CROSSING THE CHASM – AGAIN!

Paul WiefelsManaging Director & Co-Founder

The Chasm Group, LLC

AGENDA

Catching Waves

Building Strategy

Fundamentals of Market Development

Crossing the Chasm Again

THE IMPACT OF DISRUPTIVE INNOVATION

REMAINS POWERFUL AND PERSISTENT

Data Science

Social Networks

Cloud Computing

Smart Phones

Internet of Things

Deploying software applications globally

Connecting 1-to-1 with anyone anywhere

Adding a resource in a sharing economy

Making a transactional decision in real time

Optimizing real-world systems in real time

Massive leverage comes from catching these waves

Scarce & expensive now becomesubiquitous & cheap

TECH LEADERS WHO MISSED THEIR NEXT WAVE

Burroughs – Sperry – Control Data – Unisys

MSA – McCormick & Dodge – Cullinet – Cincom – ADR

DEC – Data General – Wang – Prime – Tandem

Daisy – Calma – Valid – Apollo – Silicon Graphics – Sun

Atari – Osborne – Commodore – Casio – Palm – Sega

WordPerfect – Lotus – Ashton Tate – Borland

Informix – Ingres – Sybase – BEA – Siebel Systems – PeopleSoft

Nortel – Lucent – 3Com – Banyan – Novell

Netscape – MySpace – Inktomi – Ask Jeeves – Yahoo!

Blackberry – Motorola – Nokia – Sony

All of these companies thought they were “doing the right thing.”

BUILDING STRATEGY

MARKET FOCUSED STRATEGY IS 3-DIMENSIONAL

Market Strategy

Where should we compete?

How should we compete?

How will we win?

Analysis of existing & emerging markets, profit streams, competitive intensity, etc. leading to choice of where and where not – and why

What to offer?How to offer?How to differentiate?Source of competitive advantage?Source of innovation?

Business model?Market model?Revenue model?Resources to compete?Criteria for success?

UNDERSTAND YOUR FUNDAMENTAL SOURCE OF

ADVANTAGE

ProductLeadership

OperationalExcellence

CustomerIntimacy

DiscontinuousInnovation

Absence of 4th value discipline revealed by

Clayton Christensen’s The Innovator’s Dilemma

Treacy & WiersmaThe Discipline of Market Leaders

Optimize R&D to gain

performance advantage

Optimize production and delivery systems to gain a cost advantage

Use disruptive technology

to create first mover advantage

Create differentiated customer experience

to gain customer loyalty advantage

KEY SUCCESS FACTORS FOR CUSTOMER-

FOCUSED MARKETING

Identify target markets based on customer definitions

Compelling reason to buy - Understanding met and unmet needs

How does your value-add “fit in?”

What is your current market development orientation?• What are your strengths? Relevance? Why should someone “walk?”

What is the “magic” link between you and your prospects?

What is your “elevator pitch?” How do you differentiate in a meaningful way?

What is the support?

How do you demonstrate the support?

What is your validation process?

THE DIFFUSION OF INNOVATION

The Technology Adoption Life Cycle

THE EVOLUTION OF DISCONTINUOUS

INNOVATIONS

Electric Car

“Digital Homes”

Video Phones

Gasoline Powered Car

DVD Players and DVRs

Conference Calling

Electric/gas Hybrid

Content on Demand

Video Conference e.g.Skype

Discontinuous Continuous

Discontinuous innovations require an infrastructure to prosper and proliferate.

ORCHESTRATING THE SOLUTION:

BUILDING THE VALUE CHAIN

All these linkages are requiredfor a new technology wave to succeed.

Products &Consumables

Technology

Applications

Sales & Support

Consulting

CustomerService

End Users

Technical Buyers

EconomicBuyers

Product Providers Service Providers Customers

THE DYNAMICS OF DISCONTINUOUS INNOVATION

ADOPTION

TechiesTry It!

PragmatistsStick with the Herd!

ConservativesMove Only

when Necessary!

SkepticsNo Way!

VisionariesMove Ahead of the Herd!

TECHNOLOGY ADOPTION LIFE CYCLE

Pragmatists create the dynamics of high-tech market

development.

They cast the deciding vote!

DISCOVERING THE CHASM Visionary market saturates; or visionaries abandon category

• All visionaries have bought• Too easy for “fast-followers” to catch up

Pragmatists see no reason to start yet• Too early for anything to be “in production”• No related “birds of a feather” reference groups have yet formed (beyond those of visionaries)

Mainstream Market

Early Market

MODEL BREAKS DOWN AT KEY TRANSITION

Visionaries vs. Pragmatists

Adventurous

Early buy-in attitude

Think “big”

Independent of the “herd”

Spend first

First-use capability

Think Pragmatists are pedestrian

Prudent

Wait-and-see

Manage expectations

Part of the “herd”

Spend next

Staying power

Think Visionaries are reckless

Pragmatists don't trust visionaries as references.

CROSSING THE CHASM

The Problem• 80% of many solutions—100% of none

• Pragmatists won't buy 80% solutions

Conventional solution (leading to failure)• Committing to the most common

enhancement requests

• Never finishing any one customer's (customer segment) wish-list

The Correct solution (leading to success)• Focus on a single customer segment and

build whole product for that segment

• Use experience and product to move to similar segments

The “Beachhead” segment

Buyer behavior creates market dynamics

Disruptive innovations typically launch in the Early Market

Continuous innovations often launch on Main Street

Markets are not homogenous. Winning strategies will change from inflection point to inflection point. Typically, the previous strategy will need to be significantly modified

both in concept and execution if it is to be useful for the next phase.

THE GUIDEPOSTS: MARKET DEVELOPMENT

MODEL

BEYOND THE CHASM: THE CATEGORY MATURITY

LIFE CYCLE

Technology AdoptionLife Cycle

B

GrowthMarket

C

MatureMarket

D

DecliningMarket

Fault Line!

E

End of Life

A

Indefinitely elastic middle

period

Market Growth

Time

AcquirePower

UtilizePower Divest

DecliningPower

The A-B-C-Ds Of Portfolio Management

CROSSING THE CHASM 2.0

Disruptive technologies

Adoption chasm

B2B focus

Complex Systems model

Vertical marketing

Scale linearly

Disruptive business models

Monetization chasm

B2C or B2B2C focus

Volume Operations model

Viral marketing

Scale exponentially

1.0 2.0

DISRUPTIVE BUSINESS MODELS 2.0 businesses extend 1.0 technology adoption

• The Internet is ubiquitous, low-cost, and consumer friendly

• There is no technology chasm to cross

2.0 businesses disrupt legacy business models• Service subscription displaces product license

• Advertising displaces subscription

• Self-service displaces intermediaries

Two chasms to cross—at different times!• Cross a popularity chasm to create sustainable community

• Cross a monetization chasm to create investor returns

• Do so in that sequence

TWO CHASMS TO CROSS

The Popularity Chasm• Must achieve exponential critical mass—and fast!

• Can’t spend a lot of money to do so

• This is an impossible business problem to solve

• Thus, ask kids to solve it.

The Monetization Chasm• Must translate social energy into economic returns

• Must not alienate community in so doing

• This is a difficult business problem to solve

• Adults can be helpful here

FINAL THOUGHTS

There are still chasms• Like most reality shows, most entrants don’t make it to the Finish line

Crossing has become much more complex• Three-dimensional intersections

• Looking both ways no longer good enough

Focus is still the scarce resource• Must reduce number of variables

• Must get the investment sequence right

It’s about making the right decisions. And about making the right bets.

Q & A