Categories: archive |books

Book: Crossing the Chasm

  • Read: April 2012
  • Rating: 7.5/10

Crossing the Chasm by Geoffrey Moore is a classic book about marketing and selling disruptive products to mainstream customers. You’ve inevitably heard of the adoption curve: innovators, early adopters, early majority, late majority, and laggards. Geoffrey is the guy that came up with the stuff. This book should be read by anyone who wants to market dispruptive technology, whether in high-tech or not. I’m only giving the book a 7.5, mostly because I think I’ve read too much of this stuff during business school already- but it’s inevitably the source of many other materials by a number of authors and still worth reading. The book isn’t all theory- Geoffrey also provides valuable information in actually implementing things to cross the chasm without failing.

My Notes

The point of greatest peril in the development of high-tech market lies in making the transition from an early market dominated by a few visionary customers to a mainstream market dominated by a large block of customers who are predominantly pragmatists in orientation.

Discontinuous (disruptive) innovations versus continuous (sustainable) innovations

Innovators -> Early Adopters -> Early Majority -> Late Majority -> Laggards

Cracks between:

  • Innovators and Early Adopters
  • Early Majority and Late Majority: The early majority is willing and able to become technologically competent, where necessary; the late majority, much less so

Chasm between:

  • Early Adopters and Early Majority

  • The early adopter is buying a change agent- they want to be the first to implement this change in their industry

  • The early majority want to buy a productivity improvement for existing operations- evolution, not revolution

When promoters of high-tech products try to make the transition from a market base made up of visionary early adopters to penetrate the next adoption segment, the pragmatist early majority, they are effectively operating without a reference base and without a support base within a market that is highly reference oriented and highly support oriented

Managers need to recognize that there is something fundamentally different between a sale to an early adopter and a sale to the early majority, even when the company name on the check reads the same

Marketing = taking actions to create, grow, maintain, or defend markets

  • Early market = Innovators and early adopters
  • Mainstream market = Early majority and late majority

Innovators - Technology Enthusiasts

Ones who really appreciate your product, will spend hours with it, will forgive its terrible documentation, slow performance, and more

The need:

  1. the truth, without tricks
  2. access to knowledgeable person(s) to answer their questions
  3. ability to be first to get the new stuff
  4. want to get it cheap

Easy to do business with, assuming you have latest and greatest technology and don’t need to make much money

Early Adopters - Visionaries

  • Driven by a dream, not the technology itself
  • Looking for breakthroughs, not improvements
  • Derives value from the strategic leap forward technology enables, but not the technology itself
  • Least price-sensitive segment
  • Hard to please
  • In a hurry

You must be able to have management of expectations with them

Problems of Early Market

  • Company has no expertise
  • Company sells the visionary before it has a product (vaporware)
  • Failure to communicate leap in benefits

Early Majority - Pragmatists

Risk is a negative word in their vocabulary

When buying:

  • They care about the company
  • They care about the quality of the product
  • They care about the infrastructure of supporting products and system interfaces
  • They care about the reliability of the service they are going to get

Want a market-leading product, due to its aftermarket vendors services

  • Price sensitive
  • Requires patience

Late Majority - Conservatives

  • They find something that works for them, and stick with it
  • Fear high tech a little
  • Like preassembled packages, with everything bundled, at a heavily discounted price

How to lose a mainstream market

  1. Stop investing in the market, cease R&D to match the competition, and milk it for money to invest elsewhere
  2. Shoot yourself in the flagship product

Laggards - Skeptics

  • They exist to block purchases
  • Neutralize their influence

Four fundamental characteristics of visionaries that alienate pragmatists

  1. Lack of respect for the value of colleagues’ experiences
  2. Greater interest in technology than industry
  3. Failure to recognize the importance of existing product infrastructure
  4. Overall disruptiveness

Perils of the Chasm

  1. Lack of new customers
  2. To enter the mainstream market is an act of aggression

Cross the chasm by targeting a very specific niche market where you can dominate from the outset, force your competitors out of that market niche, and then use it as a base for broader operations

Most companies fail to cross the chasm because they lose their focus, chasing every opportunity that presents itself, but finding themselves unable to deliver a salable proposition to any true pragmatist buyer

The consequences of being sales-driven during the chasm period are fatal

Achieve market leadership

Applications are naturally vertical

Platforms are naturally horizontal

Make a total commitment to the niche, and then do your best to meet everyone else’s needs with whatever resources you have left over

When markets go mass, platforms have the advantage

“If you don’t know where you are going, you probably aren’t going to get there”

You have to make a high-risk, low data decision

You need to understand that informed intuition, rather than analytical reason, is the most trustworthy decision-making tool to use

Use characterizations

Market Development Strategy Checklist

  1. Target customer
  2. Compelling reason to buy
  3. Whole product
  4. Partners and allies
  5. Distribution
  6. Pricing
  7. Competition
  8. Positioning
  9. Next target customer

Commit to one- and only one- beachhead target

Show stopper issues for crossing the chasm:

  1. Target customer
  2. Compelling reason to buy
  3. Whole Product
  4. Competition

Chasm-crosing is not the end, but rather the beginning, of mainstream market development

Target Market Selection Process

  1. Develop a library of target-customer scenarios
  2. Appoint subcommittee to make the target market selection
  3. Number and publish the scenarios in a one-page per scenario format
  4. Each member of the subcommittee to privately rate each scenario
  5. Rank order the results

The Whole Product Model

  1. Generic Product
  2. Expected Product
  3. Augmented Product
  4. Potential Product

Think about anything you would need to achieve your compelling reason to buy

Any force can defeat any other force- if it can define the battle

Your goal is to position your product as the indisputable correct buying choice

Four domains of value in high-tech marketing:

  • Technology - technology enthusiasts
  • Product - visionaries
  • Market - pragmatist
  • Company - conservative

Make products easier to buy, rather than easier to sell

Positioning:

  • is a noun, not a verb
  • single largest influence on the buying decision
  • exists in people’s heads, not in your words
  • people are highly conservative about changes in positioning

Positioning process:

  1. Claim
  2. Evidence
  3. Communications
  4. Feedback and adjustment

Positioning with an elevator pitch

High-tech distribution channels:

  • Direct sales
  • Two-tier retail
  • One-tier retail
  • Internet retail
  • Two-tier value-added reselling
  • National roll-ups
  • OEMs
  • System Integrators

Distribution-oriented Pricing

  • Customer-oriented pricing
  • Vendor-oriented pricing
  • Distribution-oriented pricing

Beyond the Chasm

Hockey stick curves are created by spreadsheets, a software tool that many have argued has driven some of the worst investment decisions of the past two decades

The discipline of profitability teaches you to “just say no” early and often