The book explores market dynamics for innovative products. The author claims that the abyss and the main market of hi-tech products are divided by an abyss, over which all the forces of a high-tech enterprise should be directed.
In Geoffrey Moore’s book, you will find useful tips to bridge this chasm and the true stories of companies that have succeeded.
Geoffrey Moore ─ writer, business consultant, and venture partner. The book turned out to be a bestseller: more than 300,000 copies were sold.
Different people accept technical innovations at different times: someone earlier, someone later
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It Takes Time for Society to Accept Technological Innovations.
Due to the different attitudes to new technologies, the adoption process proceeds in stages, different parts of society are adapting to new products at the same time. Acceptance is made according to the so-called Life Cycle of Technology Adoption.
The first to receive new items are technical enthusiasts, for whom technology is their main hobby. They want the latest news, even if they are still full of bugs and imperfect.
Then the visionaries join. They are more interested in the strategic competitive advantage of the product, rather than technology in itself. They crave revolutionary achievements, they need a few minor improvements.
The two groups above form a relatively small early market. Ahead of the product is the conquest of a larger and more disastrous main market for many new products.
When the technology has proven its worth and an obvious leader has appeared on the market, pragmatists, who make up about one-third of the market, join enthusiasts and visionaries. Unlike visionaries, they are not looking for major changes, they need the stable benefits of a standardized product, provided with serious manufacturer support. Pragmatists turn into extremely loyal consumers of the product, therefore, having enlisted their support, you will receive the key to long-term dominance in the market.
The fourth group ─ conservatives, is also numerous as pragmatists but is suspicious of high technology. They need simple, high-quality, inexpensive goods without any difficulty.
And the last group of consumers is skeptics, a small segment of the market, “sustainable” to new technologies. They are often not taken into account as clients but in vain. They can tell you why your product does not meet their expectations.
There is a Gap Between Visionaries and Pragmatists, Where Products Languish and Companies Die
Ideally, as long as the product goes through the Technology Adoption Life Cycle, each consumer group makes recommendations to the next, more skeptical group. Thus, like Tarzan jumping from branch to branch, the product retains its initial impulse.
The problem is that in the case of the so-called “fundamental” innovations that require significant behavioral changes from the consumer, this process does not go smoothly.
Such products fall into the deep gulf dividing the early and main markets, i.e. visionaries and pragmatists.
The reasons why visionaries and pragmatists buy high-tech products are fundamentally different. Visionaries want major changes and defend new technologies, even despite resistance in their company. Pragmatists, on the contrary, strive for consistency and continuity, and need to increase productivity, but not global innovations.
Because of these differences, customer reviews of visionaries will not impress pragmatists. And this becomes a serious problem since pragmatists need recommendations and comprehensive support. They buy only from reputable suppliers, and without pragmatists, a company cannot become reputable.
This paradox gives rise to an abyss, once in which, products wither and die.
The company may continue to sell the product in the early market, but this market is small and requires a lot of effort to tailor the product to a specific consumer. The voluminous main market remains out of reach for such products, and revenues cease to flow. The value of the company is falling, and disgruntled shareholders may even fire managers.
To Avoid This Sad Fate, a Company Launching an Innovative Product Must Have a Plan to Bridge the Chasm.
To achieve success in the main market, you must satisfy all the needs of the consumer with a “whole” product
Unlike early market consumers, primary buyers despise products that require the search for additional devices and services.
Those. they want to get the so-called “whole” products – goods that fully satisfy the purpose of the purchase. Pragmatists love Microsoft products because they know that an extensive infrastructure of complementary products and services is supplied with it.
In addition to the product delivered in the box (the product itself), they are waiting for the full satisfaction of their needs: installation, after-sales service, additional software and equipment.
“Whole” products are the arena where they win or lose the battle for the main markets. In order to get pragmatists as clients and successfully bridge the chasm, you must give your target audience a “whole” product. A good core product is a valuable asset, but it does not guarantee you market leadership.
Some of the components necessary to create a “one-piece” product will go beyond the core competency of your company. Therefore, to meet the needs of customers you will need partners. The only task of such unions should be the development and promotion of a “whole” product for a specific consumer segment.
For example, consider a company selling aggregated pharmaceutical research data. Customers expect her to access various sources of information, and in order to meet these expectations, she will have to cooperate with various organizations: state healthcare institutions, organizations providing medical care, and simply scientists.
Crossing the Abyss is Like the Beginning of an Invasion, First Conquer the Bridgehead – a Market Niche
Entering the main market is an act of aggression, you invade the territory of other players, so plan your attack as if it were a military operation.
Start by preparing the bridgehead. Identify a specific market niche within the pragmatic segment and become the undisputed leader in it. Based in a fortified niche, you can extend your influence to other segments, and ultimately capture the entire market. Conquering a niche is a kindling, after which you will light the fire of your success.
But capturing a niche requires concentration: you should not sell outside. Most companies in the abyss cannot resist the temptation to make money anywhere. They end up selling to everyone, but are not able to win a decent position. They spray their resources on the endless customization of the product, designed to adapt to each market segment.
Focusing on a small target niche meets the interests of pragmatists who buy a product with good support and good reviews from the market leader.
Firstly, the smaller the niche, the easier it is to receive most of the orders in it and thus become a real leader.
More niche buyers will talk about your product, and word of mouth will spread positive reviews about you faster.
And the last thing: working in a niche allows you to create a standard product tailored specifically for this niche, including additional components, services and supporting infrastructure needed by pragmatists.
Find Your First Niche by Choosing the Most Attractive Consumer Segment.
Choosing the right target niche to capture is a risky decision in the absence of reliable information. Instead of analytical thinking, informed intuition is useful here.
A tool that can help in making this decision is a process called targeting a consumer. It involves creating different scenarios in which different consumers use your product. You are considering the buyer, the end-user and how the product will improve the lives of the consumer.
So, a possible scenario for e-books includes their purchase by repair crews serving airlines. In this case, the crews will be able to read updated repair manuals even on the airfield, which will reduce the company’s costs caused by canceled flights.
The goal of this exercise is to get a list of potential customers, from which you select the segment with the most compelling reason to buy your product. If your product does not solve the serious problem of this segment, pragmatic customers will postpone the purchase decision, which will greatly complicate your entry into the market.
Inside the abyss, time is your enemy. Having found a niche, you must find partners and come up with a “one-piece” product that fully meets the needs of customers within three months.
And remember about niche competition. If a competitor has overcome the abyss before you, he will have all the advantages that you hope to get.
Once you have chosen a foothold, do not look back. You can succeed in the wrong niche, but doubts about the right choice often lead to defeat.
Use powerful arguments to demonstrate leadership in the market, this will help to effectively position your product
Product positioning is the only serious way to influence the decision to buy. As a result of positioning, the product is associated with its integral feature, for example: “Mercedes is a first-class car.”
But different consumer groups value different things. For visionaries, product properties such as speed or size are important. And for pragmatists, the main proof of the value of a product is its market position relative to competitors.
If you are a beginner who has no competitors, or your market position is beyond praise, it will be difficult for you to determine the value of the product for the pragmatist.
The good news is that you can always determine your own place by presenting your two competitors as a guide to consumers.
Imagine you run Silicon Graphics, which just introduced the first digital movie editing program.
First of all, you must identify your customers by establishing a market alternative to a competitor whose products customers have been using for years. In the case of Silicon Graphics, it will be an outdated way to manually mount the film.
Then build yourself up with an alternative product: a competitor who has released a new unusual product, something similar to yours. For Silicon Graphics, workstations can be such a competitor – an extremely advanced technical field, which is not intended, however, for video editing.
Using these two competitors, you can make a serious application for leadership by showing that you are working in a new market niche. The verbal expression of this application should be powerful and concise, and consist of no more than two phrases:
“For editors dissatisfied with traditional installation (a market alternative), our workstation is a digital editor that allows you to change the picture of your choice. Unlike work Sun stations (alternative product), we provide all installation tools. “
Find a Distribution Channel Comfortable for Pragmatists and Have It Sell
Before invading the target niche, you need to select the distribution channels through which the invasion will be carried out, as well as the pricing strategy according to which you will attack. Stick a price tag on your product and decide who will sell it.
Pragmatists are very meticulously choosing a seller. Therefore, when crossing the abyss, the main thing is to provide yourself with a distribution channel to which pragmatists are already accustomed.
Direct sales usually become the optimal channel, because they actively provoke demand, work quickly and create an atmosphere of cooperation with consumers. Typically, the presence of such a channel means that you have a specialized sales department that works only for you and actively interacts with large corporate clients.
When you become a market leader in a targeted niche, you can move from direct sales to a channel that will satisfy increased demand. Depending on the specifics of your product, it can be retail in stores, the Internet, or even a network of active resellers that complement your product, for example, with software.
Sales of new products unknown to the public ─ risky venture requiring qualifications. Therefore, the priority of your pricing policy should be to encourage distributors to sell your product. First, give them most of the price margin as a commission, later, when you gain market leadership, you can reduce it.
The second objective of pricing should be to encourage consumers to make purchases. Since pragmatists prefer to buy from market leaders, set the price that the leader would set on his product.
Consumer Markets Are More Difficult to Bridge the Chasm Than Business Ones
The most successful transitions across the abyss occur in the business market, in the consumer market it is extremely difficult to do.
A business has the economic and technical resources to adapt even an immature, imperfect product. Consumers of such resources do not have. There are also technical enthusiasts in the consumer market, but they are quickly switching to a “cool new thing.” In addition, you are unlikely to find here visionaries who will promote your product and finance your research and development.
Unlike a business, the end consumer rarely has a good reason to buy your product; they don’t have a problem that only you and your product can solve.
Take, for example, Quicken, a financial management application developed by Intuit. It turned out that consumers are quite satisfied, using a pen, paper and bank checks to manage their finances, they did not have a serious need to buy an application.
In the end, Quicken overcame the abyss by presenting itself as a combination of a smart financial management tool and a familiar way of counting on paper.
To solve problems after going out of the abyss, you need to maintain profitability and review the organizational structure
Having climbed out of the abyss, the company, as a rule, discovers that it has some obligations. For example, it may be a certain level of income promised to shareholders.
In order to leave the abyss far behind and solve all the problems, we will have to make drastic financial and organizational changes.
First of all, after the abyss, it is necessary to concentrate on maintaining and increasing profitability. The sooner the company begins to impose a “discipline of profitability”, the better, this will prevent the emergence of dependent moods and teach you to carefully select clients and projects.
Then the company needs to go through dramatic changes in the organizational structure. Perhaps the talented pioneers who ensured the growth of the company in the early markets may now become a hindrance to development, as management and “ordinary business” care little for them.
“Founders”: This is Who the Company Really Needs Now. They Extend Power and Establish Standard Documented Procedures.
To the pioneers, all this seems boring and incomprehensible; they are most often unable to work effectively in the new conditions. Inevitably, disputes arise regarding the fairness of the separation of remuneration and bonuses from sales in completely different markets: early and primary.
After overcoming the abyss, the company risks losing customers from the early market, as well as neglecting the need to upgrade the product (the second is necessary to satisfy the main market customers). To avoid this, you need to create two new temporary positions:
- The manager of the target market segment should turn relations with visionary clients into a potential bridgehead for this client to enter the market. For example, if the client is Intel, then with its help you need to enter the semiconductor market.
- The “whole” product manager will be responsible for working on a constantly updated list of product enhancements and fixes, this will keep pragmatic customers.
The Final Words
To succeed in the market, high-tech products must bridge the gulf between early and major markets. It is necessary to concentrate on a single target niche, fully satisfying the needs of the consumer, and become a market leader.
- To achieve success in the main market, you must satisfy all the needs of the consumer with a “whole” product.
- Find your first niche by choosing the most attractive consumer segment.
- Use powerful arguments to demonstrate leadership in the market, this will help to effectively position your product.
- Find a distribution channel comfortable for pragmatists and make it sell.
Why You Should Read “Crossing the Chasm”
- To leverage the power of high technology.
- To enter the market with innovative products.
- To learn how the market accepts high-tech products and find the right approach to it.
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