50 Million to 1 Billion

How to Innovate after Successfully Crossing the Chasm
I have heard our fortune 500 clients often admit “We are good at growing a $50M new product to a billion dollar business, but we struggle with funding and quickly developing that first $50M.” This bothers me! In my past two years of innovation consulting practice, I have pondered the causes to this problem with a view to solving it. I have assumed these clients would not look for the first 50M by diving into a red ocean to compete with strong incumbents on cost innovation, so the small business initiative should come from either technology innovation or business model innovation. These clients have experience of several successful new business model initiatives which delivered great financial return and market impact, so my focus turned to technology innovation. Was it because the R&D strategies that they were used to using were not really suitable for launching truly innovative products, or that the execution approach was so different from the big projects that they could not adapt? Maybe they just do not have the technology innovation capability that they should have?

Crossing the Chasm
This book is on the top of a reading list that has been recommended to innovators. The author, Geoffrey Moore, wrote the book a decade ago. At the beginning, I was skeptical if this marketing strategy focused book could bring any significant value to me as a technologist. However, after reading the first page the skepticism went away and I started to take notes on almost every page following. The author pointed out that the theories and concepts were not new to readers, but the book used a systematic way of explanation that led to new learnings and insights. That sounds like innovation I echoed. It took me a long time to finish reading, because of the unfamiliar marketing jargons and pauses to think and digest the information.

Crossing the Chasm

Crossing the chasm model by Geoffrey A. Moore. Illustrated by Aaron Kim.

Crossing the Chasm explains the nature of the new product adoption gap between the early adopters and the early majority, and the strategies one can utilize to cross it for marketing an innovative solution to the masses. It describes the differences in consumer characteristics, marketing strategies, R&D focuses, talent selections, and performance evaluations before and after the chasm crossing phases. Current successful corporations in mass market have to adopt different structure and develop new knowledge that are best suited to finding, developing and launching small innovative technology initiatives.

Consumer knowledge: Majority vs. Early adopter
In a given market segment the early adopter and the early majority have very distinctive characteristics and select products based on very different consumer value metrics, so they do not reference each other on purchase decision making. This means that a startup cannot use all that they have learned in early adopter phase and re-apply to target early majority, they have to develop a new set of consumer learnings for mass market entry. The time this learning process takes makes up the chasm phase.

New Product Adoption by Tom Fishburne

New Product Adoption by Tom Fishburne

The converse of this is also true. If a company has successfully crossed the chasm, it has to work hard to serve the majority consumers in order to stay in the mass market. The company can become better at understanding the majority consumers and develop plenty of valuable insights, which can help it take more market share and grow into a major player in the market segment. However, these valuable insights are of limited value in understanding the early adopters.

I have almost always found that the consumer knowledge that our fortune 500 clients provide to help us with an innovative technology initiative is segmented without a common theme. Because the knowledge is based on the average consumer—not belonging to any particular adoption demographic, but requiring the same product system to do the primary job for them as easily as possible. However, the early adopter has an acute need, which can potentially make up his compelling reason to buy a product. And this need is so strong that he is willing to live with some imperfections. The consumer knowledge of the majority of consumers can help us better serve existing market segments and find new opportunities in the adjacent segments to reposition current solutions, but it hardly helps the effort to launch a new innovative technology initiative to early adopters.

Talent Selection: Innovator vs. Settler
To successfully cross the chasm, the first thing a leader needs to think about is talent selection—getting the right talent for specific demands of a specific marketing situation. Attention should be paid particularly to the technologists and marketers.

Let me describe two types of technologist—the Innovator and the Settler: Innovators in technology are enthusiasts who love to solve new challenges, experiment and break the status quo. It requires constant learning efforts that are driven by deep interest in the technology and the subject. The goal of the learning is not for getting a comprehensive understanding of any given technology domain, but to answer a specific question. The innovator tires of small functional improvements on current offerings. Settlers are satisfied with leveraging their specialized knowledge in an area to serve the majority consumers better. They feel more comfortable by staying at the technology status quo and typically do not aspire to disrupt it.

The marketing focus before the chasm crossing is to attract the visionary early adopters to create a market base, therefore the marketer’s job is to develop a relationship with those visionary early adopters and picture the solution close enough to their imaginations.  The job is creative in nature. The marketing focus changes after the chasm such that we have to give full attention to attract and retain the early majority consumers and retain, if we can, the early adopters.

Business Requirement: Survive vs. Thrive
A lot of startups fail, so the main business goal for them is to survive under a clear strategy. The startups need to work hard on their products to satisfy their early adopters, this uses a product centered strategy. It is not marketing driven yet, but early adopters need to be selected very carefully to get the most out of the effort. The post-chasm strategy is all about forming a whole product solution to make the purchase easier and bring in profit.

surviveThrive-2

No surprise—it is all about people, who setup the strategy, have the knowledge, and execute. But I am not trying to conclude the company at their post-chasm phase can or cannot spawn small technology initiatives like a startup, rather the necessary resources for a successful one. In order to be good at funding a business and accelerate it to 50M, the company has to implement new processes and acquire new talents, which are drastically different than the ones they are using in the main stream market.

Qian Li, PhD

Associate

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