Wednesday, March 12, 2014

"Crossing the Chasm" Still Valid After 20 Years

Twenty years ago, I read a new book by Geoffrey Moore, Crossing the Chasm. I had the opportunity to become acquainted with the author and became a student of his methods and strategies for moving products and services from innovation to mainstream. I have several dog-eared copies of the book and have distributed scores more to clients over the years.

Crossing the Chasm popularized the “technology adoption life cycle,” which models how different groups of customers embrace a product or service over time. All established markets and popular products began as obscure inventions at the point of introduction. Not every innovation becomes popular, so navigating the life cycle is one of the biggest challenges for innovators, investors and marketers. Creating and navigating the technology adoption life cycle , that is, creating new markets, is the dream of every entrepreneur with a disruptive new idea.

While many assume crossing the chasm,” or moving from the early adopters to the early majority ,is unique to technology product adoption and it was especially present years ago when technology meant big investment and big risk for big businesses, many of the principles and tools also apply to adoption of innovative and disruptive products, services, and business models. Since mainstream users won’t take their buying cues from the early users or geeks, a gap exists between the early market and the mainstream market. Crossing the Chasm is the story of navigating the curve and leaping the “chasm” – the difference between success and failure.

What’s new in the 3rd Edition?
Recently Geoff Moore outlined in his blog “What’s New” and “What’s Not New”. I have taken the liberty to outline it below:

What’s new?
1.        Consumer IT. To paraphrase Cheech and Chong, “We don’t need no stinkin’ chasms!” Chasms are a function of required commitments perceived risks. For a consumer on the Web, there are no commitments required, and there are no risks. So a Google, a Facebook, a Twitter, an Instagram—all can (and did) go viral in record speed. In this world, it is “Tornado, or bust!”

2.        The Four Gears. New dynamics require new models—that’s why I had to add an appendix to the third edition covering this one. For consumer IT, there are four gears that need to spin up in harmony faster and faster to generate tornado winds. They are: Acquire, Engage, Convert, and Enlist. People naturally focus on Acquire and Convert because they are the two that are easiest to measure, but real power comes from the ability of a Web property to Engage users and Enlist evangelists.

3.        Cloud Computing. I am thinking specifically of enterprise IT here, and there is no question in this context that cloud itself has had to cross the chasm. But now that it has, and brought along with it SaaS applications and more recently mobile clients, the barrier to entry for next-generation B2B software companies is much lower. The chasm is still there, but it is nowhere near as daunting as it was a decade or more ago.

4.        Business Models. The new infrastructure has shifted the balance of power in tech from the product model to the as-a-service model. This has ushered in an era ofConsumption Economics (see Todd Hewlin and J.B. Woods’s book of the same name) which also works to modulate the commitment and thus the risk of embracing a new technology.

5.        Distribution. In a product economy, getting into distribution, and recruiting distribution partners who could provide the right level of service to your target customers, significantly amplified chasm dynamics. In an as-a-service economy, with the Web providing a ubiquitous distribution channel, there are still plenty of challenges around getting above the noise, but it is no longer anywhere near as hard to get into distribution.

6.        Marketing. Social networking and digital media have fundamentally changed the game. In the short term, this is actually creating some “chasm turbulence” as marketers and the marketing industry seeks to reorient themselves to the new realities. But for entrepreneurs who feel at home in the new world, it is dramatically empowering—again, a chasm dynamic reducer.

7.        New winners! Of course, that is why I had to revise the book. A new generation wants and needs to reference the companies it grew up with, not ones from a prior era. History is great, but only provided it sustains the narrative up to the present.

Overall, the key takeaways are two. First, crossing the chasm is a B2B model. B2C requires its own treatment, hence the four gears. B2B2C combines the two—and we are seeing a lot of that these days, especially when B2C companies seek to monetize their user traction.
And second, chasm dynamics, at least in the developed economies, have been muted by virtue of layer after layer of deployed technology that mitigates the risk and modulates the commitments a new user must undertake to trial the next disruptive innovation. In effect, disruptive innovation, the engine that drives the Technology Adoption Life Cycle, is becoming less disruptive.

What’s not new?

1.   The Technology Adoption Life Cycle. Communities of all sizes in all geographies in all industries, indeed in all contexts, still self-segregate into five adoption strategies when confronted by a disruptive innovation. And those five strategies are still:

• the Technology Enthusiast (who loves the innovation for what it is in itself), 
• The Visionary (who loves it for how it can deliver dramatic competitive advantage to a first mover), 
• The Pragmatist (who has approach/avoidance conflict, wanting the benefits, leery of the risks), 
• The Conservative (who is suspicious of the benefits and certain of the risks), and 
• The Skeptic (who believes the disruptive innovation is most likely an instrument of the Devil).

2.    The Whole Product.
 The whole product is the complete set of products and services needed to fulfill the customer’s reason to buy. How they respond to this issue is what separates each of the five strategies. Technology enthusiasts are content to just play with the product itself. Visionaries will fund projects to build out a whole product before anyone else is ready to. Pragmatists need to see a whole product in production before they are comfortable to jump in, and they will check references assiduously to see if it is really there. Conservatives need a bulletproof whole product, and even then they are sure they are going to break something. Skeptics think the whole product will never come into existence

3.    Business Ecosystems. If anything, these are more pronounced in the present era, where global outsourcing requires vendors to orchestrate a supply chain and a delivery and support chain end to end. Even when the customer or consumer perceives little to no risk, the business partner does, if for no other reason than the opportunity cost of committing to an innovation that never gets to critical mass. In other words, there is the challenge of customer adoption, and the parallel challenge of ecosystem enlistment, and until both chasms are crossed, you do not have a going concern. 

4.    Word-of-Mouth References. Pragmatists are the ones who make or break any market development strategy, if for no other reason than they move as a herd and thereby create bloc voting effects. And pragmatists make their buying decisions based on what they see other pragmatists just like them doing. So word-of-mouth has always been the number one influence on making risk-bearing purchase decisions, and always will be.

5.    The Chasm. Pragmatists will forever hold back until they see others like them jump in, and visionaries will always go ahead of the herd in search of first-mover advantage, and this will always create chasms. (It is good to be in a business that promises lifetime employment.)

6.    Pragmatists in Pain. In order to get the pragmatist community activated, a subset of pragmatists have to go ahead of the herd. These will be pragmatists in pain. They will be saddled with an ever-worsening problem that cannot be solved by their established systems. In short, under current course and speed, they are toast. Once they become aware they have nothing to lose, they become candidates for adopting the new technology—but only if it comes in the context of a complete solution to their increasingly pressing problem.

7.    Beachhead Strategy. To serve pragmatists in pain, you need to pre-wrap a complete solution, including the efforts of partners and allies. This can only happen with a great degree of focus, and even then it requires a market-making narrative that is compelling enough to win over the other participants in your solution. This is an uncommon situation and is normally specific to a particular type of process in a particular industry. Focusing intensely on that process and that industry is still the fastest, surest, safest way to cross the chasm.

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