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
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Today’s environment makes Moore’s Law (Gordon’s, not Geoffrey’s) ridiculously outdated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??
(READ)…STEVE JOBS
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.