to orient and maintain relationship with your customers about your products and services? Where would you advertise a technology product? • • Procter and Gamble Company uses certain tools in marketing fast moving consumer goods. Would you advertise it? Marketing and Sales do mean different things?
  9. 9. The classical Diffusion Theory Everett Rogers (1962) • Found that for most members of a social system, the adoption-decision depends heavily on the adoptiondecisions of the other members of the system. • The more people adopt an innovation, the lower the perceived risk. • The result is an S-curve shaped pattern of innovation diffusion. • Synthesized research on adoption of innovation from several fields: Anthropology, Early sociology, Rural sociology, Education, Industrial sociology, Medical sociology
  10. 10. The Technology Adoption Lifecycle • The Diffusion of Innovations is a social process Source: Carnegie Mellon University * Reused from Geoffrey Moore, Dealing with Darwin © 2005, TCG Advisors LLC
  11. 11. The Technology Adoption Lifecycle • The Diffusion of Innovations is a social process Source: Carnegie Mellon University * Reused from Geoffrey Moore, Dealing with Darwin © 2005, TCG Advisors LLC
  12. 12. The Technology Adoption Lifecycle • The Diffusion of Innovations is a social process Source: Carnegie Mellon University * Reused from Geoffrey Moore, Dealing with Darwin © 2005, TCG Advisors LLC
  13. 13. The Technology Adoption Lifecycle • The Diffusion of Innovations is a social process Source: Carnegie Mellon University * Reused from Geoffrey Moore, Dealing with Darwin © 2005, TCG Advisors LLC
  14. 14. The Technology Adoption Lifecycle • The Diffusion of Innovations is a social process Source: Carnegie Mellon University * Reused from Geoffrey Moore, Dealing with Darwin © 2005, TCG Advisors LLC
  15. 15. Adoption of new Products
  16. 16. Governing Model Pragmatists: Stick with the herd! Conservatives: Hold on! Visionaries: Get ahead of the herd! Skeptics: No way! Techies: Innovators Early Early Majority Late Majority Laggards
  17. 17. Innovators –Technology Enthusiasts Primary Motivation: • Learn about new technologies for their own sake Key Characteristics: • Strong aptitude for technical information • Like to alpha test new products • Can ignore any missing elements • Do whatever they can to help Challenges: • Want unrestricted access to top technical people • Want no-profit pricing (preferably free) Key Role: Gatekeeper to the Early Adopter
  18. 18. Early Adopters –The Visionaries Primary Motivation: • Gain dramatic competitive advantage via revolutionary breakthrough Key Characteristics: • Great imaginations for strategic applications • Attracted by high-risk, high-reward propositions • Will help supply the missing elements • Perceive order-of-magnitude gains –so not price sensitive Challenges: • Want rapid time-to-market • Demand high degree of customization and support Key Role: Fund the development of the early market
  19. 19. Early Majority –Pragmatists Primary Motivation: • Gain sustainable productivity improvements via evolutionary change Key Characteristics: • Astute managers of mission-critical applications • Understand real-world issues and tradeoffs • Focus on proven applications • Like to go with the market leader Challenges: • Insist on good references from trusted colleagues • Want to see the solution in production at the reference site Key Role: Bulwark of the mainstream market
  20. 20. Late Majority –Conservatives Primary Motivation: • Just stay even with the competition • Avoid competitive disadvantage Key Characteristics: • Better with people than technology • Risk averse • Price-sensitive • Highly reliant on a single, trusted advisor Challenges: • Need completely pre-assembled solutions • Would benefit from value-added services but do not want to pay for them Key Role: Extend product life cycles
  21. 21. Laggards – Skeptics Primary Motivation: • Maintain status-quo Key Characteristics: • Good at debunking marketing hype • Disbelieve productivity-improvement arguments -Believe in the law of unintended consequences • Like taking a contrarian position • Seek to block purchases of new technology Challenges: • Not a customer • Can be formidable opposition to early adoption Key Role: Retard the development of high-tech markets
  22. 22. Law of Diffusion of Innovations
  23. 23. Implications for Sales & Marketing Customer goal: Competitive Advantage Solve problem Adopt the obvious Extend paradigm Customer need: Potential of technology Complete solution Make safe choice Better value Vendor goal: Strategy: Validate technology Segment share Market share Profitability Segment focus Show ROI Set standards Relationship mgmt. Demo the technology Technology proficiency Customer Intimacy Closing deals
  24. 24. Crack 1 & 2
  25. 25. Crack 1 Early Adopters do talk to Innovators. Still Crack 1 occurs. Problem: Innovators like cool technology products that cannot be readily translated into major new business benefits. Early Adopters want competitive advantage. • Esperanto • Desktop Video Conferencing Solution: The product must be made to enable a valuable strategic leap forward.
  26. 26. Crack 2 Late Majority talks to Early Majority. Still Crack 2 occurs. Problem: The Early Majority is willing and able to become technically competent when needed. The Late Majority is not. • Scanners and Video Editing Programs • Telephone transferring systems Solution: Ensure very high user-friendlieness to ensure ease of adoption.
  27. 27. Fundamental flaw • The Chasm is a time of great despair, when the excitement of the early market wanes, but the mainstream market is still not comfortable with the immaturity of the solutions available (in the Chasm sales falter and plummet • A fundamental flaw is the notion that rapid mainstream growth could follow continuously on the early market success. customer development teaches that the rules to the left of the Chasm are unique and different. Why?
  28. 28. Crossing the Chasm and Entering the Tornado
  29. 29. Dominated by early adopters and insiders. Techies” and “Visionaries” The Chasm “Pragmatists” and “Conservatives” Mainstream The “chasm” is the gulf that exists between the two distinct market-places for technology products: 2 very different segments of buyers…
  30. 30. Dominated by early adopters and insiders. Techies” and “Visionaries” The Chasm “Pragmatists” and “Conservatives” Mainstream But getting from one side of the chasm to the other is anything but easy! Why do we want to get there?
  31. 31. The chasm The Early Majority does not talk to the Early Adopters. Hence a huge Chasm. • The Early Adopters is buying a revolutionary change agent • • • • Expect a clear discontinuity between the old and the new Expect clear strategic advantages Tolerate bugs and glitches The Early Majority is buying evolutionary productivity improvement • • • Want to minimize the discontinuity with the old way Wants innovations to enhance established business processes Expect a more or less bug free product
  32. 32. Different value delivered It is new to the market • It is the fastest product • It is the easiest to use • It has elegant architecture • It has unigue functionality • It is the de facto standard • It has the largest installed base • It has most third party supporters • It has great quality of support • It has a low cost of ownership • Visionary Pragmatist
  33. 33. Different Buying Behavior Willing to take risk Rely on horizontal references: other industries & techies • Want to buy from new firms • Want rich techsupport • • Wants very little risk • Relies on vertical references within their industry • Wants to buy from market leaders • Wants one point of contact • Visionary Pragmatist
  34. 34. What Pragmatists think of Visionaries 1. The visionaries love technology but are bored with the mundane details of their own industry, which is the everyday work of us pragmatists. 2. The visionaries want to build systems from the ground up and do not appreciate the importance of networks, systems and processes already in place. 3. The visionaries seem to do all the fun things. They get all the funds and all the attention for their blue sky projects. If they fail, it is us pragmatists who have to clean up the mess. If they succeed, the disruptive change is just too much to handle. Pragmatists don’t trust visionaries as references!
  35. 35. Catch 22 • “The pragmatists will use only those products that are already used by a majority of pragmatists. And generally look to one and other as references. So, how can we get them to use a new product?”
  36. 36. Discovering that you are in the chasm Visionary markets saturates, or visionaries abandon • Too late for revolutionary competitive advantage • There are other cool disruptive things out there Pragmatists see no reason to buy yet • Too early for anything to be ”in production” • No herd of references has yet formed
  37. 37. Behavior of Early Clients and % When All “Innovators” and “Early Adopters” are Served …. The company drops into Chasm • Who are my first “5” customers – and why will they buy from me? • Who are my next “50” customers and why will they buy from me? • Who are my next “500” customers and why will they buy from me?
  38. 38. Why Sales Falter Companies target sales opportunity to “early adopters” in 4 – 5 segments instead of focusing on a single target customer The idea of focusing intensively on whichever opportunity comes in first is what becomes attractive to companies • • Then a “wish list” is painstakingly extracted & recorded from each segment The key requirements gets developed for the next release, true to its intent, it has something for everybody. Unfortunately, it has everything for nobody. • • That is, no one had 100% of its whole product requirements fulfilled. • We never finished any one customer’s list. But that is precisely the requirement that pragmatist insist upon before they purchase • e.g. while the visionaries (early adopters) accept 80% of the product, the pragmatist wants to see the remaining 20% fulfilled. • • Without the complete product, there is no hope for mainstream
  39. 39. Crossing the chasm The problem • 80% of many solutions –100% of none • Pragmatists won’t buy 80% solutions! Conventional solution (tends to fail) • Committing to the most common enhancement requests • Never completely satisfying any one customer segment’s needs ”D-day” solution (more likely to succeed) • Focus all efforts on a single ”beach head” segment with a compelling reason to buy, develop a whole product, become a market leader • Then leverage product and user references to attack other segments The consequence of being sales-driven instead of strategy-driven in the chasm is fatal –Focus !!!
  40. 40. D-Day- Omaha Beach
  41. 41. The D-Day Analogy Today
  42. 42. ”D-day” invasion strategy & tactics 1. Target the point of attack Segmentation–isolate target customers and their compelling reason to buy 2. Assemble the invasion force Differentiation–develop the ”whole product” and choose allies to realize this 3. Define the battle Positioning–reate the competition(if there is none, you still need one) and position yourself 4. Launch the invasion Distribution and Pricing–select your distribution channel and set your price
  43. 43. Target the point of attack Segmentation Target a specific market segment: Target customer (user, tech., econ.)? • Compelling reason to buy? • Whole product? • Competition? • Partners • Distribution • Pricing • Positioning • Next target customer • Focus all resources of achieving a dominant leadership position– to become a Big Fish in a Small Pond!
  44. 44. Selecting a Niche Market - Beachhead 1. Is the target customer well funded and are they accessible to our sales force? 2. Do they have a compelling reason to buy? 3. Can we today, with the help of partners, deliver a whole product to fulfill the reason to buy? 4. Is there no entrenched competition that could prevent us from getting a fair shot at this business? 5. If we win this segment, can we leverage it to enter additional segment?
  45. 45. Assemble the invasion force Differentiation • Think through the customer’s problems–and solutions–in their entirety. • Develop the “whole product”, including the generic product plus everything else you need to address your customers’ compelling reason to buy. • These may be provided in-house or by using partners and alliances.
  46. 46. What is a Whole Product In marketing, a whole product is a generic product augmented by everything that is needed for the customer to have a compelling reason to buy. It's All About Risk In high tech, products are often more costly and complicated, so the customer has more at stake. Therefore market adoption of a technology product is dependent upon helping customers reduce perceived risk.
  47. 47. Define the battle - Positioning • Positioning is key to make buying easy Define your category and position (market leader!) • Be clear about who will use it and for what? • Show competition and differentiation (pragmatists demand a comparative context) • Ensure staying power
  48. 48. Defining the Value Proposition Statement • For….(target customers, beachhead segment) • Who are dissatisfied with… (current market or internal alternative) • Our product is a … (new product category) • That provides… (key problem solving capacity) • Unlike… (current product alternative) • We have assembled… (key whole product features)
  49. 49. Launch the invasion (Distribution and Pricing) • Secure access to a customer-oriented distribution channel • Direct sales is often the optimal channel for high tech, and typically the best initial channel for crossing the chasm • Reward your channel during the Chasm phase! • Set pricing at the market leader price-point Customers will (almost) only see channel and price!
  50. 50. What Comes after the beachhead? Bowling Alley
  51. 51. Bowling Alley Market Development
  52. 52. Beyond the Chasm I (Tornado) • As more niche markets are successfully penetrated, the solution is perceived to be less of a niche product and more of an all-purpose solution. This creates momentum around the technology, and the hyper growth phase of the Tornado begins. The Tornado is a period of hyper growth when the pragmatic buyers flock en masse to adopt the technology as the standard. The product focus has also shifted away from the problems of the end user and toward the infrastructure buyer that can implement the technology to solve their problems. Successful companies with technology in the Tornado "just ship" the product and focus less on the customer because this is a hyper growth phase where market share is determined and leadership is established. A leader is needed to create stability in the market, and the company that sets the standard for the technology will reap tremendous financial rewards. Companies create value in the Tornado phase by balancing product leadership and operational excellence, or the ability to successfully execute the business plan.
  53. 53. Beyond the Chasm II (The main street) • Main Street represents a time when the purchasing fury has subsided and supply and demand is brought to equilibrium. Moore describes the entrance into Main Street as a "calamitous" experience. Revenue shortfall, loss of talented employees, and shareholder lawsuits due to a floundering stock price are not uncommon. However, if a corporation comes to terms with the fact that Main Street is an inevitable part of the life cycle, it can be quite profitable. To ensure success, corporate strategy must shift once again toward a combination of customer intimacy and operational excellence.
  54. 54. Crossing the Chasm! 1. Target the point of attack 2. Assemble the invasion force 3. Define the battle 4. Launch the invasion How hard can it be? Thanks you!