Crossing The Chasm | Part I
A summary of "one of the most transformative books in technology entrepreneurship".
This is Part I of a two-part series, the second part to be released next Saturday.
Crossing The Chasm is one of the most transformative books in technology entrepreneurship. By Geoffrey Moore, the book helps tech companies make the leap between convincing early adopters and selling to the mainstream market. The "chasm,” of course, is the middle ground between those early adopters and the mainstream market. Companies that successfully cross the chasm reap bountiful profits. Those that fail to cross etch their names into the Silicon Valley graveyard.
If we could distill the book into one sentence it's this: Technology products follow the same path of customer adoption, and companies that stick the jump across the gap win the market.
Here's Moore's explanation (emphasis mine):
"Every truly innovative high-tech product starts out as a fad -- something with no known market value or purpose but with 'great properties' that generate a lot of enthusiasm within an 'in-crowd.' That's the early market. Then comes a period during which the rest of the world watches to see if anything can be made of this; that is the chasm. If in fact, something does come out of it -- if a value proposition is discovered that can predictably be delivered to a targetable set of customers at a reasonable price -- then a new mainstream market forms, typically with a rapidity that allows its initial leaders to become very, very successful."
Crossing the chasm requires a complete effort from everyone inside the company -- not just the marketing department. Moore sows easy-to-understand technology adoption models through 200+ pages of actionable, timeless high-tech marketing wisdom.
I first heard of the book through venture capitalist Bill Gurley's Above The Crowd blog post, "Amazon’s AWS Strategy Becomes Clearer Every Day" (link here). That blog post prompted me to buy the book and write this review.
At 211 pages, you can read it on the weekend. The book splits into three parts:
Discovering The Chasm
Crossing The Chasm
Getting Beyond The Chasm
Moore devotes two chapters to Discovering The Chasm, five chapters to Crossing The Chasm, and one chapter to Getting Beyond The Chasm. Like Moore, we're splitting the review into three parts and pulling our favorite lessons/quotes/models/themes from each section.
Discovering The Chasm: First Part of Book
Technology Adoption Lifecycle
Before we try to understand what the chasm is, where it lies, and how we can cross it, we must learn the Technology Adoption Life Cycle (or TALC). According to Moore, TALC is "a model for understanding the acceptance of new products." There are five stages of TALC:
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
Each stage follows a chronological pattern. In other words, you can't have Early Adopters until you have Innovators. And you can't have Laggards until you have a Late Majority. Here's Moore's explanation of the TALC thesis (emphasis mine):
"The underlying thesis is that technology is absorbed into any given community in stages corresponding to the psychological and social profiles of various segments within that community. This process can be thought of as a continuum with definable stages, each associated with a definable group, and each group making up a predictable portion of the whole."
Let's examine each group in detail.
Innovators: The Technologists
Innovators love the latest technology products and services. Most times, Innovators buy such products before the company launches a formal marketing campaign. The smallest group (by the number of people) in the life cycle, Innovators play the most critical role in a technology product: Initial approval.
We all know someone that qualifies as an Innovator. They're the gal at the office with the latest {insert Apple's newest device;}. They're the ones getting 6G phones while you hack away at your iPhone 7. Innovators get their hands on the latest products before anyone else. Why? Moore explains, saying, "technology is a central interest in their life, regardless of what function it is performing."
One of the best examples of Innovators within a product is LEGOs. Yep, those plastic landmines that lurk right under your foot. LEGO built an immense Innovator network -- so much so that it spawned LEGO forums where Innovators gathered virtually to share ideas and blueprints for new designs. LEGO almost died as a business by not listening to its Innovator cohort.
David Robertson's book Brick By Brick paints the perfect picture of Innovators at work. Here's an example from a story about Tesca Fitzergald (emphasis mine):
"Tesca Fitzgerald's foray into artificial intelligence software development via LEGO was, as Mindstorms marketing manager Steven Canvin later put it, 'pretty mind-blowing. It's very likely that this young girl created the largest program ever written in our software.' At the same time, Tesca's achievement was one more milestone in a remarkable journey that has seen LEGO transform itself from a remote, highly insular organization, where only the public relations manager spoke for public consumption, to one that has adroitly managed to open up to its most inventive customers, learn from them, and thereby harness their creativity."
You cannot overemphasize the importance of the Innovator to a product's success. As Moore notes, "Winning [Innovators] over at the outset of a marketing campaign is key nonetheless, because their endorsement reassures the other players in the marketplace that the product does in fact work."
Innovators are high signal-to-noise product testers. Win them, and your product has a shot. If you don't, revert to the drawing board.
How To Market To Innovators: Keep the product cheap. Contact them directly (email, for example). Try to find Innovators that have access to the "big boss" (i.e., CTO responsible for technology purchases).
Early Adopters: Willing To Pay For Bugs and Glitches
Early Adopters appreciate the power of new technology. Like Innovators, Early Adopters buy new product concepts without well-established references, use-cases, or product success.
While Innovators focus on the minute details of the product (like hardware specs and UI/UX features, Early Adopters concentrate on the "vision" of the product. Members of this group can easily paint a picture of what their life "could look like" if they adopted this new technology and how much better they could live with it.
Moore explains the importance of grabbing Early Adopters in a product cycle (emphasis mine):
"Because early adopters do not rely on well-established references in making these buying decisions, preferring instead to rely on their own intuition and vision, they are key to opening up any high-tech market segment."
There are drawbacks for Early Adopters. First, most versions of a technology product (i.e., the ones Early Adopters buy) have bugs and glitches. These issues make the product difficult to use, frustrating, and cumbersome (can I get an "Amen!” from the CyberPunk crowd?).
Second, Early Adopters pay a hidden tax, aptly named "Early Adopters Tax." Blair Frank explained the tax in a 2011 blog post, The early adopter tax and you (emphasis mine):
"There’s also the issue of price: a product often gets progressively cheaper, sometimes even a few months after its launch, as in the case of the iPhone. Early adopters are paying a premium for things that will get progressively cheaper as they get older. In addition to being cheaper, gadgets like smartphones, computers and tablets are constantly being revised by their manufacturers, often with new features and performance upgrades for the same price."
A better way to think about the "tax" is as a "bus fee." If you want to ride with the latest technology, you have to pay the toll. Of course, there are ways to incentivize Early Adopters through product discounts, free beta trials, etc.
How To Market To Early Adopters: Visionaries are easy to sell to but hard to please. Sell them a dream, an alternate reality that incorporates your high-tech product.
Early Majority: Aren’t Afraid of Technology, But Need Verification From Others
Early Majority members buy on practicality. In other words, they ask themselves, "how much will this technology improve my life? And will I use it enough to justify the purchase?" This group understands that 90% of fancy products die as fads, burning to a crisp before reaching the mainstream atmosphere.
Early Majority members scour product review websites, customer forums, and Consumer Report magazines. Heck, they perform more due diligence on products than most "investors" do in companies.
It's vital to win this "dad-mode" cohort, as Moore explains (emphasis mine):
"[Early Majority] want to see well-established references before investing substantially. Because there are so many people in this segment -- roughly one-third of the whole adoption lifecycle -- winning their business is key to any substantial profits and growth."
While Innovators and Early Adopters can tolerate bugs, glitches, and continuous version updates, the Early Majority don't have the patience. This group needs a complete, (relatively) error-free product experience, or they won't buy. We’ll argue later that the Early Majority is the most important category for technology companies to get product-fit right.
How To Market To Early Majority: Show the customer that the product has worked with other customers (i.e., product reviews).
Late Majority: Getting These Customers Is Like Pulling Teeth
There is one significant difference between the Late Majority and its Early Majority counter-part: Late Majority members are not comfortable with technology products. Think of the Late Majority as the "Grandparent Mode" of customer adoption.
Moore explains the Late Majority below (emphasis mine):
"As a result, [the Late Majority] wait until something has become an established standard, and even then they want to see lots of support and tend to buy, therefore, from large, well-established companies."
Like Early Majority, the Late Majority is a third of a product's potential customer base. Getting these customers is essential, but it comes at a cost.
Selling to the late majority means you're selling a mature product. Mature products sport lower profit margins due to increased competition (I.e., you're not the only new kid on the block). That said, mature products require lower selling costs (like advertising, marketing, etc.), and as Moore notes, "virtually all the R&D costs have been amortized."
How To Market To Late Majority: Take a low-cost approach and offer the Late Majority customer the complete package solution. Remember, these are customers that don't want bugs, and they abhor drastic change. Prioritize service of existing technology over developing new products.
Laggards: Don’t Worry About These People
Laggards are the tin-hat members of TALC -- they want nothing to do with technology. Moore says the only time a laggard buys technology is "when it is buried so deep inside another product -- the way, say, that a microprocessor is designed into the braking system of a new car -- that they don't even know it is there."
Moore suggests completely ignoring this group of customers. You'll never reach them and waste money trying.
There is one benefit to listening to laggards. Moore suggests that laggards "point continually to the discrepancies between the sales claims and the delivered product." In other words, laggards are like jealous cousins. They'll point out every flaw they see, even the ones you want to fix.
Cracks In The Bell Curve
High-tech market development follows a linear path from left to right on the TALC. First, capture the innovators and grow that market. Then, penetrate the Early Adopters and grow that market. Repeat that process until you grasp the early/late majorities.
If you have the time (and patience), capture the laggards. Companies that smoothly navigate the customer bell curve reap the most significant reward. Moore calls this phenomenon "catching the curve.” Products that "catch the curve" become the de-facto industry standard and generate abnormal profits.
Most companies fail at achieving "de-facto industry-standard" adoption levels. Why does this happen? Cracks and Chasms. Not only a great name for a band, but the discovery of cracks and chasms between each customer cohort also allows companies to see where they were going wrong in product marketing. Moore explains below (emphasis mine):
"This [gap] symbolizes the dissociation between the two groups -- that is, the difficulty any group will have in accepting a new product if it is presented in the same way as it was to the group to its immediate left."
In short, you can't sell the same product the same way to different customer groups. What you used to sell to the innovators fails to connect with the early adopters. What works on the Early Majority won't translate to the Late Majority.
Moore identified two cracks in the TALC.
The First Crack: Innovators & Early Adopters
The first crack falls between the innovators and the early adopters. The gap exists because customers can't translate a hot product into an actual significant benefit.
A great example of a product falling through the first crack is the Dvorak Keyboard. Created by Dr. August Dvorak, the keyboard tried to "maximize typing efficiency." Dr. Dvorak claimed that a traditional keyboard forced a typist to move their fingers over more expansive spaces (I.e., higher hurdling) while using more "weak" fingers (fourth and pinkie) to hit the keys.
The combination of farther travel time and weak fingers resulted in (supposed) slower words-per-minute times. The Dvorak Keyboard’s solution was simple. It pushed the most common typed diagraphs ("ed,” for example) to the middle, forcing only strong fingers (pointer and middle) to hit the primary keys.
There was one major problem with the Dvorak Keyboard. Nobody used it. And if someone wanted to try it, it took ~52 hours of practice to reach a person's current aptitude on a QWERTY keyboard.
No doubt the Dvorak Keyboard was popular with the "typist-nerd" innovators. These are the people timing their average WPM scores between Dvorak and QWERTY keyboard sessions. But the keyboard failed to reach the Early Adopters because there was no significant new benefit to their lives. Why switch if it takes more than two days to achieve the same typing speed as a conventional keyboard?
To hurdle the first crack, a new product must (in Moore's words):
"Show that the new technology enables some strategic leap forward, something never before possible, which has an intrinsic value and appeal to the nontechnologist."
The Second Crack: Early Majority & Late Majority
The second crack in the curve falls between the Early Majority and the Late Majority. At this stage on the curve, the market is well-developed, with the product absorbed into mainstream cohorts. Moore reveals that the crack at this stage hinges on "the demands on the end-user to be technologically competent."
In other words, the product’s success is equal to the length of a customer's learning curve to use the product. Early Majority customers are willing to learn new technologies. Some even enjoy the challenge of a new technology product. Late Majority customers aren't as keen.
To cross this crack, the high-tech company must make their product as easy to use as possible without diminishing the complex challenges the product solves. Moore explains (emphasis mine):
"When a product reaches this point in the market development, it must be made increasingly easier to adopt in order to continue being successful. If this does not occur, the transition to the late majority may well stall or never happen."
Moore uses the telephone to describe the second crack. Telephoning offers call forwarding, three-way conferencing, and call transferring (remember, Moore wrote this book in 1991). Though dated, the example highlights several reasons why crossing this crack is essential to high-tech companies. Moore writes (emphasis mine):
"The problem is that for people who are not frequent users of the [telephone] system the protocols are simply too hard to remember. As a result, users do not use the features, and so companies in mature markets find it harder and harder to get paid for the R&D they have done because the end-user cannot capture the benefit. Instead, they bemoan that the product has become a commodity when in fact it is the experience of the product that has been commoditized."
Getting paid for R&D while maintaining a mature customer market is no small feat. One hardware/software company that does this better than almost anyone isApple (AAPL). The iPhone is the epitome of profitable R&D investment at a mature market scale.
iPhones are easy enough to use without a user manual. But AAPL's genius isn't in their hardware or software achievements. It’s in how they market their relatively unchanged phones each year with (seemingly) ever-increasing customer anticipation.
With a solid marketing plan, high-tech companies can leap the tiny cracks between Innovators/Early Adopters and the Early/Late Majorities.
The Chasm: Early Adopters & Early Majority
But there's one gap -- a chasm -- that exists between the Early Adopters and The Early Majority. An abyss so wide Moore devotes the rest of the book to organizing a plan of attack.
According to Moore, the chasm is "by far the most formidable and unforgiving transition in the Technology Adoption Life Cycle, and it is all the more dangerous because it typically goes unrecognized." The chasm goes unrecognized to most companies because the customer order looks the same between the two cohorts.
Moore opines that "Typically, in either segment [Early Adopters or Early Majority], you would see a list of Fortune 500 to Fortune 200 customers making relatively large orders -- five figures for sure, more often six figures or even higher."
From an order magnitude perspective, it's almost impossible to tell the difference between Early Adopters and Early Majority customers. The danger, of course, is that each cohort has completely different reasons for why they purchase the product.
Early Adopters, for instance, purchase because they want a head-start against their competition. Moore calls this motivation the "change agent.” Early Adopters pay the tax of bugs and glitches to (hopefully) gain lower product costs, faster time to market, or complete customer service.
These customers understand that in buying the product, they accept a potential upheaval of their current operations. And they're okay with that because the reward (i.e., beating the competition) outweighs the switching costs that come with the technology.
On the other hand, the Early Majority customer buys the product because they want a productivity improvement for current operations. They're not looking for radical change (like the Early Adopters). These customers demand smooth transitions between their existing processes and the processes that come with the new technology.
In short, they want everyone to play nice together in the sandbox. Playing friendly means no bugs, no glitches, and no hours wasted on customer support lines.
The contrast between the two customer cohorts creates a massive catch-22, which acts as the proverbial wedge driving the chasm formation. Moore explains this catch-22, saying (emphasis mine):
"So what we have here is a catch-22. The only suitable reference for an early majority customer, it turns out, is another member of the early majority, but no upstanding member of the early majority will buy without first having consulted with several suitable references."
Early Majority customers need the validation and assurance of other Early Majority customers. But what good-and-proper Early Majority customer would risk their neck reaching back towards the Early Adopter customer for confirmation? Moore reveals the fundamental problem with the catch-22, saying (emphasis mine):
"In sum, 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."
Therein lies the solution. High-tech products need to create a support base within the Early Majority market to cross the chasm. In turn, that early support base will act as a catalyst for rapid Early Majority customer adoption.