Henrik Berglund - Crossing the Chasm
1. Background: Classical diffusion theory
2. The Technology Adoption Life Cycle
3. Categories of Technology Adopters
4. Cracks and Chasms in the Adoption Life Cycle
5. Strategies and Tactics for Crossing the Chasm
3. Classical diffusion theory Everett Rogers (1962) Found that for most
members of a social system, the adoption-decision depends heavily on the
adoption-decisions of the other members of the system. The more people adopt
an innovation, the lower the perceived risk. The result is an S-curve shaped
pattern of innovation diffusion. Synthesized research on adoption of
innovation from several fields: Anthropology, Early sociology, Rural
sociology, Education, Industrial sociology, Medical sociology
4. Example: simple model
5. Example: simple model
6. Example: simple model
7. Example: simple model
8. Example: simple model
9. Example 2: dynamics of riots Consider a hypothetical mob. Each person's
decision to riot or not is dependent on what everyone else is doing.
Instigators will begin rioting even if no one else is, while others need to
see a critical number of trouble makers before they riot, too (reduces risk
of getting caught). This threshold for rioting is assumed to follow some
(e.g. normal) distribution. Result: S-curve.
10. Adoption of new products
11. Classical diffusion theory When faced with discontinuous innovations,
customers fall into five broad categories along an axis of risk-aversion.
Innovators Early Adopters Early Majority Late Majority Laggards
12. Technology adoption life cycle In high-tech, the categories have been
given more specific names (Geoffrey Moore). Innovators = Technology
Enthusiasts Early Adopters = Visionaries Early Majority = Pragmatists Late
Majority = Conservatives Laggards = Skeptics
13. Technology adoption life cycle Techies: Try it! Visionaries Get ahead of
the heard! Pragmatists: Stick with the herd! Late Majority Sceptics: No way!
Early Majority Early Adopters Innovators Laggards Conservatives: Hold on!
Critical qualitative differences, especially in product needs and buying
behaviors.
14. Innovators – Technology Enthusiasts Primary Motivation: - Learn
about new technologies for their own sake Key Characteristics: - Strong
aptitude for technical information - Like to alpha test new products - Can
ignore any missing elements - Do whatever they can to help Challenges: -
Want unrestricted access to top technical people - Want no-profit pricing
(preferably free) Key Role: Gatekeeper to the Early Adopter
15. Early Adopters – The Visionaries Visionaries Get ahead of the
heard! Late Majority Early Majority Early Adopters Innovators Laggards
16. Early Adopters – The Visionaries Primary Motivation: - Gain
dramatic competitive advantage via revolutionary breakthrough Key
Characteristics: - Great imaginations for strategic applications - Attracted
by high-risk, high-reward propositions - Will help supply the missing
elements - Perceive order-of-magnitude gains – so not price sensitive
Challenges: - Want rapid time-to-market - Demand high degree of
customization and support Key Role: Fund the development of the early market
17. Early Majority – Pragmatists Pragmatists: Stick with the herd!
Late Majority Early Majority Early Adopters Innovators Laggards
18. Early Majority – Pragmatists Primary Motivation: - Gain
sustainable productivity improvements via evolutionary change Key
Characteristics: - Astute managers of mission-critical applications -
Understand real-world issues and tradeoffs - Focus on proven applications -
Like to go with the market leader Challenges: - Insist on good references
from trusted colleagues - Want to see the solution in production at the
reference site Key Role: Bulwark of the mainstream market
19. Late Majority – Conservatives Late Majority Early Majority Early
Adopters Innovators Laggards Conservatives: Hold on!
20. Primary Motivation: - Just stay even with the competition - Avoid
competitive disadvantage Key Characteristics: - Better with people than
technology - Risk averse - Price-sensitive - Highly reliant on a single,
trusted advisor Challenges: - Need completely pre-assembled solutions -
Would benefit from value-added services but do not want to pay for them Key
Role: Extend product life cycles Late Majority – Conservatives
21. Laggards – Sceptics Late Majority Sceptics: No way! Early Majority
Early Adopters Innovators Laggards
22. Laggards – Sceptics Primary Motivation: - Maintain status-quo Key
Characteristics: - Good at debunking marketing hype - Disbelieve
productivity-improvement arguments - Believe in the law of unintended
consequences - Like taking a contrarian position - Seek to block purchases
of new technology Challenges: - Not a customer - Can be formidable
opposition to early adoption Key Role: Retard the development of high-tech
markets
23. Since these groups are so different… Late Majority Early Majority
Early Adopters Innovators Laggards
24. …adoption is interrupted at key transitions. Late Majority Early
Majority Early Adopters Innovators Laggards Crack 1 Crack 2 The Chasm
25. Crack 1 Early Adopters do talk to Innovators. Still Crack 1 occurs.
Problem: Innovators like cool technology products that cannot be readily
translated into major new business benefits. Early Adopters want competitive
advantage. • Esperanto • Desktop Video Conferencing Solution:
The product must be made to enable a valuable strategic leap forward.
26. Crack 2 The Late Majority talks to Early Majority. Still Crack 2 occurs.
Problem: The Early Majority is willing and able to become technically
competent when needed. The Late Majority is not. • Scanners and Video
Editing Programs • Telephone transferring systems Solution: Ensure
very high user-friendlieness to ensure ease of adoption.
27. The chasm Early Adopters Innovators Crack 1 Late Majority Early Majority
Laggards Crack 2 The Chasm (This is the big one)
28. The chasm The Early Majority does not talk to the Early Adopters. Hence
a huge Chasm. The Early Adopters is buying a revolutionary change agent
Expect a clear discontinuity between the old and the new Expect clear
strategic advantages Tolerate bugs and glitches The Early Majority is buying
evolutionary productivity improvement Want to minimize the discontinuity
with the old way Wants innovations to enhance established business processes
Expect a more or less bug free product
29. Different value delivered Visionaries Pragmatist It is new to the market
It is the fastest product It is the easiest to use It has elegant
architecture It has unigue functionality It is the de facto standard It has
the largest installed base It has most third party supporters It has great
quality of support It has a low cost of ownership The Chasm
30. Different buying behaviors Visionaries Pragmatist Willing to take risk
Rely on horizontal references: other industries & techies Want to buy
from new firms Want rich tech-support Wants very little risk Relies on
vertical references within their industry Wants to buy from market leaders
Wants one point of contact The Chasm
31. What Pragmatists think of Visionaries 1. The visionaries love technology
but are bored with the mundane details of their own industry, which is the
everyday work of us pragmatists. 2. The visionaries want to build systems
from the ground up and do not appreciate the importance of networks, systems
and processes already in place. 3. The visionaries seem to do all the fun
things. They get all the funds and all the attention for their blue sky
projects. If they fail, it is us pragmatists who have to clean up the mess.
If they succeed, the disruptive change is just too much to handle.
Pragmatists don’t trust visionaries as references!
32. Crossing the chasm – Catch 22 “The pragmatists will use only
those products that are already used by a majority of pragmatists. And
generally look to one and other as references. So, how can we get them to
use a new product?” ? The Chasm Visionaries Pragmatist
33. Discovering that you are in the chasm Visionary markets saturates, or
visionaries abandon - Too late for revolutionary competitive advantage -
There are other cool disruptive things out there Pragmatists see no reason
to buy yet - Too early for anything to be ”in production” - No
herd of references has yet formed The Chasm Visionaries Pragmatist
34. Crossing the chasm The problem - 80% of many solutions – 100% of
none - Pragmatists won’t buy 80% solutions! Conventional solution
(tends to fail) - Committing to the most common enhancement requests - Never
completely satisfying any one customer segment’s needs
”D-day” solution (more likely to succeed) - Focus all efforts on
a single ”beachhead” segment with a compelling reason to buy,
develop a whole product, become a market leader - Then leverage product and
user references to attack other segments The consequence of being
sales-driven instead of strategy-driven in the chasm is fatal – Focus
!!! Beachhead segment
35. D-day – Omaha Beach
36. ”D-day” invasion strategy & tactics 1. Target the point
of attack Segmentation – isolate target customers and their compelling
reason to buy 2. Assemble the invasion force Differentiation – develop
the ”whole product” and choose allies to realize this 3. Define
the battle Positioning – reate the competition (if there is none, you
still need one) and position yourself 4. Launch the invasion Distribution
and Pricing – select your distribution channel and set your price
37. Target the point of attack Segmentation • Target a specific market
segment: – Target customer (user, tech., econ.)? – Compelling
reason to buy? – Whole product? – Competition? – Partners
– Distribution – Pricing – Positioning – Next target
customer • Focus all resources of achieving a dominant leadership
position – to become a Big Fish in a Small Pond!
38. Assemble the invasion force Differentiation • Think through the
customer’s problems – and solutions – in their entirety.
• Develop the “whole product”, including the generic
product plus everything else you need to address your customers’
compelling reason to buy. • These may be provided in-house or by using
partners and alliances.
39. Define the battle Positioning • Positioning is key to make buying
easy – Define your category and position (market leader!) – Be
clear about who will use it and for what? – Show competition and
differentiation (pragmatists demand a comparative context) – Ensure
staying power • Positioning statement – For [target customers],
– Who are dissatisfied with [the current market alternatives], –
Our product is a [new product category] – That provides [key
problem-solving capability], – Unlike [the product alternative],
– We have assembled [key whole-product features for our specific
application].
40. Launch the invasion Distribution and Pricing • Secure access to a
customer-oriented distribution channel • Direct sales is often the
optimal channel for high tech, and typically the best initial channel for
crossing the chasm • Reward your channel during the Chasm phase!
• Set pricing at the market leader price-point Customers will (almost)
only see channel and price!
41. Crossing the Chasm! 1. Target the point of attack 2. Assemble the
invasion force 3. Define the battle 4. Launch the invasion How hard can it
be?
42. Henrik Berglund Chalmers University of Technology Center for Business
Innovation www.henrikberglund.com twitter: khberglund Thank You! And, thank
You Geoffrey: http://www.tcg-advisors.com/who/moore.htm
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