Introduction

Geoffrey A. Moore’s “Crossing the Chasm” is a seminal work in the field of technology marketing, addressing the unique challenges faced by companies bringing disruptive products to mainstream customers. This 3rd edition revisits and updates the core concepts, recognizing the evolving landscape of the tech sector. The book’s central premise is that a significant gap exists between the early adopters of new technology and the pragmatic majority, and successfully bridging this gap – the “chasm” – is crucial for sustainable growth and profitability. This summary aims to capture every essential idea, argument, story, and nuance presented in the book, offering readers a thorough understanding of Moore’s frameworks and practical advice.

Part One: Discovering the Chasm

Chapter 1: High-Tech Marketing Illusion

This chapter introduces the concept of the Technology Adoption Life Cycle and highlights a critical flaw in the traditional high-tech marketing model that leads to the “chasm.”

The Technology Adoption Life Cycle

This section explains the model that describes how different groups of consumers adopt new technologies over time.

• Model Overview: The Technology Adoption Life Cycle depicts market penetration of new technology products as a progression through different consumer types: Innovators, Early Adopters, Early Majority, Late Majority, and Laggards, typically represented as a bell curve.
• Discontinuous Innovations: The model is particularly relevant for “discontinuous” or “disruptive” innovations, which require users to change their behavior or modify existing products and services, unlike “continuous” innovations that involve incremental upgrades.
• Innovators (Technology Enthusiasts): These are the first to adopt new technology, often buying for the pleasure of exploration; they are crucial for initial validation but represent a small market segment.
• Early Adopters (Visionaries): Non-technologists who grasp and appreciate the potential benefits of a new technology and are willing to base buying decisions on vision; they are key to opening market segments.
• Early Majority (Pragmatists): Practical consumers who wait for proven solutions and established references before buying; they represent a large segment crucial for growth and profit.
• Late Majority (Conservatives): Tech-averse individuals who wait until a technology is a standard and supported by large companies; they represent another large, profitable segment.
• Laggards (Skeptics): Consumers who avoid new technology unless it’s deeply embedded in other products; generally not a target for market development.

The High-Tech Marketing Model and its Flaw

This section describes the traditional approach to marketing technology based on the adoption curve and where it goes wrong.

• Traditional Model: The traditional model suggests developing a high-tech market by smoothly moving from left to right across the adoption curve, using each adopted group as a reference base for the next.
• Momentum is Key: Maintaining momentum and creating a “bandwagon effect” is considered essential to prevent being overtaken by competitors and to capitalize on the “window of opportunity.”
• Successful Examples: Companies like Apple (iPad), Microsoft, Intel, Dell, Qualcomm, ARM, Cisco, Google, SAP, Oracle, and HP have achieved dominant market share by following a path that appears to conform to this model.
• The Flaw: Cracks and the Chasm: The model’s illusion is that the progression is smooth; in reality, significant gaps exist between the groups, particularly between Early Adopters and the Early Majority.

Cracks in the Bell Curve

This section elaborates on the specific gaps between the adoption groups.

• Innovators to Early Adopters: A gap exists when a technology cannot be readily translated into a major, appealing benefit for non-technologists; primarily a technological challenge requiring a compelling flagship application (e.g., virtual reality, 3-D printing).
• Early Majority to Late Majority: A gap exists when the technology requires technological competence that the Late Majority lacks; products need to be made increasingly easier to adopt (e.g., home automation, programmable appliances).

Discovering the Chasm

This section focuses on the most critical and often overlooked gap.

• The Deep Divide: The chasm is the significant gap between the Early Adopters and the Early Majority, particularly dangerous because it’s often unrecognized despite shared superficial characteristics (customer lists, order size).
• Radical Differences: The basis for buying is fundamentally different: Early Adopters seek a change agent for strategic advantage and tolerate glitches, while the Early Majority wants productivity improvements for existing operations, minimal disruption, and fully debugged products.
• Reference Problems: Early Adopters do not make good references for the Early Majority because of these differences, and the Early Majority is highly reference-oriented, creating a “catch-22.”

Bodies in the Chasm

This section provides examples of products and companies that failed to cross the chasm.

• Examples of Failure: Products like Holograms, pen-based tablets, fuel cells, QR codes, and MOOCs have generated publicity but failed to reach mainstream status due to discontinuity in adoption and inability to lower barriers for the Early Majority.
• Segway’s Failure: A classic example of a product stuck in the chasm due to a “showstopper” (stairs) preventing a breakthrough application for the mainstream.
• Motorola Iridium’s Failure: Another example of a failed venture due to showstoppers (buildings, bulky handsets, high cost) preventing mainstream adoption.
• Lack of Support Base: Companies in the chasm operate without a sufficient reference base and support base within a market that values both.

A High-Tech Parable

This section illustrates the typical trajectory of a high-tech venture that fails to cross the chasm.

• The Cycle of Failure: A company starts with Innovators and Early Adopters, sees promising early sales, ramps up expectations and spending based on the flawed High-Tech Marketing Model, faces disappointing mainstream sales, experiences internal conflict and turnover, and ultimately fails or becomes a “zombie enterprise.”
• Misinterpreting Early Success: The failure stems from misinterpreting early market sales as the beginning of mainstream adoption and failing to recognize the fundamental differences between these market segments.
• High-Tech Marketing Illusion: The belief that new markets unfold smoothly, leading to inappropriate strategies and resource allocation during the critical chasm period.

Chapter 2: High-Tech Marketing Enlightenment

This chapter provides the necessary context to understand and navigate the challenges presented by the chasm, offering a path to “high-tech marketing enlightenment.”

First Principles

This section establishes foundational definitions for marketing and market in the context of high technology.

• Marketing Defined: Marketing is taking actions to create, grow, maintain, or defend markets; it is about developing and shaping something real, not creating illusions.
• Market Defined (High-Tech): A market is a set of actual or potential customers for given products or services who have a common set of needs or wants AND who reference each other when making a buying decision.
• Importance of Referencing: The self-referencing aspect is crucial because it allows for word-of-mouth leverage, which is essential for efficient market penetration and development, particularly for companies with scarce resources.
• Market vs. Category: Distinguishing between a “market” (a self-referencing group that can be acted upon) and a “category” (an aggregate of sales, not a single entity for marketing focus) is vital for effective strategy.
• Market Segmentation: Marketing professionals insist on market segmentation to identify the natural, self-referencing market boundaries within an aggregate of sales.

Early Markets

This section delves into the characteristics of the customer segments on the left side of the chasm.

• Dominant Customers: The initial customer set is primarily made up of Innovators (Technology Enthusiasts) and Early Adopters (Visionaries), with Visionaries often dominating buying decisions.

Innovators: The Technology Enthusiasts

This section describes the first group to adopt new technology.

• Adoption Driver: They appreciate technology for its own sake and buy for the pleasure of exploring new devices’ properties.
• Role in Business: They are gatekeepers who evaluate new technology early on; winning them over provides initial validation.
• Requirements: They demand truth without tricks, access to technical experts, early access to new products, and often prefer low prices or perceive technology as free.
• Finding Them: Often found in advanced technology groups in large companies, or as designated “techies” in smaller ones; reachable through technical media and direct response advertising.
• Strategic Importance: They are like kindling, helping to start the fire by providing feedback and becoming early supporters; finding those with access to “big bosses” (visionaries) is key.

Early Adopters: The Visionaries

This section describes the second crucial group in the early market.

• Adoption Driver: They have the insight to match emerging technology to strategic opportunities and the charisma to champion risky projects for breakthrough business goals.
• Role in Business: They are a source of “hidden venture capital” through their large project budgets, willing to take high risks for “order-of-magnitude” ROI.
• Strategic Importance: They drive the high-tech industry by seeing vast potential; they are the least price-sensitive segment.
• Working with Them: They are easy to sell to but hard to please due to buying a “dream”; prefer a project orientation with phases and milestones.
• Entrepreneurial Alignment: Requires “productizing” deliverables from visionary projects to create marketable products for less ambitious goals.
• Sense of Urgency: They are in a hurry and exert deadline pressures, requiring careful account management and executive restraint from vendors.
• Prospecting: Often find vendors by maintaining relationships with technology enthusiasts; require a small, sophisticated direct sales force for effective communication and negotiation.

The Dynamics of Early Markets

This section summarizes how the early market develops and common pitfalls.

• Development Process: Requires an entrepreneurial company, breakthrough technology enabling a compelling application, technology enthusiasts for evaluation, and a well-heeled visionary sponsor.
• Seed and Verify: The company seeds enthusiasts with early products and shares its vision with visionaries, who then consult enthusiasts to verify feasibility.
• Common Pitfalls: Lack of market expertise (requiring focus on small, self-referencing segments), selling the visionary before the product is ready (vaporware), and failing to articulate the compelling application for the visionary.
• Corrective Responses: Focus on being the biggest fish in a small pond (“bowling pin” strategy), admit mistakes and refocus on product development for pilot projects, or re-evaluate if the product is truly a breakthrough for an early market or better suited as a supplementary product in a mainstream market.

Mainstream Markets

This section introduces the characteristics of the customer segments on the right side of the chasm.

• Dominant Customers: Mainstream markets are dominated by the Early Majority (Pragmatists), who tend to be leaders for the Late Majority (Conservatives) and rejected by Laggards (Skeptics).

Early Majority: The Pragmatists

This section describes the largest and most crucial segment for long-term profitability.

• Adoption Driver: Driven by practicality and a strong sense of what works; seek predictable, incremental improvements (“percentage improvement”).
• Buying Behavior: Wait and see how others fare, require well-established references, and avoid being pioneers (“Pioneers have arrows in their backs”).
• Strategic Importance: Represent the bulk of market volume; winning their business is fundamental to substantial profits and growth.
• Loyalty and Standardization: Once won, they are loyal and often enforce company standards, dramatically increasing sales volumes and lowering costs for vendors.
• Buying Considerations: Care about the vendor company, product quality, infrastructure of supporting products, and reliability of service; plan on living with decisions long-term.
• Vertical Orientation: Communicate more within their own industry; building relationships and gaining references within a vertical market is crucial but challenging for start-ups.
• Distribution: Prefer minimizing distribution relationships for leverage and control; often favor Value-Added Resellers (VARs) for turnkey solutions.
• Competition: Like to see competition to get costs down and have alternatives; prefer buying from perceived market leaders to ensure aftermarket support develops.
• Price Sensitivity: Reasonably price-sensitive, willing to pay a modest premium for top quality or special services, but want the best deal otherwise.
• Marketing to Them: Requires patience, understanding industry-specific issues, participating in industry forums, being visible in industry media, having installations in other companies in the industry, developing industry-specific applications, and building partnerships.

Late Majority: The Conservatives

This section describes the second-largest segment in the mainstream market.

• Adoption Driver: Generally against discontinuous innovations, preferring tradition over progress; adopt new technology late, often just to stay on par with others.
• Buying Behavior: Tend to invest at the end of a technology life cycle when products are mature and prices are low; their primary goal is often simply not to get stung.
• Fear of High Tech: Often feel a bit fearful of technology; prefer preassembled, bundled packages with heavily discounted prices dedicated to single functions.
• Market Opportunity: Represent a major opportunity to extend the market for mature technologies by repackaging low-cost, trailing-edge components into single-function systems.
• Keys to Success: Thoroughly thinking through the “whole solution” for a target end-user market and having a low-overhead distribution channel to reach them effectively; “as-a-service” offerings are appealing due to convenience.
• Focus on Convenience: Requires a focus on convenience rather than performance, user experience rather than feature sets.
• Underdeveloped Segment: Often perceived as a burden rather than an opportunity by high-tech companies, leading to underdeveloped profitability in this segment.

The Dynamics of Mainstream Markets

This section summarizes how mainstream markets develop and the challenges of maintaining leadership.

• Pragmatist Drive: Pragmatists drive mainstream market development; winning their support is key to entry and long-term dominance.
• Maintaining Leadership: Requires at least keeping pace with the competition; doesn’t necessitate being the technology leader but having a product “good enough” and responding to competitor breakthroughs.
• Consolidation and Stability: Mature markets often see consolidation (e.g., Oracle’s acquisitions) where stability and predictability become highly valued.
• Transition to Conservatives: Smooth transition requires maintaining strong relationships with pragmatists while adding value to the old infrastructure for conservatives.
• Service Importance: The importance of ancillary services increases as products mature; “as-a-service” offerings address this by reducing installation/implementation demands and improving user experience (e.g., Apple iPad).
• Addressing Disenfranchisement: Acknowledging and addressing the issues of those still feeling left behind by technology is necessary for broader success.

Laggards: The Skeptics

This section describes the final segment, which often acts as a roadblock.

• Role in Market: They generally do not participate in the high-tech marketplace except to block purchases; the primary marketing function is to neutralize their influence.
• Skeptic’s Argument: Often argue that disruptive innovations rarely fulfill promises and come with unintended consequences.
• Value to Marketers: Skeptics point to discrepancies between sales claims and delivered products, highlighting where customers might fail; ignoring them can lead to lost market share through negative word of mouth.
• Reframing Promises: Their skepticism suggests that the value of a system is often discovered after installation rather than being known at purchase, emphasizing the need for product flexibility, adaptability, and ongoing account service.

Back to the Chasm

This section returns to the central theme and explains why the chasm exists despite the value of the adoption model.

• Model’s Flaw: The model implies a smooth progression, but the transition between segments is awkward due to the need for new strategies just as old ones become comfortable.
• Lack of Reference Base: The biggest problem is the lack of a suitable customer base for referencing when transitioning to a new segment; gaps symbolize the difficulty in using the group on the left as a reference for the group on the right.
• Weakening Reference Base: While there are some affinities between Innovators/Early Adopters and Early Majority/Late Majority, the gap between Early Adopters and Early Majority is most significant due to fundamental incompatibilities.
• Four Characteristics Alienating Pragmatists:
  • Lack of Respect for Colleagues’ Experience: Visionaries don’t rely on established references, unlike pragmatists who require them from their industry peers, creating a catch-22.
  • Interest in Technology over Industry: Visionaries focus on futuristic technology forums, while pragmatists prioritize industry-specific forums and issues.
  • Ignoring Existing Infrastructure: Visionaries build from scratch, while pragmatists expect and rely on existing standards, support groups, and third parties.
  • Lack of Self-Awareness about Disruptiveness: Visionaries may disrupt organizations and move on, leaving pragmatists to deal with the consequences; pragmatists are cautious about schemes they have to live with.
• Mismatched Sales Pitch: High-tech companies often fail to change their sales pitch from visionary benefits to pragmatist requirements (e.g., “state-of-the-art” vs. “industry standard”).
• The Problem of Time: Vendors need pragmatists to buy now, but pragmatists want to wait; the vendor must ensure the pragmatist buys first.

Part Two: Crossing the Chasm

Chapter 3: The D-Day Analogy

This chapter introduces the central strategy for crossing the chasm: focusing all resources on a specific, limited target market segment to achieve dominance.

The Perils of the Chasm

This section reiterates the challenges faced by companies stuck in the chasm.

• Lack of New Customers: Insufficient sales from either the early market (saturated) or the mainstream market (unready) lead to negative cash flow.
• Competitor Counterattack: Mainstream competitors, previously ignoring the venture, now see it as a target and actively counterattack.
• Limited Refuge: Difficulty retreating into existing major-account relationships for additional funding or continuing to service the early market due to customization demands and the emergence of newer technologies.
• Investor Pressure: Investors expect growth based on flawed plans, leading to disappointment and potential predatory behavior from “vulture capitalists.”
• Urgency to Enter Mainstream: The need to quickly enter a mainstream market segment and establish relationships with pragmatist buyers to control destiny.

Fighting Your Way into the Mainstream

This section introduces the D-Day strategy as a model for entering the mainstream market.

• Act of Aggression: Entering the mainstream market is an aggressive act met with resistance from established competitors and suspicion from customers.
• The D-Day Strategy: Replicate the Allied invasion of Normandy by targeting a specific niche market where you can dominate, driving out competitors, and using it as a base for broader operations.
• Concentrated Force: Concentrate an overwhelmingly superior force on a highly focused target (“point of attack”) to simplify the challenge and efficiently develop a solid base of references and support.
• Galvanizing the Enterprise: The strategy galvanizes the entire company by focusing everyone on a specific, achievable goal that is directly leveraged into long-term success.
• Counterintuitive for Start-ups: This strategy is often counterintuitive for start-up management due to a lack of discipline in saying “no” to sales opportunities outside the target niche.

How to Start a Fire

This section uses the analogy of starting a fire to explain the need for a niche market approach.

• Analogy: Trying to cross the chasm without a niche is like trying to light a fire without kindling; the promotional budget (paper) and market opportunity (log) are insufficient without smaller target segments (kindling).
• Failure of Will: The reluctance to commit to niches is a failure of will, not understanding; companies are sales-driven, not market-driven.
• Fatal Consequences of Being Sales-Driven: Being sales-driven during the chasm period is fatal because it prevents securing a beachhead in a mainstream market by failing to deliver the “whole product” needed for pragmatist customer satisfaction and references.
• Whole Product Commitments: These are expensive and resource-intensive; they must be made sparingly and strategically, focused on a single niche market for leverage.
• Lack of Word-of-Mouth: A sales-driven approach in disparate segments prevents the critical mass of informed individuals needed for word-of-mouth to develop, making selling harder.
• Market Leadership: Pragmatists want to buy from market leaders; to achieve this early on, a “big fish, small pond” approach is necessary by focusing on a single segment to gain sufficient market share.
• “Owning” a Market: Dominating a segment leads to “owning” the market, creating barriers to entry for competitors and providing more predictable revenues and lower sales costs.

What About Microsoft?

This section addresses the apparent exception to the niche strategy rule.

• Unique History: Microsoft’s history is unique and not a good precedent for most companies; it operated from a context of being a de facto standard (from IBM’s PC franchise) and was born “inside a tornado of demand.”
• Fast Follower: Microsoft’s success was based primarily on being a fast follower and co-opting new technologies (Windows from Macintosh, Internet Explorer from Netscape Navigator).
• Controlling the Gates: As owner of client-server clients, Microsoft controlled access to the pragmatist side of the chasm, allowing it to adopt discontinuous innovations on its own terms.
• Burglary and Stealth: For most companies without this advantage, entering the mainstream market is an act of “burglary, breaking and entering, deception, often even of stealth,” requiring careful selection of targets.

Beyond Niches

This section discusses the long-term strategy after establishing an initial beachhead.

• Life After Niche: Major market dominance transcends niches but continues to involve developing new segments for growth and profit.
• Strategic Target Market Segments: The key to moving beyond the initial niche is selecting a target segment that facilitates entry into adjacent segments (“bowling pin” strategy).
• Example: Apple Macintosh: Targeted graphics arts departments (a small niche with a painful problem) and leveraged that win into adjacent departments (marketing, sales) and external markets (creative agencies, publishers).

Successful Chasm Crossings

This section provides real-world examples of companies that successfully implemented a focused approach.

• Focus on Specific Problems: Successful companies targeted niches with problems so pressing that they motivated early pragmatist adoption ahead of the herd.
• B2B Focus: Most successful crossings happen in business markets where institutions can absorb the challenges of immature offerings.
• Vertical vs. Horizontal: Application layer software is naturally vertical, while infrastructure is horizontal; however, disruptive infrastructure vendors must take a vertical approach to cross the chasm due to adoption dynamics.

Documentum: A Document Management Application Crosses the Chasm

This section details the successful chasm crossing of Documentum.

• Starting Point: Documentum had flat revenues and was stuck in the chasm despite good technology.
• Targeted Niche: Targeted the regulatory affairs departments in Fortune 500 pharmaceutical companies, a small niche but with “excruciating” pain (cost of delays in New Drug Approval process).
• Executive Sponsorship: Tackling a “million-dollars-per-day” problem ensured strong commitment from top brass, overruling IT’s preference for established vendors.
• Rapid Adoption: Demonstrated solving the problem within a year, leading to commitment from major pharmaceutical companies.
• Bowling Pin Effect: Leveraged the initial niche success into adjacent departments within drug companies and then into related process industries (chemicals, oil refineries) and finally financial services.
• Keys to Success: Knocking over the head pin (solving a serious problem for a committed customer) and lining up other market segments for leverage.

Salesforce.com: A Software-as-a-Service Company Crosses the Chasm

This section details the successful chasm crossing of Salesforce.com.

• Disruptive Model: Introduced software-as-a-service (SaaS) as a disruptive alternative to traditional on-premise enterprise software.
• Backlash: Faced resistance from the existing enterprise ecosystem due to perceived insecurity and network dependency.
• Targeted Segmentation: Focused on salespeople and managers, mid-market companies, the United States only, and technology-savvy industries (high tech, telco, pharma, financial services).
• Compelling Problem: Addressed the problem of “making the quarter” for salespeople by providing a true productivity tool for pipeline visibility and next-step actions.
• Viral Adoption: Salespeople loved the product and told others, leading to viral adoption without requiring CIO approval in some cases.
• Subscription Model Advantage: The subscription model incentivized Salesforce to keep customers using the product, leading to expansion within accounts.
• Keys to Success: Targeting a beachhead segment that was big enough to matter, small enough to win, and a good fit with their core offering; this allowed them to expand rapidly with relatively little opposition.

VMware: Disruptive Infrastructure Crosses the Chasm

This section details the successful chasm crossing of VMware.

• Disruptive Technology: Developed software to “virtualize” computers, allowing multiple operating systems/applications on one machine or one application across multiple machines.
• Early Use Cases (Pre-Chasm): Initially adopted by technology enthusiasts for running multiple operating systems on one PC and by technologists for running multiple applications on one server or one application on multiple servers (addressing underutilized capacity).
• Chasm-Crossing Use Case: The critical use case for crossing the chasm was in the testing phase of the software development life cycle, allowing systems administrators to quickly spin up and down simulation environments.
• Huge Win for Administrators: This solved a recurring, challenging problem for administrators, making them the heroes of the chasm crossing.
• Post-Chasm Expansion: Success in the testing niche led to additional use cases cascading to IT operations managers (optimizing hardware utilization), VPs of operations (improving reliability), and CIOs (enabling cloud computing and agility).

From Idea to Implementation

This section transitions from the concept of crossing the chasm to the practical steps for implementation.

• Breaking Down the Challenge: The remaining chapters break down the challenge into four pieces: selecting the point of attack, assembling the invasion force, defining the battle, and launching the invasion.
• Unique Transition: Crossing the chasm is a singular moment of transition requiring special techniques not used at other times in the adoption cycle.

Chapter 4: Target the Point of Attack

This chapter focuses on selecting the specific niche market that will serve as the beachhead for crossing the chasm.

A High-Risk, Low-Data Decision

This section highlights the inherent difficulty of choosing the initial target market.

• The Challenge: Selecting the target market segment is a high-risk decision made with little or no useful hard information.
• Lack of Experience and Data: Companies lack experience in the target segment and cannot predict outcomes for a discontinuous innovation.
• Futility of Numeric Data: Relying on market-size forecasts from external firms is folly as they are based on arbitrary assumptions and are not actionable for specific segment targeting.
• Paralysis: The anxiety of making a high-risk, low-data decision can lead to paralysis.

Informed Intuition

This section proposes using intuition as a decision-making tool in a low-data environment.

• Acknowledging Lack of Data: The proper response is to acknowledge the lack of data and approach the decision differently.
• Intuition as a Tool: Informed intuition, based on isolating a few high-quality, memorable images (data fragments) that represent broader reality, is a trustworthy tool.
• Memorable Images: Only work with memorable images (“poster children”) that represent characteristic market behaviors (e.g., “Beibers,” “Goths,” “geeks”).
• Beyond Abstraction: While “visionaries,” “pragmatists,” and “conservatives” are abstract categories, they need to become more concrete and target market-specific.

Target Customer Characterization: The Use of Scenarios

This section introduces a formal process for creating concrete images of target customers.

• Focus on Customer, Not Market: Avoid focusing on abstract market categories; focus on specific target customers.
• Making Them Up: Since real customers are few, create representative “images” or scenarios to guide decision-making.
• Formal Process: Target customer characterization is a formal process to generate and refine these scenarios, ideally leading to 8-10 distinct alternatives.
• Illustrative Example: 3-D Printing: Demonstrates how to apply the process to a product like a 3-D printer, considering potential target customers and applications.

Sample Scenario

This section provides a template and example of a target customer scenario.

• Template: A representative format includes header information (end user, technical buyer, economic buyer) and a “day in the life” before and after the product adoption.
• Header Information: Focuses marketing and R&D on a specific use case, detailing industry, geography, department, job title (B2B) or demographics (consumer).
• “A Day in the Life (Before)”: Describes a frustrating situation for the user, including scene, desired outcome, attempted approach, interfering factors, and economic consequences.
• “A Day in the Life (After)”: Replays the same situation with the new technology, detailing the new approach, enabling factors, and economic rewards.
• Tactical but Strategic: This micro-level exercise has major implications for setting overall marketing strategy.

Processing the Scenario: The Market Development Strategy Checklist

This section describes how to evaluate the generated scenarios to identify the best target.

• Supplying the “Data”: Scenarios provide the necessary data fragments for decision-making.
• Refining the Data: The Market Development Strategy Checklist refines this data by rating each scenario against key go-to-market factors.
• Showstopper Issues (Stage 1): Scenarios are first rated against four critical “showstopper” factors; low scores eliminate the scenario as a beachhead target.
  • Target Customer: Single, identifiable, accessible, and well-funded economic buyer.
  • Compelling Reason to Buy: Sufficient economic consequences to make the buyer anxious to fix the problem.
  • Whole Product: Ability to field a complete solution with partners within three months for dominance within twelve months.
  • Competition: The problem is not already addressed by a company that has already crossed the chasm in that space.
• “Nice to Have” Factors (Stage 2): Scenarios passing Stage 1 are rated against five additional factors where low scores can usually be overcome with investment and time (though cheaper and sooner are preferred).
  • Partners and Allies: Existing relationships with necessary partners to fulfill the whole product.
  • Distribution: An in-place sales channel that can reach and fulfill the whole product requirements for the target customer.
  • Pricing: Consistency with the target customer’s budget and value gained, plus sufficient compensation for partners and the channel.
  • Positioning: Credibility as a provider to the target niche.
  • Next Target Customer: Potential for “bowling pin” leverage into adjacent niches.
• Rank Ordering and Commitment: Scenarios are rank ordered, and the team commits to one – and only one – beachhead target.
• One Target Only: Emphasizing that a company cannot cross the chasm in two places simultaneously.

Committing to the Point of Attack

This section discusses the difficulty and necessity of committing to a specific niche.

• Challenge for Entrepreneurs: Difficult for tech-focused entrepreneurs to commit to a pragmatic, niche strategy they don’t personally embody.
• Failure of Will: A defining moment requiring a shift in mindset and strategy.
• White-Water Rafting Strategy: Best to make the decision quickly and go “hard in the direction chosen,” as hesitating can be fatal.
• Winning the Picked Beachhead: Success depends not on picking the optimal beachhead but on winning the one picked by focusing all attention on the whole product.
• Guarding Against False Assumptions: Validate the winning scenario with market research, but start moving forward without delay.

And Yes, Size Matters

This section addresses the optimal size of the target niche.

• Bigger is Not Always Better: For dominance, a company needs over 50% (or more) of new sales in the segment over the next year; attacking a segment too large prevents achieving this market-leader impact.
• Rules of Thumb: The target segment should be “big enough to matter, small enough to lead, good fit with your crown jewels.”
• Sub-segmenting: If the segment is too big, sub-segment it based on special interest groups or geography, respecting word-of-mouth boundaries.
• Augmenting: If the segment is too small to generate sufficient sales, it must be augmented, again respecting segmentation boundaries.

Recap: The Target Market Selection Process

This section provides a checklist for the target market selection process.

• Develop Scenarios: Create a library of target customer scenarios with input from customer-facing personnel.
• Appoint Subcommittee: Select a small team, including potential veto holders, to make the selection.
• Publish Scenarios and Spreadsheet: Organize scenarios and rating factors for systematic evaluation.
• Rate Showstopper Factors: Subcommittee members privately rate scenarios, then discuss and consolidate ratings.
• Rank Order and Filter: Rank scenarios based on showstopper scores and set aside those that don’t pass.
• Rate Remaining Factors: Repeat the rating process for the remaining factors and rank order the finalists.
• Commitment: Discuss and commit to one beachhead target; if the group cannot decide, assign someone to build a bowling pin model.
• No Viable Scenario: If no scenario survives, do not attempt to cross the chasm; continue to take early market projects and search for a viable beachhead.

Chapter 5: Assemble the Invasion Force

This chapter focuses on building the necessary resources and partnerships to successfully attack the target market segment.

Defining the Battle

This section emphasizes that marketing is warfare and having the right force is crucial.

• Marketing is Warfare: Success requires having the right weapons (whole product and partners), not just good slogans or advertising.
• Wiring the Marketplace: Create a market where your product is the only reasonable buying proposition for a given target customer and application.
• Securing Monopoly: Understand the whole product concept and organize the marketplace to provide a whole product incorporating your offering.

The Whole Product Concept

This section explains the core idea of the whole product.

• The Gap: A gap exists between the marketing promise and the ability of the shipped product to fulfill it; ancillary services and products are needed to bridge this gap and create the “whole product.”
• Formal Model (Levitt): Identifies four levels of whole product: Generic (what is shipped), Expected (minimum needed to meet buying objective), Augmented (fleshed out for maximum chance of achieving objective), and Potential (room for growth with ancillary products and enhancements).
• Example: Internet Browser: Illustrates the different levels for an internet browser.
• Shifting Battleground: At the introduction of disruptive innovation, the battle is at the generic product level; in mainstream markets, the battle shifts to the outer circles of the whole product as generic products become similar.

The Whole Product and the Technology Adoption Life Cycle

This section relates the whole product concept to the different stages of adoption.

• Increasing Importance: The outer circles of the whole product increase in importance from left (Innovators) to right (Conservatives) across the adoption cycle.
• Innovators’ Self-Reliance: Technology enthusiasts are least in need of whole product support and enjoy cobbling together solutions.
• Visionaries’ Responsibility: Early Adopters accept responsibility for creating the whole product themselves to gain strategic advantage.
• Pragmatists’ Demand: Early Majority customers require the whole product to be readily available from the outset and prefer products with an established whole product infrastructure (e.g., Microsoft Office, iPhone, Cisco routers).
• Pragmatists Buy Whole Products: Pragmatists evaluate and buy based on the whole product, not just the generic product.
• Lack of Attention as Problem: Failure to recognize the need for whole product marketing is a major cause of disillusionment with high-tech’s inability to deliver on its promises.

Whole Product Planning

This section emphasizes the importance of planning for the whole product.

• Centerpiece of Market Domination: Whole product planning is crucial for dominating a mainstream marketplace.
• Market Leader Preference: Pragmatists back market leaders to minimize whole product costs and gain leverage; winning the whole product battle means winning the war.
• Looking Like a Winner: Perception of winning the whole product battle is key, but pretending is a losing tactic.
• Minimum Commitment: The minimum whole product needed to cross the chasm is what assures the target customers can fulfill their compelling reason to buy.
• Simplified Model: A simplified model distinguishes between “what we ship” and “whatever else the customers need” to achieve their buying objective.
• Marketing Promise: The “whatever else” is the marketing promise to win the sale; failing to deliver on this promise creates negative word of mouth and hurts sales productivity.
• Lack of Whole Product as Problem: Less than 100% whole product delivery means the target market may not develop as forecast, even with a superior generic product.
• Taking Responsibility: Companies must take responsibility for defining and ensuring the delivery of the whole product to control their destiny.
• No External Support in Chasm: During the chasm, there’s no hope of external whole product support that isn’t specifically recruited by the company.

Some Real-World Examples

This section provides case studies illustrating whole product implementation.

• Competitive vs. Non-Competitive Scenarios: Discusses scenarios with installed competition (like invading Normandy) and those without (like landing on a new continent).

Aruba and Wireless Networks for Enterprises

This section details how Aruba built a whole product to compete with Cisco.

• Competitive Landscape: Aruba targeted Cisco, a much larger incumbent, by leveraging a point of disruption (Wi-Fi threatening wireline networks) and a new standard (802.11n).
• Targeted Niche: Focused on the U.S. college and university market, an early BYOD segment with high wireless needs.
• Surrounding the Core Product: Built a whole product around their core wireless network technology by partnering or acquiring companies providing necessary components (network management, security, video codecs, remote access).
• Loyalty Building: Going the “extra mile” for customers builds long-lived loyalty.
• Core Dynamic: This is the dynamic that allows start-ups to cross the chasm against installed incumbents.

Lithium and Customer-Enabled Tech Support

This section details how Lithium built a whole product in a market without direct competitors.

• Creating a Market: Lithium created a market for online customer communities when the idea was novel and pragmatists were skeptical.
• Targeted Enclave: Found their pragmatist enclave in overworked and underappreciated tech support organizations.
• Compelling Idea: Created a system for customer-enabled tech support where customers provide expert advice online, often for free.
• Whole Product Elements: Built a whole product by providing consulting support for curating content, extending support to mobile devices, integrating with CRM systems, and extending support to the social web.
• Meeting Needs: Met the needs of both immediate customers (tech companies) and their customers’ customers (consumers and tech enthusiasts).

Partners and Allies

This section discusses the role of external relationships in building the whole product.

• Strategic Alliances: Large-scale partnerships between relatively equally matched peers (e.g., SAP, HP, Andersen Consulting; Intel, Microsoft; Cisco, EMC, VMware) can be powerful but complex to manage.
• Tactical “Whole Product” Alliances: More suitable for product managers, these alliances have the sole purpose of accelerating whole product infrastructure within a specific target market segment.
• Mutual Benefit: Benefits the vendor by ensuring customer satisfaction and the partner by expanding their marketplace without marketing effort.
• Initiation and Management: Readily initiated and managed at the product marketing manager level, often arising from customer interactions or whole product planning exercises.

Partners and Allies: The Example of Rocket Fuel

This section provides an example of “silent” whole product partners.

• Specialized Offering: Rocket Fuel provides specialized AI algorithms for digital advertising, requiring leverage of existing systems and players.
• Leveraging Existing Systems: Building clean interfaces to access digital ad exchanges and engaging with industry participants like ad agencies and media buyers.
• Peripheral Relationships: Leveraging industry boards for contract standardization and ad servers for transparent performance metrics.
• Ecosystem Alignment: The advertising industry rallied around companies like Rocket Fuel because everyone had an interest in engaging consumers online.
• Lesson: If you want to go fast, go alone; if you want to go far, go with others.

Partners and Allies: The Example of Infusionsoft

This section provides an example of building a partner ecosystem to address onboarding and support needs.

• Targeting Small Businesses: Infusionsoft provides sales and marketing services to small businesses, who are often late adopters of technology.
• Initial Partnering: Partnered with marketing gurus who sold seminars to small business owners, helping to attract early adopters.
• Chasm Crossing Challenge: Needed to expand to the pragmatist majority, having success with specific niches (professional speakers, fitness studios, dentists).
• Onboarding as Whole Product Issue: Learned that carefully supervised onboarding was crucial for customer retention, even after offering free setup.
• Scaling Support with Partners: Created a training and certification program for Infusionsoft Certified Consultants, who provide onboarding and coaching services and also generate referrals.
• Lesson: Whole product partnerships built around specific target markets and compelling reasons to buy are sustainable and effective.

Partners and Allies: The Example of Mozilla

This section provides an example of orchestrating a strategic partnering scenario.

• Challenge: Mozilla needed to expand its Firefox browser to mobile devices and orchestrate the ecosystem for its open-source platform.
• Targeted the “Next Two Billion”: Focused on users in developing economies who would use mobile devices and needed a free, low-cost platform.
• Recruited Anchor Partners: Secured commitment from key mobile operators (Telefonica, Deutsche Telekom) and device manufacturers (ZTE, TCL).
• Ecosystem Alignment: Held summits and planning days to align the ecosystem at executive and operating levels.
• Maintained Standards: Fought to maintain common core standards for scalability.
• Orchestrated Launch: Led a launch at Mobile World Congress with multiple CEOs committing to the platform.
• Lesson: The market development steps outlined in the book can be applied to strategic partnering scenarios; focus on target customers, compelling reasons to buy, whole product, and creating competition.

Recap: Tips on Whole Product Management

This section provides a checklist of practical advice for managing the whole product.

• Define and Communicate: Use the doughnut diagram to define and communicate the whole product and each party’s responsibilities.
• Minimize Set: Reduce the whole product to its minimal, necessary set to avoid unnecessary burdens.
• Ensure Mutual Benefit: Review the whole product from each participant’s point of view to ensure all vendors benefit equitably.
• Develop Relationships Slowly: Build whole product relationships gradually from existing cooperation towards formalization.
• Avoid Competing Partners: Do not recruit directly competing partners to serve the same need in the same segment.
• Focus on Communication: Formalized relationships are for communication, not driving cooperation; trust is key.
• Work Across Organizations: Work from the bottom up with large partners and top down with small ones to be close to decision-making.
• Manage Your Own Company: The most difficult partner may be your own company; look to customers as allies to fight for equitable distribution of benefits.

Chapter 6: Define the Battle

This chapter focuses on understanding and influencing the competitive landscape to ensure success in securing the beachhead.

Define the Battle

This section emphasizes the importance of controlling the competitive narrative.

• Marketing is Warfare: Winning requires defining the battle by setting the turf and competitive criteria.
• Understanding Competition: Succeeding means understanding who or what the competition is, their relationship with the target customer, and how to drive them out.
• Customer’s Perspective: The goal is to define the battle in a way that aligns with what target customers truly want and need.

Creating the Competition

This section explains how the nature of competition changes across the adoption cycle and the need to actively create it in the mainstream.

• Shifting Nature of Competition: Competition changes dramatically across the Technology Adoption Life Cycle.
• Early Market Competition: Not from competitive products but from alternative modes of operation, inertia, risk aversion, or lack of a compelling reason to buy; competition is at the level of corporate agenda.
• Mainstream Market Competition: Defined by comparative evaluations of products and vendors within a common category; comparison is a fundamental condition for purchase.
• Need to Create Competition: Coming from the early market with no perceived competitors, you often have to create your competition in the mainstream to provide the comparative context pragmatists require.
• Positioning within a Category: Create competition by positioning your product within a credible and attractive buying category populated with familiar alternatives.
• Avoid Rigging the Competition: Do not create a self-serving or irrelevant universe that clearly favors you but lacks credibility or attractiveness to pragmatists.
• Focus on Pragmatist Values: The key is to focus on the values and concerns of the pragmatists, not visionaries.

The Competitive Positioning Compass

This section introduces a model for understanding value domains and buyer orientation.

• Value Domains: Four domains of value in high-tech marketing: technology, product, market, and company; the domain of greatest value changes as products move through the adoption cycle.
• Specialists vs. Generalists: Early markets dominated by specialists (interested in technology and product); mainstream by generalists (interested in market and company).
• Skepticism vs. Support: Buyers move from skepticism to support across the cycle.
• Winning Over Skeptics: Skeptical specialists can be won by demonstrating technology advantage and product credibility; skeptical generalists by demonstrating market leadership and company credibility.
• Natural Rhythms: Developing early markets (technology to product) and mainstream markets (market to company).
• Unnatural Chasm Transition: Moving from visionary support back to pragmatist skepticism, from product-oriented to market-oriented issues, and from specialists to wary generalists.
• Market-Centric Values: Crossing the chasm requires shifting marketing focus to market-centric value attributes (whole product, user experience, compatibility, whole product price, situational value).
• Creating Market Leadership: Lacking market leadership, create its valued attributes within a segment to bring true market leadership into existence.

More Specifically: Market and Product Alternatives

This section elaborates on using two specific competitors as reference points.

• Beacons for Value Proposition: Use two competitors as beacons to help the market locate your unique value proposition.
• Market Alternative: A vendor the target customer has been buying from for years; represents the budget you are targeting and the problem you are addressing.
• Product Alternative: A company leveraging the same or similar disruptive innovation; gives credibility to the new technology and allows differentiation based on your segment-specific focus.

Creating the Competition: The Example of Box

This section applies the concept of market and product alternatives to Box.

• Competitive Landscape: Box faced SharePoint (market alternative) and Dropbox (product alternative).
• Positioning: Positioned itself at the intersection: “Dropbox’s ease of use meets SharePoint’s enterprise standards,” highlighting ease of use and enterprise features.
• Matrix Visualization: Illustrated with a 2×2 matrix placing the alternatives and your company at the intersection.
• Clarity of the Game: Using reference competitors clarifies your target market and disruptive innovation.

Creating the Competition: The Example of WorkDay

This section applies the concept of market and product alternatives to WorkDay.

• Competitive Landscape: WorkDay targeted the installed base of PeopleSoft (market alternative) and leveraged the SaaS model pioneered by Salesforce.com (product alternative).
• Positioning: Message was to target PeopleSoft customers with the benefits of SaaS, differentiating from the old client-server paradigm.

Failing to Create the Competition: The Examples of Segway and Better Place

This section provides cautionary tales of companies that failed to establish clear competitive positioning.

• Segway’s Failure: Unable to find clear market or product alternatives, leaving it isolated and without a clear competitive context for pragmatists.
• Better Place’s Failure: Had a product alternative (other electric vehicles) but lacked a clear market alternative (no existing budget or category to target).

In Closing

This section summarizes the importance of selecting credible reference competitors.

• Clues to Readiness: Difficulty finding credible market or product alternatives is a clue that you may not be ready to cross the chasm.
• Existing Budget: Chasm crossing requires an existing budget allocated to a broken process; choosing a market alternative wisely addresses this.
• The Fight: Calling out a market alternative means you are in for a fight for that budget.
• Technology Shift: The product alternative highlights the technology shift and why old solutions cannot keep up.
• Positioning and Differentiation: Market alternatives call out the budget and category, while product alternatives call out the differentiation.

Positioning

This section delves into the critical element of positioning for mainstream markets.

• Most Discussed, Least Understood: Positioning is a highly discussed but poorly understood component of high-tech marketing.
• Positioning as a Noun: Best understood as an attribute associated with a company or product, not the marketing activities to create it.
• Influence on Buying Decision: Positioning is the single largest influence on the buying decision, shaping both the choice and the evaluation process.
• In People’s Heads: Positioning exists in people’s heads, not in your words; frame positions in words likely to resonate with their existing understanding.
• Conservative About Change: People resist changes in positioning; effective strategies demand the least change.
• Positioning as a Verb: Activities designed to bring about positioning as a noun.
• Goal: Easy to Buy: The correct goal is to make products easier to buy, not easier to sell.

The Claim: Passing the Elevator Test

This section focuses on articulating a clear and concise positioning statement.

• Difficulty of Articulation: The hardest part is reducing the claim to a readily understandable format.
• Consequences of Failing the Test: Prevents word-of-mouth transmission, leads to inconsistent marketing communications and R&D, hinders partner recruitment, and makes financing difficult.
• Formula for the Claim: A two-sentence formula based on target segment, market alternative, product category, compelling reason to buy, product alternative, and key whole product features.
• Examples (Verinata, HANA): Applying the formula to real-world examples.
• Giving Things Up: Articulating a clear claim requires giving up less important claims to focus on a single primary differentiation statement.
• Limited Space in Heads: People use shorthand references and have limited space for positioning; if you don’t fill it with a single attribute, the market or competition will do it for you.
• Claim vs. Tagline: The positioning statement is not the ad tagline; it controls the ad campaign to ensure it stays on strategy.

The Shifting Burden of Proof

This section explains how the type of evidence needed to support positioning changes across the adoption cycle.

• Evolution of Evidence: The kind of evidence needed evolves from product-focused (benchmarks, reviews) to market-focused (market share, partner commitment) as the market matures.
• Transition from Product to Market: Crossing the chasm involves a transition from product-based evidence (features, benchmarks) to market-based evidence (market share, partner investment).
• External Control: In the mainstream, major sources of evidence (market share, partner commitment) are not directly under the company’s control.
• Market Share as Evidence: To the pragmatist, market share is the most powerful evidence of leadership and likelihood of victory.
• Partner Commitment as Evidence: In the absence of definitive market share numbers, the quality and commitment of partners and allies serve as evidence of leadership (“identify leaders by their followers”).

Whole Product Launches

This section discusses how to communicate the whole product message to the market.

• Beyond Product Launches: Traditional product launches (briefing analysts, press tours) are not suitable for crossing the chasm because the product is not new news.
• Focus on the Market: The message should be “Look at this hot new market,” highlighting a new approach to a problem, emerging partners, and growing customer base.
• Credibility Through Bandwagon Effect: Communicate the bandwagon effect in progress to gain credibility.
• Communications Venues: Business press (for credibility and big ideas) and “vertical media” (for engaging pragmatists and conservatives in specific industries).
• Business Press: Use financial analysts as references, organize press conferences with multiple spokespersons, or sponsor conferences; requires earning coverage over time.
• Vertical Media: Participate in trade shows, conferences, and publications; ideal for discussing whole product issues and positioning the vendor as a consultant.
• Goal of Whole Product Launch: Develop relationships in support of a positive word-of-mouth campaign to build barriers to entry for competitors.

Recap: The Competitive Positioning Checklist

This section provides a checklist for defining the battle effectively.

• Focus Competition: Center the competition within the market segment defined by your must-have value proposition.
• Create Reasonable Alternatives: Create competition around a reasonable and comprehensive set of alternatives for pragmatists, avoiding artificial exclusions.
• Control Communications: Reduce your claim to a formula and manage all communications to stay within its bounds, emphasizing differentiation.
• Demonstrate Validity: Support your claim through the quality of your whole product and partners to establish market leadership for pragmatists.

Chapter 7: Launch the Invasion

This chapter covers the final elements of the D-Day strategy: distribution and pricing, which are the points of direct contact with the new mainstream customer.

Launch the Invasion

This section sets the primary goals for distribution and pricing during the chasm crossing.

• Number-One Corporate Objective: Secure a distribution channel into the mainstream market that the pragmatist customer is comfortable with; this objective comes before revenues, profits, press, and even customer satisfaction.
• Function of Pricing: During the chasm period, pricing’s fundamental function is to motivate the chosen channel.
• Attracting Distribution: Aim to attract customer-oriented distribution with distribution-oriented pricing.

Customer-Oriented Distribution

This section identifies different types of mainstream customers and their preferred distribution channels.

• Five Classes of Customers: Identifies five groups: Enterprise executives, End users, Department heads, Design engineers, and Small business owner-operators.
• Direct Sales (Enterprise Buyer): For large, complex system purchases; involves consultative sales, relationship marketing, solution selling, provocation-based selling, and professional services.
• Web-Based Self-Service (End-User Buyer): For low-cost, personal technology purchases; involves promotional marketing, direct response sales activity, freemium models, e-commerce, and automated support (FAQs, chat, communities).
• Sales 2.0 (Department Manager Buyer): For medium-cost, use-case-specific solutions; involves direct-touch marketing, sales, and service entirely over digital media, often with remote support and local partners for on-site needs.
• Traditional Two-Tier Distribution (Design Engineer): For component technologies designed into products; involves web communication, sales presence for samples, distributors for inventory, and component vendors for post-sales support.
• Value-Added Resellers (Small Business Owner): For modest business purchases; involves local VARs as trusted advisors, with the product vendor taking responsibility for marketing and much of the sales effort.
• Picking the Primary Channel: Choose the channel that best fits your target market strategy; be willing to switch if necessary.

Distribution-Oriented Pricing

This section examines different perspectives on pricing and its role in motivating the channel.

• Complexity of Pricing: Pricing decisions are difficult due to competing perspectives (customer, vendor, distribution).

Customer-Oriented Pricing

This section describes how customer expectations influence pricing.

• Visionaries: Relatively price-insensitive, willing to pay a premium for strategic advantage (value-based pricing).
• Conservatives: Expect low prices for mature products that have become commodities (cost-based pricing).
• Pragmatists: Expect to pay a premium for the market leader (up to 30%) because it minimizes whole product costs and provides leverage (competition-based pricing); will discount if not the leader.
• Chasm Pricing: Premium margin above a norm set by comparison to market and product alternatives, reflecting next-generation technology and investment in a segment-specific whole product.

Vendor-Oriented Pricing

This section describes how internal costs influence pricing.

• Internal Factors: Based on cost of goods, sales, overhead, capital, expected return, etc.
• Impact on Market: Influences distribution channel decisions by establishing price points and impacts profitability and ability to fund R&D.
• Revenue and Transaction Volume: Different price points require different transaction volumes to achieve revenue targets, influencing sales funnel management.
• Least Sound Basis for Chasm: Least sound basis for chasm pricing decisions as focus must be external (customer and channel).

Distribution-Oriented Pricing

This section focuses on pricing’s role in motivating the distribution channel.

• Key Issues: Is it priced to sell? Is it worthwhile to sell?
• Priced to Sell: Price should not be a major issue in the sales cycle; avoid pricing too high (common for chasm-crossing companies) or too low.
• Worthwhile to Sell: Price must include sufficient margin to reward the channel for the extra effort of introducing a disruptive innovation.
• Fundamental Pricing Goal: Set pricing at the market leader price point (reinforcing leadership) and build a disproportionately high, temporary reward for the channel into the margin.

Recap: Invasion Launching

This section provides a checklist of guiding principles for launching the invasion.

• Secure Distribution Channel: The prime goal is to secure access to a customer-oriented distribution channel that pragmatists expect.
• Channel/Price Point Fit: Select the channel based on price point, but consider supplementary channels during the chasm transition if needed.
• Price as a Message: Price conveys market leadership and should be based on comparable products’ pricing.
• Margins are Channel’s Reward: Pay a premium margin to the channel during the chasm period to incentivize their effort and leverage their relationships.

Conclusion: Leaving the Chasm Behind

This final chapter looks beyond marketing tactics to address the broader organizational changes required to leave the chasm behind and sustain mainstream success.

Leaving the Chasm Behind

This section introduces the idea that successfully crossing the chasm requires a fundamental transformation of the enterprise.

• Market-Driven by Force: All organizations are market-driven by the inexorable forces of market development, whether acknowledged or not.
• Awareness is Key: Management must be aware of the changes to leverage opportunities.
• Post-Chasm Enterprise Bound by Pre-Chasm Commitments: Early, hasty commitments can cripple the post-chasm enterprise, requiring difficult management to navigate contradictions.
• Molting Process: Requires a change in company self, moving from celebrating individual performance to rewarding predictable group dynamics.
• Redirected Innovation: Innovation and creativity must be redirected towards pragmatist values.
• Re-evaluating Skills and Instincts: Skills that built early market success must be re-evaluated in light of mainstream challenges.
• Behavioral Norms: Establish new behavioral norms rather than trying to convert individuals; help individuals find where they fit best.

Financial Decisions: Breaking the Hockey Stick

This section addresses the financial transformation needed in the post-chasm enterprise.

• Purpose: Make Money: The purpose of the post-chasm enterprise is profitability, unlike the pre-chasm organization focused on investor risk reduction.
• Lack of Profit Discipline: Early market organizations lack the discipline of profitability, leading to financial commitments with unforeseen consequences (e.g., hockey stick forecasts).
• Hockey Stick Forecasts: Unjustifiable projections of rapid, continuous revenue growth used to secure venture capital.
• Revenue Development as Staircase: Actual revenue development looks like a staircase (rapid growth, lull in chasm, rapid growth in mainstream segments).
• Mortgaging on Flawed Model: Committing to the hockey stick scenario can lead to radical equity dilution and company failure when the reality is a staircase.
• The Valley of Death: The venture community is aware of this problem, sometimes calling it the “valley of death.”

The Role of the Venture-Financing Community

This section calls on venture capitalists to adapt their investment approach.

• Rethinking Variables: The chasm model requires rethinking investment bets based on performance against competition within time.
• Chasm Width and ROI: The pressing question is how long it will take to achieve predictable ROI from a mainstream market, which depends on creating and installing a sustainable whole product.
• Predicting Time: Time projections depend on analyzing target customers, compelling reasons to buy, and whole product components.
• Market Size: Market size is limited by the value proposition and whole product, not other factors like alliances or pricing which affect penetration rate.
• Investment Decision Factors: Key factors are market size, penetration rate, cost to achieve leadership, and anticipated market share; these can be estimated based on the chasm model without fundamental leaps of faith.
• Call to Action: Incorporate chasm crossing into business plans, demand specific target customers, compel companies to define and build whole products, and use the chasm model to manage financial assets.

The Role of the Venture-Managing Community

This section addresses how entrepreneurs should manage capital and adopt profitability.

• Capital vs. Profitability: How long to live off venture capital and when to adopt break-even cash flow.
• Insecurity Before Break-Even: Destiny is not under your control until break-even is achieved.
• Early Profitability: Strong case for adopting profitability from day one in slow-developing markets with low capitalization requirements.
• Benefits of Early Profitability: Teaches discipline, forces focus due to resource constraints, accelerates time to market, and strengthens valuation when seeking external capital.
• Reasons to Forgo Early Profitability: High cost of category development/market entry (e.g., manufacturing-intensive operations) or rapid category development where swift growth is crucial (e.g., Internet land grab).
• Capital Intensity: Typically more capital intensive to cross the chasm than to build the early market.
• Ineffectiveness of Early Capital Infusions: Massive capital infusions often fail to accelerate early market development.
• Investing in Chasm Crossing: The time to spend market development money is after establishing early market leadership to fund whole product investment, channel development, and marketing communications.
• Avoid Committing to Cash Flow During Chasm: Do not commit to throwing off significant cash during the chasm period.

Organizational Decisions: From Pioneers to Settlers

This section discusses the transformation of the workforce needed to cross the chasm.

• Chasm Separates People Types: The chasm separates visionaries from pragmatists in both customers and the companies serving them.
• Pioneers to Settlers: Crossing the chasm requires a transformation from pioneers to settlers within the enterprise.
• Pioneer Characteristics: Push technology boundaries, dislike institutionalization/infrastructure/documentation, want to do great deeds and move on; their brilliance fuels the early market.
• Pioneers as Liabilities: After crossing the chasm, pioneers’ focus on innovation and resistance to standardization/compromise can disrupt mainstream efforts.
• Outplacing Pioneers: Critical to transfer pioneer technologists (to other projects or companies) and pioneer salespeople (who continue making visionary sales requiring custom whole product development).
• Difficulty of Transition: Struggling with how to replace knowledge, who will take over roles, and the morality/fairness of outplacing those who contributed early success.
• Need for Impeccable Performance: The transition must be handled impeccably to minimize negative impact on those leaving and those staying.
• Foreseeing and Planning: Acknowledge that pioneers’ goal is to create a mainstream market and work towards putting themselves out of a job, with appropriate planning and compensation.
• Settlers Take Different Places: Settlers occupy roles pioneers wouldn’t, building infrastructure and procedures needed for pragmatists.

Two New Job Descriptions

This section proposes two new transitional roles to manage the organizational shift.

• Target Market Segment Manager: Temporary role to transform a visionary customer relationship into a beachhead for mainstream entry in that customer’s industry.
  • Goal: Learn the customer’s business, supervise the visionary project, ensure achievable phases, get user feedback, work with whole product manager to distinguish ongoing from idiosyncratic elements.
  • Expected Outcomes: Expedite initial installation (securing references), introduce a “settler” account manager, and leverage the project to create whole product extensions for industry-wide problems.
• Whole Product Manager: Temporary role to transition from product manager to product marketing manager by taking authority over the enhancement list and prioritizing contribution to mainstream customer satisfaction.
  • Product Manager: Internal role ensuring product creation, testing, and shipping on budget/schedule/spec; typically a pioneer.
  • Product Marketing Manager: External role bringing the product to market, managing marketing agenda from target customers to pricing; a settler role.
  • Whole Product Manager Role: Manages the bug report/enhancement list, prioritizing based on mainstream customer satisfaction and contribution to the whole product; transitions to Product Marketing Manager when mainstream market shape emerges.
• Shift in Authority: Transferring authority from pioneer product managers to whole product managers is crucial for moving from a product-driven to a market-driven organization.

Coping with Compensation

This section addresses the importance of compensation in recognizing different contributions and tenures.

• Improper Compensation: Wastes money and demotivates people by failing to recognize differences between pioneer and settler contributions and tenures.
• Sales Compensation: Distinguish between account penetration (pioneer) and account development (settler).
  • Account Development (Settler): Reward longevity, customer satisfaction, and predictable revenue stream; spread over time, objectives-based, equity appropriate if tied to stability; not high-risk, not high-reward.
  • Account Penetration (Pioneer): Bulk of rewards immediately for winning the account; extraordinary, high-risk, deserves extraordinary compensation; needs a reality check (not tied too closely to unconfirmed revenue, not based on promising more than deliverable); bonus-based, event-driven, not extended (equity inappropriate).
• Developer Compensation:
  • Founder Equity: Bet their lives on the equity gamble.
  • Early Employees: Created core product, feel entitled to mainstream gains but shouldn’t get a major share as mainstream success is a whole product effort; deserve larger share of early market returns.
  • Equity as Fallback: Equity is often the fallback for early employees due to tight cash in early market, but it’s a compromise as it should be reserved for settlers who stay.
• Appropriate Distribution of Rewards: Sorting through these issues and designing appropriate compensation programs is crucial for avoiding agony and loss of momentum during chasm crossing.

R&D Decisions: From Products to Whole Products

This section discusses the necessary shift in R&D focus after crossing the chasm.

• R&D is High Tech: Technology drives the industry, but products, markets, and enterprises create persistent demands on R&D.
• Whole Product R&D: Driven by the marketplace, not the laboratory; begins with market segmentation, penetrates habits/behaviors, prefers assembling from existing technologies; heroes are like George Washington Carver, finding new uses for existing things.
• Not “Heady Stuff”: Often ignored or called “maintenance,” assigned to lower-status personnel.
• Short Product Cycles, Long Whole Product Cycles: Product life cycles are getting shorter, but whole product life cycles are as long as ever.
• Emergent Discipline: Whole product R&D is an emergent discipline representing a convergence of high-tech and consumer marketing, where consumer marketing tools become useful.
• Focus Groups: Useful for guiding continuous innovation by focusing on derivatives of known products to meet specific segment needs.
• Packaging Studies: Crucial for ensuring a successful out-of-box experience and reducing expensive support costs.
• Cooperation Needed: Whole product R&D requires direct cooperation between marketing and engineering, as one is ignorant without the other; it’s not just market research or product development, but a new kind of cooperation.

Leaving This Book Behind

This section concludes the summary, reiterating the key concepts and offering a final thought.

• Covered Ground: Reviewed the flaw in the traditional model, the perils of the chasm, the D-Day invasion strategy and tactics (target, assemble, define, launch), and the post-chasm organizational changes (finance, people, R&D).
• Self-Imposed Challenges: The chasm is largely self-imposed; mastering it requires understanding and stopping contributing factors.
• Beginning of Your Road: The book’s framework aims to provide understanding and remove impediments to action.
• Future Convergence: The chasm model (B2B) and the Four Gears Model (consumer) may increasingly converge, with grassroots movements generating mass adoption and institutional marketing capitalizing on them, particularly in areas where public and private interests intersect.