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Crossing

the chasm: a short review of the key concepts


Introduction
Crossing the chasm is a best-selling book that was first published in 1991 by Geoffrey A. Moore. The purpose of the book is first to identify and describe what causes many disruptive innovations to fail in the market (i.e. the so-called chasm between the early market made of innovators and visionaries, and the mainstream market made of pragmatists) and second to propose a strategy to successfully cross the chasm. Although the book is geared towards disruptive, or discontinuous, innovations, many of them IT-related, it provides key learning and insights for innovation marketing in general, both in B2B and B2C environments. It is a very easy and even pleasant read, praised by engineers, marketers and financiers alike.

The revised Technology Adoption Life-Cycle (TACL)


The original model of the TALC was developed in the 60s by Everett Rogers, a professor of rural sociology, and his associates, who wanted to understand the adoption pattern of agricultural products. They then generalized the concept and made it popular in the book Diffusion of Innovations published in 1962. This model predicts that the adoption follows a bell curve across time, from Innovators to Laggards, through Early Adopters, Early Majority and Late Majority. The transition between groups happens naturally and the sales grow into a sigmoid or S curve (in yellow here), which is the accumulation of the periodic (e.g. yearly) sales under the bell curve. The problem spotted by Moore is that when it comes to disruptive technological innovation (and to a lesser degree, to innovation in general), the transition between groups does not happen so smoothly. In reality, the endorsement of one group does not grant the adoption of the following one. In fact, there are cracks between the groups, and most importantly between the Early Adopters (EA) and the Early Majority (EM), which is where the chasm lies. As a result, Moore crafted a revised TALC that takes into account these cracks.


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Why is there a chasm?


More importantly, Moore explained why the chasm between EA and EM actually exists. Many professionals working with disruptive innovations knew that something was happening that caused companies to fail, but it was not clear what, and the previous TALC model did not provide good explanations. Moores explanation is based on psychographics, i.e. the profiles of the different groups adopting across time. Short descriptions of the groups are given in the table below. Innovators a.k.a. Technology enthusiasts
- Pursue new technology products aggressively; sometimes seek them before they are on the market. - Often make a technology purchase simply to explore the new devices properties. - Only few in any given market segment. - Their endorsement reassures the other players in the marketplace that the product does work.

They are key to get the technology first introduced


- Like Innovators, buy into new product concepts very early in their life cycle. - Unlike Innovators, they are not technologists. - They find it easy to imagine, understand and appreciate the benefits of a new technology. - They can relate these potential benefits to their other concerns. - Whenever they find a strong match, EA are willing to base their buying decision upon it. - They do not rely on well-established references, they prefer to rely on their intuition and vision

Early Adopters a.k.a. Visionaries

They are key to opening up the market segment


- Can relate to the technology, comfortable with their ability to handle a high tech product. - But ultimately driven by a strong sense of practicality. - They are content to wait and see how other people are making out before buying in themselves. - They want to see well-established references before investing substantially. - Many people are in this category: roughly one third of the buying population.

Early Majority a.k.a. Pragmatists

They are key to any substantial profit and growth Late Majority a.k.a. Conservatives Laggards a.k.a. Skeptics
2 Crossing the Chasm Key Concepts 03.09.2012 Arnaud LE NEVEZ - Not comfortable with their ability to relate to and handle a high tech product. - Wait until the technology has become an established standard. - Want to see lots of support, tend to buy from large, well-established companies. - Another large category: about one third of the buying population.

Highly profitable as most R&D costs have been amortized


- Dont want anything to do with new technology! - Will be forced fed with a high tech product.

To put it simply, the main issue is that EAs are driven by their intuition and vision, and seek to achieve a certain competitive advantage by adopting early. On the contrary, the members of the Early Majority are pragmatists, mostly driven by a sense of practically, and are happy to see how others do before they jump in. Further differences are detailed below. Early Adopters / Visionaries - - - - - - seek a change agent want to be first to implement it keep ahead of the competition expect a radical discontinuity prepared to champion the cause can bear with the bugs

Early Majority / Pragmatists - - - - - - seek a productivity improvement want minimum discontinuity want evolution, not revolution enhance, not overthrow do not want to debug easy integration w/ existing tech

The differences between these two groups are therefore very strong, and as a result the EAs do not make good references for the Early Majority. However, the Early Majority is the first major group in the sequence that is really concerned about disruptive change, and therefore need good references to make the buying decision. Consequently, the transition between these two groups is blocked.

Why does it matter?


Companies that bring disruptive innovations to the market are very likely to face this issue. Even experienced management can fall into this trap, as traditional strategy and decision- making will typically not work in this kind of endeavor. Below is an illustrative story that is taken from the book and that, in my opinion and based on what I observed, very neatly describes how a company might get trapped into the chasm. 1. Illusion In the first years, the early market, made of innovators and early adopters, brings the illusion that sustainable growth is underway. The original model of technology adoption gives hopes of tremendous revenue increases, and venture capitalists push for a strong commercial development. Major sales force expansion is undertaken, sales collateral and advertising are developed, and customer support is strengthened. 2. ...and disillusion However, sales revenues are disappointing, and growth in expenses vastly overtakes growth in income. At the same time, R&D is bogged down with several special projects committed to in the early contracts. The sales people complain that there are holes in the product, that it is overpriced and not what the customer wants. The engineers claim they have met the specs and schedule for every major release.


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Executive managers lament that the sales force lacks the ability to communicate the vision, and simply isnt aggressive enough. Nothing is resolved, and off line, political enclaves begin to form. 3. End of the Story Revenue targets are not met, deficit becomes unbearable, board and investors blame the founders and the president, who in turn put the screws on the sales team. Turn over follows, vice-president of marketing is fired; time to bring in real management. More financing is required, with terrible dilution for the initial investors and staff. Real management does not do any better, key defections occur. Time to bring in consultants. Investors decide they need a turnaround artist, with layoffs followed by more turnover. In the end, despite having good technology, exciting products, and initial promising returns from the market, the venture rides off to become a twilight company: an enterprise on life- support, not truly alive but unable to choose death with dignity. 4. What happened What the company interpreted as a ramp in sales leading smoothly up the curve was in fact an initial blip - the early market - and not the emergence of a mainstream market. The company failed to recognize the difference between a sale to an early adopter and a sale to the early majority. Thus, in the most difficult period, when the company was just entering the chasm, it held high expectations rather than modest ones, and spent heavily in expansion projects instead of husbanding resources. In order to avoid these perils, the company needs to go deeper into the dynamics of the TALC and derive a marketing strategy from the understanding of these market dynamics.

Sohow to cross the chasm?


It is beyond the scope of this document to describe the strategy developed by Moore to cross the chasm. However, I listed below the key elements of that strategy. Again, I highly recommend reading the book to get a complete picture. Moore suggests a 4 steps approach to crossing the chasm. It is described in the book using the metaphor of the D-Day, in reference to the Allied invasion of Normandy during World War II. 1. Target the point of attack a. Screen potential in niche markets b. Analyze the impact of the new technology on target customers using utilization scenarios and customer profiles c. Rank the various customer segment based on a list of criteria d. Select one segment and one only to be the beachhead there can not be two 2. Assemble the invasion force a. Define the whole product, that is: the product that fulfills the target customers compelling reason to buy. This usually entails 3rd party accessories or services. b. Find partners/allies to build the whole product c. Make sure all partners are supportive and have their share of the benefits
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3. Define the battle a. Pragmatists need to have the ability to compare for them to buy. Therefore you need to create competition for your product. b. Strictly speaking, competition may simply not exist, therefore you need to look for existing market alternatives, i.e. what you aim to replace. c. Define the product positioning statement and focus all communications on it. d. Demonstrate quality of whole product and partners to win pragmatists trust 4. Launch the invasion a. Select the best channel to reach your target customer segment b. Beware of pure sales partnerships with large organizations c. Direct sales are in general the best solution d. Adapt channels if necessary during the course of adoption These four steps provide a blueprint for an organization to successfully attract pragmatist buyers, and eventually cross the chasm.


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