Crossing The Chasm
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A presentation on why companies fail to cross from the early market to the mainstream market
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Crossing The Chasm
- 1. presented by Nwankwo Emmanuel Aegis School of Business and Telecommunications 1
- 2. This is a term used to describe the complexity that is involved in the evolution of product from the early market into the mainstream market. Many business plans are based on a traditional Technology Adoption Life Cycle. Hence, the use of “TECHNOLOGY ADOPTION LIFE CYCLE” on the next slide will help us to understand the Chasm. Aegis School of Business and Telecommunications 2
- 3. Area under the curve represents number of customers “The Chasm” Technology Adoption Lifecycle Technology Adoption Life Cycle The groups above are discussed in the next slide Aegis School of Business and Telecommunucations 3
- 4. The Early market Technology Enthusiasts Technocrats, fundamentally committed to new technology Have a Technological mindset . Hope technology improve their lives. Crusaders of the product who recommend it to others. visionaries Revolutionaries who use technology for competitive advantages. Willing to experiment with the new technology Rely on recommendation from Innovators for purchase of product Believe that the product will serve future needs Chasm The Mainstream market pragmatists Entry signify beginning of growth Comfortable with new technology and products Make the bulk of all technology infrastructure purchases. Adopt technology only after weighing its benefits Conservatives Enters when market approaches saturation Pessimistic about investing in technology Price-sensitive, highly skeptical, and very demanding Skeptics Not potential customers Conservatives who are technophobic They don’t adopt unless they are forced by circumstances Market target is not directed at them Aegis School of Business and Telecommunucations 4
- 5. Technology adoption models are expressed in terms of a standard bell curve, it means statistically, a random sample of any given market or population must contain: 2.5% innovators, 13.5% early adopters, 34.0% early majority, 34.0% late majority, and 16.0% laggards. So even if an industry is conservative by nature, there will always be a sequence of adoption by different types of buyers. Composition of Technology Adoption Model Aegis School of Business and Telecommunucations 5
- 6. • Technology is a central interest in their life. • Are more likely to communicate “horizontally” across industry boundaries. • Intrigued with any fundamental advance. • Often make a technology purchase simply for pleasure. • Not very many innovators in any given market segment. Aegis School of Business and Telecommunucations 6
- 7. • Buy into new product concepts very early in their life cycle. • Easy to imagine, understand, and appreciate the benefits of a new technology to their other concerns. • Rely on their own intuition and vision, they are key to opening up any high-tech market segment. • Highly motivated, and driven by a “dream.” • Are not technology minded, but business minded. • likely to communicate “horizontally” across industry boundaries • Not looking for an improvement; they are looking for a fundamental breakthrough. • See the future in terms of windows of opportunity, and they see those windows closing.Aegis School of Business and Telecommunucations 7
- 8. • Pragmatists have ability to relate to technology, but ultimately driven by a strong sense of practicality. • Believe that many of these new inventions end up as passing fads. • Aim to make a percentage improvement—incremental, measurable, predictable progress. • Tend to be “vertically” oriented. • Pragmatists won’t buy from you until you are established, yet you can’t get established until they buy from you. • they like to see competition—wait to see costs get down. • Evaluate and buy whole products. Aegis School of Business and Telecommunucations 8
- 9. • Conservatives, often fear high tech a little bit, are against discontinuous innovations. • Not so comfortable with their ability to handle a technology product. • The products they understand best are those dedicated to a single function • They wait until something has become an established standard. • They want to buy from large well-established companies. • They tend to invest only at the end of a technology life cycle, when products are extremely mature. Aegis School of Business and Telecommunucations 9
- 10. • These group simply don’t want anything to do with new technology. • They do not participate in the high-tech marketplace, except to block purchases. • Laggards are generally regarded as not worth pursuing on any other basis. • The only time they ever buy a technological product is when it is buried so deep inside another product— Example, say, that a microprocessor is designed into the braking system of a new car. Aegis School of Business and Telecommunucations 10
- 11. The point of greatest peril in the development of a high- tech market lies in making the transition from an early market dominated by a few visionary customers to a mainstream market dominated by a large block of customers who are predominantly pragmatists in orientation. A successful crossing is how high-tech fortunes are made; failure in the attempt is how they are lost. Aegis School of Business and Telecommunucations 11
- 12. The early market The mainstream market Chasm Aegis School of Business and Telecommunucations 12
- 13. Aegis School of Business and Telecommunucations 13
- 14. Visionaries Pragmatists Perceived cause of chasm • Intuitive • Support revolution • Contrarian • Break away from pack • Follow own dictates • Take risks • Motivated by future opportunities • Seek what is possible • Analytic • Support evolution • Conformist • Stay with the herd • Consult with their colleagues • Manage risks • Motivated by present problems • Pursue what is probable Aegis School of Business and Telecommunucations 14 CHASM
- 15. Crossing strategy For all these reasons— • Whole product leverage • Word-of-mouth • Effectiveness • Perceived market leadership • Positioning it is critical that, when crossing the chasm, you focus exclusively on achieving a dominant position in one or two narrowly bounded market segments. Based on this strategy, we recommend the Competitive Positioning Compass Model, which we will see on the next slide. Aegis School of Business and Telecommunucations 15
- 16. Supporters Specialists Generalist Skeptics Developingthe EarlyMarket Developingthe MainstreamMarket The Competitive-Positioning Compass Aegis School of Business and Telecommunucations 16
- 17. Summary To cross the chasm, a company focus on a single market, a beachhead, win domination over a small specific market and use it as a springboard to adjacent extended markets to win. Crossing the chasm requires the following steps: •Target the point of attack. •Assemble an invasion force. •Define the battle -create the competition -define positioning -develop the elevator pitch -build this into all your company communications. •Launch the invasion. Aegis School of Business and Telecommunucations 17
- 18. Aegis School of Business and Telecommunucations 18
Editor's Notes
- Represents the gulf between two distinct marketplaces for technology products— the first, an early market dominated by early adopters and insiders who are quick to appreciate the nature and benefits of the new development, and the second, a mainstream market representing “the rest of us,” people who want the benefits of new technology but who do not want to “experience” it in all its gory details.
- SOLUTION- There are two keys to success here. 1.The first is to have thoroughly thought through the “whole solution” to a particular target end user market’s needs, and to have provided for every element of that solution within the package. This is critical because there is no profit margin to support an afterpurchase. 2. The other key is to have lined up a low-overhead distribution channel that can get this package to the target market effectively. Stop investing in the market, cease funding R&D to match the competition, and milk it for money to invest elsewhere.
- The groups are distinguished from each other by their characteristic response to a discontinuous innovation based on a new technology. Each group represents a unique psychographic profile-a combination of psychology and demographics that makes its marketing responses different from those of the other groups.
- SUMMARY: First there is a market… Made up of innovators and early adopters, it is an early market, flush with enthusiasm and vision and, often as not, funded by a potful of dollars earmarked for accomplishing some grand strategic goal. Then there is no market… This is the chasm period, during which the early market is still trying to digest its ambitious projects, and the mainstream market waits to see if anything good will come of them. Then there is. If all goes well, and the product and your company pass through the chasm period intact, then a mainstream market does emerge, made up of the early and the late majority. With them comes the real opportunity for wealth and growth. • First problem: The company simply has no expertise in bringing a product to market. • A second problem: The company sells to the visionary before it has the product. • Problem number three: Marketing falls prey to the crack between the technology enthusiast and the visionary by failing to discover, or at least failing to articulate, the compelling application that provides the order-of-magnitude leap in benefits.
- SOLUTION-This is a long-term agenda, requiring careful pacing, recurrent investment, and a mature management team. One of its biggest payoffs, on the other hand, is that it not only delivers the pragmatist element of the Technology Adoption Life Cycle but tees up the conservative element as well.