Business

Crossing the Chasm by Geoffrey A. Moore

More business wisdom is packed into these 200 pages than a whole stadium full of MBAs. I've read a lot of business books, and usually they only have one or two good points to make. But then they've got X hundred pages to fill so they end up being very repetitious. Couple this with the kind of dry writing style you might expect from a book about business, and you've got guaranteed snoozers.

Crossing the Chasm, on the other hand, is packed cover-to-cover with useful information, and the writing is witty and evocative. I'd call it a page-turner, but it actually took me a while to read, because every page was so thought-provoking that I'd stop find myself stopping to ponder and digest the concepts it contained.

The basic premise is that markets can be divided into five segments: technology enthusiasts, visionaries, pragmatists, conservatives, and laggards.

Technology enthusiasts love to try anything new. It's a cinch to "sell" to them - all you have to do is be new and shiny. Of course this means they get bored of your product as soon as it's not new anymore. They're good for shaking out initial bugs, but produce little revenue beyond the brief honeymoon.

Visionaries are looking for huge-leap-forward products which will give them incredible results, cost be damned, and they don't mind putting together the pieces of immature technologies to get it to work. Again, a great initial market, and in fact the two of these combined can give a company a false sense of security about their product's success.

Then comes the chasm. This gap between what the tech enthusiasts and the visionaries are willing to do (pay premium prices, struggle with immature products) and what the next class, pragmatists, are willing to do. This gap kills most companies, and they are blindsided by it. It seemed that the product was doing so well, and then it just fell off a cliff. What happened?

Pragmatists are such a difficult market to penetrate because they rely on references from other pragmatists. Catch-22 - how do you sell your first pragmatists? Dealing with this issue is the bulk of the book's material. The very summarized version is that you heavily subdivide your target market until you have a relatively tiny group with very specific needs that are not well met by current general-purpose technologies. The book calls these "pragmatists in pain." Through a series of very aggressive tactics, your product can come to dominate this market slice. Repeat a few more times and you've got a good launching point for mass-market product adoption.

The book spends less time on the other two groups, since they are less critical. Conservatives start buying once most pragmatists have the new technology. Laggards wait until they just don't have any other choice. There are strategies for dealing with these groups, but technology companies need not worry about these until fairly deep into the product's lifecycle. (The book does argue that many companies are missing out on some substantial revenues by not adapting mature products to fit the needs of those markets, and suggests some interesting strategies for dealing with this stage of the product's life.)

Markets

I found that one of the most striking revelations of the book was to redefine my view of the term "market," as follows: a market is only a market when the members talk to one another. For example, one can't really say that there's a small business owners market: few of these people talk to one another. There is a trucking market, however: you've got truck drivers, mechanics, vendors, suppliers, and business owners who are all in contact with one another and share information about products on a regular basis.

This is they key to marketing, because it's prohibitively expensive to reach every customer completely afresh. A product is successfully marketed when it starts to generate buzz, word-of-mouth, brand recognition, and cross-references among its target market. Misunderstanding this one simple point has killed or crippled many otherwise promising products.

This is particularly difficult for a platform technology. For example: HTTP, SQL, the PC, an operating system, and programming language, or even something like eBay. Platforms are only useful when almost everyone else is using it. A general-purpose technology is difficult to sell initially, so you have to create an application which targets a narrow vertical market, and eventually that success can be capitalized upon to access a broader market. This seems counter-intuitive, since platforms are by their nature general-purpose, but it's nearly impossible to succeed otherwise.

For example: Apple started by selling their computers to graphic design firms and musicians, even though it's a perfectly good computer for general-purpose use. Oracle targeted their products as specific types of enterprise business, even though the SQL database could be used for nearly anything.

Informed Intuition

How do you identify a niche market which doesn't really exist yet? For this, the book suggests a process called informed intuition. In the development world, we call this user-story-driven development. The product team should dream up a series of plausible user profiles. For each, lay out details like who is the end user, the technical buyer, and the economic buyer. (The last two are often the same in consumer markets, but typically different at a company. The guy that decides what is needed is different from the guy that signs the checks.) Lay out sample user stories for each profile: accomplishing a particular task without the new technology, and then with. What are the frustrations that are solved by the product? What economic rewards are gained?

Once you've got a few dozen of these user stories, you can use a scoring technique to zero in on the absolute best possible place to start. Scoring categories include compelling reason to buy, whole product, partners and allies, distribution channels, and competition.

Once the best user profile is selected, that's your market. The company commits to chasing customers from that market and no others. Painful though it is, potential sales in other markets must be deflected or ignored. They will split the company's resources at a critical time when absolutely everything must be focused on establishing a beachhead in a single market.

Positioning

Another great section is on positioning. The primary technique here is to locate yourself in your chosen market relative to two competing products or methods. One of these should be a venerable and respected technique that is time-proven but lacks efficiency or is otherwise painful in some way. The other competitor should be a disruptive technology from the same era as your own product, but inferior in some way for your target market.

For example: Quicken, a personal finance package, positioned itself against a venerable competitor (pen and checkbook) and a comparable software package called Managing Your Money. The latter had many complex features useful for a serious investor, but Quicken focused on making paying bills very straightforward for a home user. The positioning should never dis the competition, just show how it's better for your target user. "Sure, Managing Your Money is great for finance wizards, but wouldn't a home user like you prefer an easy way to pay your bills that feels like a checkbook?"

Another example: Silicon Graphics workstations. Like most computing platforms, these could be used for anything: email, word processing, playing games. But they targeted the film industry. The venerable competition was the old cutting room technique where film was manually spliced. The modern competitor was Sun and HP workstations, which were priced, appeared, and functioned similar to the SGI workstations. But SGI's machines included a bunch of special inputs and outputs designed especially for film editing, and special software for film editing was available only on their platform. This allowed them to completely dominate the film editing market. (And to reiterate here: there is no "high end workstations" market. People in the film industry don't talk to people who write weather modeling software, even though they buy the same products.)

Ultimately, your positioning should boil down to a single sentence following the pattern of "It's X for Y." Quick is Managing Your Money for paying your bills. Google Docs is Microsoft Office on the web. Silicon Graphics computers are workstations for the film industry. People can understand your position when it's relative to something else. Anything else will simply be too long to explain, and thus will not gain any traction in the heads of your target audience.

Pioneers and Settlers

The final chapter contained a bit of wisdom that I found incredibly apropos to my own career as an entrepreneur and technology innovator. This is the difference between the pioneer personality type, and the settler personality type.

Pioneers are the innovators who start companies and found new products. They love to do great deeds, create things from whole cloth, change the world. They hate building infrastructure, writing documentation, or generally doing the things necessary to turn a product into a long-term revenue stream.

Settlers, by contrast, like to take over a product which has been invented and proven on a small scale, and then convert that into long-term success. This is done through things like trying to establish the product as an industry standard.

You need both personality types for a successful product. The key is timing. Pioneers have to come in early, do their great deeds, get compensated, and get out. Otherwise, they get restless. This becomes disruptive and damaging to the product the longer they are kept around, because what is needed after the initial development is stability. Trading off the pioneers for settlers has to be done at the right time, or else it can kill the company. This is often a difficult political maneuver, because pioneers may think of what they've created as their baby, and don't want to relinquish control - even though they aren't happy where they are.

I'm a pioneer, through and through. When I start a new venture I know that the clock is ticking. Eventually I get bored, and when that happens, I risk losing everything I've built because of my restlessness. I've learned the hard way that finding good settlers to take over is the only way to get long-term benefit out of my innovations.

Rating: 5 of 5
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