- Identifying a niche market to attack
- Defining the "whole" product
- Positioning the product in relation to its competition
- Execution of the attack through distribution and pricing
Concludes with a discussion of how a company must evolve and some of the issues that must be addressed (personnel/compensation) post chasm
Chapter 1: Chasm defined
- Four type of customers
- Early adopter/Innovators, Early majority, Late majority, Laggards
- The population is distributed in a bell curve
- Each of the four categories one standard deviation way from the mean
- Normal technology adoption life cycle (TALC) moves from one segment to the next, left to right
- Innovations are continuous or discontinuous
- Technology innovations are often discontinuous
- This has the effect of disrupting the TALC
- Gaps/cracks between each segment
- Innovator to early adopter
- Early adopter to Early majority: Early adopter wants a change agent, Early majority wants a productivity improvement
- Moving from early adopter to early majority is a move from a market with no reference/support to one with a well defined reference/support model
- The chasm is the gap between the early adopter/innovator and the early majority
Chapter 2: Chasm examined
- Innovators: Demand extensive information, but will support the product even if the product is half baked
- Visionaries (Early adopter): Derive value from the the strategic leap forward, not the technology itself
- Expect breakthrough, not improvement
- Highly demanding, expect the"dream"
- Pragmatists (Early majority): The large revenues reside with the pragmatists
- Slow to make decisions, move only when they sense the market is moving
- Late majority/Laggards
Chapter 3: Overview: How to cross the chasm
- Sell to visionaries <-chasm-> Sell to early adopters
- How to handle the chasm:
- Take over a niche market
- Company must be market driven not sales driven
- Being sales driven in the chasm period is fatal
- Problem: Leader like sales driven companies, not market driven companies
- Provide the "whole" product
- Market leadership - big fish, small pond
- Growth will need word of mouth - spreading the customers dilutes this: 10 customer in 10 segments is worse than 3-4 customers in 3 segments
- Strategic niches
- Commit to the niche
- Act locally, not globally
- Target closed communities
- Platforms vs. Applications
- Products must take a vertical approach to cross the chasm i.e must become an application
- Platforms enable mass market adoption - will help once the chasm is crossed
Chapter 4: Identify the point of attack
- This is a High Risk, Low data decision
- Informed intuition better than analytical reasoning
- Define target customer characterizations
- Use case scenarios
- Market development strategy checklist
- Target customer, reason to buy, whole producer, partners, distribution, pricing, competition, positioning, next target customer
- Size of the market:
- Pick on someone your own size
- Steps:
- List library of target customer scenarios
- Analyze, rank and decide
- Commit to the point of attack
Chapter 5: Define the product
- Whole product marketing
- Whole product can be categorized based on satisfaction of requirements:
- Generic, Expected, Augmented, Potential
- A seemingly inferior product may actually be inferior only in the "generic", it may be superior in the "whole"
- A whole product may need support:
- Third parties usually do not contribute during the chasm
- Need to form tactical alliances
- Markets are an ecology of interrelated interests
- Steps:
- Develop a whole product diagram (donut)
- Develop needed alliances/relationships
Chapter 6: Define the battle
- Any force can defeat any other if the battle is defined
- Create the competition:
- Locate the product in a buying category which has established credibility with pragmatist buyers
- Focus on the needs of the pragmatists: Use a Competitive Positioning Compass
- Opinion/knowledge about technology (Specialist/Generalist)
- Opinion about proposition (Supporter/Skeptic)C
- Crossing the chasm (Move sales from Supporters of technology/proposition -> to skeptics of technology/proposition.
- Move from product metrics (fastest, easiest) to market metric (largest base, cost)
- Positioning
- In people heads, not in words
- Pragmatists are conservative about changes in positioning
- Positioning is about making a product easier to buy, not easier to sell
- Process: Claim, Evidence, Communications, Feedback/adjustments
- Pass the elevator test
- For A, Who are dissatisfied with B, Our product is C, That provides D, Unlike E, We have assembled F
- Proof: Market share, Alliance
- Steps:
- Focus product by defining competition
- Define position
Chapter 7: Launch the attack
- Objective: Secure a channel into mainstream market with which pragmatist will be comfortable
- Prioritize above revenue, profits, customer satisfaction
- Motivate the channel
- Customer oriented distribution, Distributor oriented pricing
- Distribution: Direct selling, Retail selling to OEMs to VARs, System integrators
- Can the channel create a relationship to the mainstream customer?
- Direct selling is the vest to create the relationship, crossing the chasm
- Retail fulfills a demand, rather than create it
- VARs provide support
- Price point between $10K and $75K is the hardest to sell
- Products needs marketing and end support
- VARs do not expand a market
- Start with direct selling, move to suitable channel after awareness is created
- Pricing: Customer oriented, vendor oriented, distribution oriented
- Customer oriented:
- Visionaries: High cost: Value based pricing
- Pragmatists: Competitive based pricing
- Conservatives: Low cost: Cost based pricing
- Vendor oriented:
- Internal costs drive pricing decisions
- Distribution:
- Price based on market
- Price for market leadership
- Steps:
- Define the distribution channels
- Define the pricing model
Chapter 8: Conclusion
- Post chasm enterprise bound by the commitments of the pre chasm enterprise
- Avoid making wrong commitments in pre-chasm stage
- Post chasm enterprise: Purpose is to make money
- Stop custom development and roll out generic product
- Pre chasm enterprise: Purpose is proof of concept of product and small early revenues
- Typical mistake: Promise of hockey stick growth post chasm
- Reality: Staircase: cycles of slow growth, stagnancy and then rapid growth, caused by repeatedly crossing chasms in different market segments
- Venture capitalist concerns:
- How long till chasm is crossed. How long before reasonable profit from mainstream market?
- Chasm can be crossed only when the whole product is built, may need a long time
- Technologist: Adopt discipline of profitably from day one
- Except: When high entry barrier exists
- Rapid development needed (land grab)
- Composition of company needs to be different before and after the chasm in Engineering/Sales
- Navigating the chasm: May need reorgs with new job descriptions to handle the shift