MASiV 2014: Market Development Strategy and Technology Adoption


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Chasm Group presentation at Woodside Capital conference held January 2104. Covers key technology trends, strategic and operational issues tied to tech adoption and go-to-market strategies, social media/apps adoption, with illustrative cases

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  • Thank you, Kelly. Really sets the stage for today.
    Conference is about M&A with emphasis on Day One on consumer, internet, and mobile
    I’d like to focus this talk on those companies looking to grow…to achieve escape velocity by transforming ideas and innovations into mainstream businesses. Thinking about the issues from both a strategic and operational lens, with implications for companies evaluating M&A candidates.
    By way of introduction, many of you may be familiar with the theories of Crossing The Chasm developed for B2B markets, and based on the work of Geoffrey Moore, our Chairman Emeritus. As technology has changed, so has our practice which led me to join the Chasm Group in 2011 after a 25+ year career operating career in early stage and multi-billion consumer and B2B enterprises.
    The emergence and lightning growth of consumer, internet, and mobile has certainly impacted how we think about tech adoption…and how we think about pathways to growth.
  • Speed and Change are today’s new normal
    Today’s environment makes Moore’s Law (Gordon’s, not Geoffrey’s) ridiculously outdated
    Back in 1965, Gordon Moore shocked the world when he said processor speed would double every 2 years
    Technology innovations not only proliferate but also mutate.
    5 screens and counting?…laptop, tablet, phone, watch, eyeglasses
    Data analytics is a big deal when the goal is useful big data that drives behavior…and money.
    Consider Google…a digital data company building robots, smart cars
  • What’s hot and what’s not in the new normal…
    CES 2014 main themes for hardware were sensors and connectivity
    Everything on display is not always a success…witness 3D TV’s, but
    Wearables – smart watches, health/fitness bands, smart eyewear, clothes with sensors embedded in fabric
    what if you gain/lose weight?
    Car tech – from Google self driving to Audi self parking
    Home connectivity– smart appliances / devices tied to smartphones
    From whole home to specific device automation…like Nest thermostats
    On software side, seeing tons of new apps built for iOS and Android…photos and videos on steroids
    Drafting is a major theme…improving on established categories through micro-targeting
    Not So Hot:
    Belkin slow cookers…whole idea was set it and forget it; not manage it from my smartphone
    Segways…people movers don’t do well on stairs
    Mentioned 3D…no content, new habits like wearing funny looking glasses…now embedded to future-proof TVs
  • Adapted our Crossing the Chasm models to address the growth needs of high volume consumer markets
    Created 2 useful planning tools to support the transition from visionary ideas to mainstream adoption.
  • Focus is the scarcest resource
    Anyone know who this brilliant theorist is??
    Not easy stuff when you’re "too busy" to methodically think through & analyze the market development & product positioning
    When too busy making product or selling to anyone who’ll buy, you can fall prey to:
    Disconnected from best customers
    Out of touch…what do evolving customers truly want, makes them buy, why prefer you
    Haphazard customer targeting and selling
    Incomplete product feature sets
    Less than satisfactory revenue growth, market share
    Competitors nipping at your heels (possibly even beating you)
  • In brief time, want to speak to some compasses and models we use at …9 point target market development model and 4 Gears model
    Each planning approach seeks to provide focus tied to where you stand in the tech adoption lifecycle and how to think about executing.
    The first three are the critical strategic considerations, esp. 1 & 2, while the others represent key executional considerations
  • TMI model addresses the central issue of prdt-mkt fit
    Three areas stand out as paramount from a strategy perspective, require getting really close to consumers
    Discovering product-market fit is one of the major challenges facing all companies…hear all the time from VC firms.
    Whole product:
    Can include supporting tech, distributors, retailers, complementary products to fulfill a need
    Easy to buy, install, use, own
    Look at this model in action…Nest Labs
  • Founded in 2011 by Tony Fadell, creator of the Apple iPod and key contributor to the iPhone with his Apple partner, Matt Rogers, a 27 year old known for his software work on the iPhone.
    They are innovating in the home automation market, selling thermostats built as small computers connected to the internet and controlled thru smartphones.
    Perfect timing given how tech has evolved with sensors and connectivity as CES 2014 themes.
    With a sound 9 point strategy, they are winning big and winning fast.
  • Decision 1: Nest decided to go after energy-conscious consumer market unlike large incumbent players like Honeywell selling mostly to contractors and distributors.
    Worth noting that they did not seek to change consumer behavior. This allowed them to go after the mainstream market from the get go.
    It is a market big enough to matter at 10M units sold per year, small enough to win with a few incumbents targeting contractors, and fits their crown jewels to a tee.
    Decision 2:
    No need to engage in cumbersome programming and lots of manual overrides.
    Self learning includes “Away” feature thru sensors
    Decision 3: Whole Product
    Everything right down to simplified installation screws for any surface.
    No surprise coming from ex-Apple people who get design and function in a self contained ecosystem.
  • With strategy questions nailed, the rest all fell into place,
    Sold close to 1M units per annum at $250 each.
    Next target: same app/new target + new app/same target.
    Working with utility companies looking to manage peak usage issues,
    Expand into Europe where energy savings will be even greater…
    Launched the Nest smoke/carbon dioxide protector…works with the thermostat.
    I own both. When the smoke alarm sounds, I wave my hand and stops vs frantically opening windows and doors
  • Monday’s News:
    Google is not a search company or advertising company…digital data company
    Putting data to work for billions of people
    Putting cash to work unlike Apple
    Data for self drive cars, robotics, energy usage and behavior
    Nest generates huge data volumes that can open many new revenue streams
    Segue to example of new technology with room for improvement…Fitbit health/fitness bands
  • Wearables category—
    Highly touted market
    raising lots of money (Fitbit $43M October)
    not quite taking off despite tremendous PR
    I got mine for Christmas, the Fitbit Flex, and kinda got bored with it quickly.
  • Decision 1: Market that is big enough to matter. It appeals to the early adopters who are non-techies that like to try what’s new and cool. But..
    Decision 2: In my view, no compelling reason to buy right now.
    Asking people to develop new habits quickly and integrate the gadget into their daily life in new ways
    For me, kinda interesting for a week or so but that’s it
    Decision 3: Automated actionable insights…tell me something new and valuable
    Which activities burn calories and how many?
    How does food or activity correlate with sleep?
    I think this product concept has potential…medical arena… not ready for prime time.
  • My sentiments exactly
    I wore mine for this meeting…think I’ll re-gift it.
  • I think Nest and Fitness call attention to this quote..
    Anyone know who said this??
  • To conclude, want to speak to those of you interested or involved with social media and applications.
    Thinking about tech market adoption, we use the 4 Gears model…a process that happens in anything but a linear progression.
     In this example, assume we’re taking about free or freemiums.
    1st gear: Engage users:
    Create experience so compelling/differentiated that users will want to repeat it.
    Repetition creates pattern of consumption that is a key underpinning of a mass market.
    Once you’ve this gear spinning.…
    2nd gear: Acquire traffic:
    This gear interacts with the first gear and answers the question…can this scale. Each modifies the other.
    Demand side (onboard new users who will want something more/different than the initial users)
    Supply side (onboard new content/participants that broaden the offer to appeal to an growing and more diverse user base).
    Get through this acquire and engage phase as fast as possible to get to a tipping point when you assume your rightful position.
    Time depends on target market size….thousands or millions… not predictable.
    3rd Gear: Enlistment (gets you to tipping point…your rightful placement…market propels you forward
    Hyper-engage with a small, vocal minority of users who have shown a propensity to evangelize on your behalf.
    Believe in you so much that your app is part of their identity.
    Net Promoter Score of 9 or 10…definitely recommend to a friend…what fuels viral marketing and drives down cost of consumer acquisition.
    Net Promoter Score of 7 or 8…probably recommend to a friend…ensures customer retention…using but not evangelizing. This state forestalls churn.
    Net Promoter Score of 1-6: have concerns recommending to a friend… see churn and at a score of 1 or 2, you get counter-evangelism akin to the 2004 movie about McDonald’s called Super Size Me
    4th Gear:
    Think URL..Ubiquity Now, Revenue Later. Monetization slows the gears so you have to feather it in.
    Done too soon or quickly, it pops the clutch and stalls the engine.
    Takes a lot of experimentation to get pricing right
    Every money move requires ramping the engine back up as fast as possible.
  • This game is not for the faint of heart
    When you’ve got all the gears humming in the right sequence
    engage and disengage the clutch at the right times in the right sequence
    can get to a very sizeable loyal user base
    I know you’re all impressed with my PPT skills
    Great successes introduced monetization late in the game…letting an acquiring monetization company handle it.
    YouTube to Google (2006): $1.8 Billion
    Same deal today worth $4.2 Billion
    Google share price: 2006= $481 2014= $1122
    Intragram to Facebook (2012): $1 Billion
    Tumblr to Yahoo! (2013): $1.1 Billion
  • The metamorphosis from visionary ideas to mainstream businesses is a process
    Today it happens really fast…speed and change as the new normal
    Focus and discipline at every step matters
    Not easy stuff, but models and compasses can help…
  • As Kelly mentioned, this conference is built around interactivity…we’re all the content. So let’s talk.
    Thank you.
  • MASiV 2014: Market Development Strategy and Technology Adoption

    1. 1. Achieving Escape Velocity Transforming Visionary Ideas into Mainstream Businesses © 2014 The Chasm Group, LLC
    2. 2. • Speed of technology advances • Device and platform proliferation • Evolving consumer • More big data, better data analytics • The Internet of Things • Speed to success, speed to failure • Systems of engagement on fire The New Normal – Speed and Change 2 © 2014 The Chasm Group, LLC
    3. 3. WHAT’S HOT •Consumer hardware – Wearables – Car tech – Home Connectivity/Automation – 4K TVs •Consumer software – Drafting established platforms/categories – App Stores: Microsoft, Salesforce, Apple… WHAT’S NOT 3 © 2014 The Chasm Group, LLC
    4. 4. What Do Speed and Change Mean To You EARLY STAGE •How do you quickly create a new category, or re-invent one? •How do you challenge incumbents? THE NEW RULES ESTABLISHED MAINSTREAM •How do you balance current and future businesses? •How do you neutralize competitive upstarts? •How do you make the right acquisitions? Move fast but not haphazardly Employ compasses and models Focus and discipline 4 © 2014 The Chasm Group, LLC
    5. 5. “If you don’t know where you’re going, you’ll end up someplace else” 5 © 2014 The Chasm Group, LLC
    6. 6. Market Development Strategy Checklist Key sponsor 1. Target Consumer 2.Compelling Reason to Buy Complete solution 3.Whole Product 4.Partners & Allies Manages sales & Fulfillment complexity © 2014 The Chasm Group, LLC Maps to all the above 7.Competition 8.Positioning / Messaging Next growth segment Fill in the gaps 5.Sales Strategy 6.Pricing Strategy Legitimate alternatives Key motive 9.Next Target Core differentiation
    7. 7. Product – Market Fit: Three Core Strategic Questions 7 © 2014 The Chasm Group, LLC
    8. 8. 8 © 2014 The Chasm Group, LLC
    9. 9. Nest Labs Product - Market Fit: Three Core Strategic Questions 1 2 3 TARGET MARKET COMPELLING REASON TO BUY WHOLE PRODUCT SOLUTION  Consumers, not contractors – Design and coolness matters Energy Savings Consistent Home Comfort Self learning Easy to buy Easy to use Easy to install Easy to upgrade over web Beautifully designed 9 © 2014 The Chasm Group, LLC
    10. 10. Nest Labs: Market Development Strategy Checklist Energy-Conscious Consumers 1. Target Consumer 2.Compelling Reason to Buy Easy to buy, install, use, upgrade Website, retail partnerships Honeywell Prestige Smoke/ carbon Monoxide detectors © 2014 The Chasm Group, LLC Easy energy savings, Easy home comfort 3.Whole Product 4.Partners & Allies 5.Sales Strategy 6.Pricing Strategy 7.Competition None required Parity with reference competitor 8.Positioning / Messaging 9.Next Target Self learning
    11. 11. 11 © 2014 The Chasm Group, LLC
    12. 12. 12 © 2014 The Chasm Group, LLC
    13. 13. Product – Market Fit: Three Core Strategic Questions 1 2 3 TARGET MARKET COMPELLING REASON TO BUY WHOLE PRODUCT SOLUTION  Health/Fitness Enthusiasts  Dieters  Coolness factor  o     Monitors activity levels Monitors my sleep…YAWN Requires new habits Requires daily input (food/sleep) Kludgy smartphone programming Uncomfortable to wear  Data > Automated actionable insights 13 © 2014 The Chasm Group, LLC
    14. 14. 14 © 2014 The Chasm Group, LLC
    15. 15. “That’s been one of my mantras – focus and simplicity. You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”” 15 © 2014 The Chasm Group, LLC
    16. 16. The Four Gears for Web-Based Businesses ACQUISITION Starter Motor © 2014 The Chasm Group, LLC 16
    17. 17. Four Gears to Drive Sustained Growth ACQUISITION © 2014 The Chasm Group, LLC 17
    18. 18. Growth is a Process 18 © 2014 The Chasm Group, LLC
    19. 19. What Do You Think? Andrew Salzman (415) 812-1925 19 © 2014 The Chasm Group, LLC