MIS Book Review -Crossing The Chasm

Preliminary Information

The book was first written in 1990 and published in 1991. The revised edition was published in 1998. The book primarily focuses on high technology market development and specifically Moore introduces the idea of the Technology Adoption Life Cycle (TALC). This is a model for understanding the acceptance of new products.

The book is divided into two parts; Part I, Discovering the Chasm and Part II Crossing the Chasm.

Introduction

The ubiquity of high tech products that surround us is only eclipsed by the number of high tech products that have failed. The new digital world is full of virtual corpses where a good idea is prevented from becoming a successful product by falling into the “Chasm” that is the title of this book. Geoffrey Moore has written a book that attempts to explain the method of crossing the chasm between the early product users and the mainstream where the real money is made. He explains how markets can be identified and exploited by the correct strategy delivered at the correct moment in the life of the product.

Part I: Discovering the Chasm

Moore segments the market into five distinct categories:

Innovator:
These people are using the technology for the love of the challenge. It does not matter that there are some problems that’s all part of the fun to these “techies”.

Early adopter:
A more serious user of the product who sees the product for what it will bring, not for the technical challenge; these are the business “visionaries”. This is the brink of the chasm, get to the next segment and you are a proven market leader.

Early majority:
If the product gets this far it has serious prospects of success. The toughest chasm is behind you. These are loyal “pragmatists” but they need peer review, references and support before they will pay a premium price for the product.

Late majority:
These “conservatives” represent approximately one third of the market they extend the product’s life when it is no longer state-of-the-art.

Laggard:
Sceptics, these are the people who will only adopt when they need to.
Figure 1 below indicates the bell curve of the product’s life with the groups highlighted within them. It can be seen that there are many chasms between the groups but the largest is between the early adopter and the early majority.

Figure 1: The Technoogy Adoption Life Cycle

Moore suggests that you need to isolate the psychographics of your customers and develop your marketing program around them. As the product moves through the adoption life cycle each segment needs to be treated differently. You need to ensure that you have the right sort of references, something that a visionary will adopt as a good product idea will not necessarily be the same as that of a pragmatist. Now that he has discovered the chasm Moore attempts to cross it.

Part II: Crossing the Chasm

How to get the pragmatist to bite? You have got to enter the mainstream market. Moore sees this as being an invader, as an act of aggression.
He likens the required strategy to the allied invasion of Normandy on D Day on June 6 1944.

Using the war analogy Moore urges businesses to “target the Point of Attack” i.e. target a specific niche market and focus all your resources on achieving the dominant leadership position in that segment.
He uses established marketing strategies such as:

1. Divide up the universe of possible customers into market segments
2. Evaluate each segment for its attractiveness
3. Narrow targets down to a very small number
4. Pick one and go after it

Following the identification of the niche market Moore introduces the “Whole Product Concept”.

Figure 2: The Whole Product Model

This idea is that there is a gap between the promise made to the customer and the ability of the shipped product to fulfil that promise. In Moore’s view the whole product planning is the centrepiece for developing a market domination strategy. Applying it to the TALC pragmatists only buy whole products.

In the mainstream market occupied by the pragmatist, competition is defined by a comparative evaluation of products and vendors within a common category. Pragmatists don’t want to buy until they can compare and so competition becomes a fundamental condition of purchase. So to break into the mainstream pragmatist market you have to go and create your competition. This means we need to change to a market centric focus from a product-centric focus. Some examples would be describing the product as “having the largest customer base” rather than “the fastest processing speed” and “de facto standard” rather than “elegant architecture”.

Moore again brings in some well-established marketing theory regarding positioning which can actually be applied to any developing business. He explains that positioning exists in people’s heads not in your words and that people are highly conservative about entertaining changes in positioning.
He urges businesses to focus on what the customer wants and how to make your products easier to buy.

Applying the positioning process to high tech businesses he analyses 4 stages in the process which correspond to four primary psychographic types:

1. Name it and frame it - this will work for a technology enthusiast
2. Who and What for - explain this and you will engage the visionary
3. Competition and differentiation - pragmatists will be attracted here
4. Financials and futures - conservatives

Four key components need to be communicated: the claim, the evidence, communications and feedback /adjustment.
The definition of claim is cleverly described as “Passing the Elevator Test”, i.e. can you explain your product in the time it takes to ride up in an elevator?

He offers a proven formula for successful positioning:

Target the customers
Who are dissatisfied with … (current market alternative)
Our product is a … (new product category)
That provides … (key problem solving capability)
Unlike … (the product alternative)
We have assembled … (key whole product features for your specific application)


The final pieces of the D Day strategy are distribution and pricing which are the only two points where marketing decisions come into direct contact with the new mainstream customer.

Moore makes a point of emphasising that “the number one corporate objective, when crossing the chasm, is to secure a channel into the mainstream market with which the pragmatist customer will be comfortable.”

This objective should come before revenues, profits or customer satisfaction.

He lists the structure of high tech distribution from direct sales to systems integrators and briefly mentions the internet as a distribution medium although he does recognise that this could become the biggest distributor of all for some types of product. In his opinion the right choice of distribution channel for crossing the chasm is to initially use direct sales and support as a demand creation channel to penetrate the initial target segment and then “transition” to the most efficient fulfilment channel for your offer.
Ie, start the fire and once the fire is lit spread it as soon as possible.

His discussion on pricing is based on his earlier classification of customers using psychographics:

Visionaries: price insensitive, value based pricing
Conservatives: low pricing, cost based pricing
Pragmatists: expect to pay a premium price for the market leader relative to competition.

The fundamental pricing goal for crossing the chasm is to set pricing at the market leader price point. By doing this you reinforce your claims to market leadership.

Moore’s conclusion refers to leaving the chasm behind. He describes the “chasm phenomenon- the rapid acceleration in market development followed by a dramatic lull occurring whenever a discontinuous innovation is introduced.“

He believes that this affects all parts of an organisation, including finance, organisational development and research and development. All these areas of the enterprise are bound by the commitments made by the pre-chasm body so it is vital to avoid making the wrong kind of commitments during the pre-chasm period.

Finally he examines the types of individuals that can be found in the organisation and how they fit into the pre and post chasm phases of an organisation. He then suggests how compensation packages should be structured depending on the contribution made by the individual.

Moore’s final paragraphs claim that the marketing methods recommended in the book are representative of “best practices” as conducted by The Chasm Group.


Conclusion

Moore’s credentials are certainly impressive; leading edge companies such as Oracle, Sun and Apple that he has worked for are all leaders in the technology revolution. Moore’s easy writing style is accessible to both the technologically minded and to those who are not. His use of examples gives clarity to some of his more detailed arguments. It is easy to find examples in the current technology sector that fit into Moore’s framework. In 2003 a small internet telephony company called Skype was launched. For a long time such a product had been the preserve of “innovators” and “early adopters” but now Skype, with 100 million users, has clearly crossed the chasm and is entering the early adopter phase. Just as Skype seems destined to succeed ideas such as the internet dumb terminal appear to have fallen into the chasm. Network dumb terminals were an idea pushed in the mid 1990s by such giants as IBM and Oracle as a way to release the Windows strangle hold. Sadly this good idea joined many other technology corpses in the chasm.

Moore’s approach can be considered rather formulaic in that he fails to consider the effect that mergers may have on products or how the merger may enhance the marketing base. His assertion that certain percentages of customers represent groups is too rigid to fully encompass the vast arrays of different high tech products and the customers that use them.

Moore’s TALC model has to face one sobering fact: The most successful software company ever known does not adhere to his model. This for Moore is not a problem because Microsoft is a special case and the model conveniently does not cover special cases.

I feel the book is now somewhat dated and the rise of the internet has superseded some of the books more fundamental arguments about product marketing and distribution.

The conclusions that Moore reaches appear to be disjointed and have little relevance to core theme of the book, he inserts odd sections about “venture financing and venture managing communities” also a section on the types of compensation of employees within a high tech business which appear to be little more than space fillers.

Having studied marketing I found Moore’s application of core marketing strategies to high tech products was interesting and informative although some of the subtler applications of high tech (VOIP?) would be lost on the general reader.

Appendix

Other Books written by Geoffrey Moore:

Living on the Fault Line: Managing for shareholder value in any economy

Inside the Tornado: Strategies for developing, leveraging and surviving hyper-growth markets

Dealing with Darwin: How great companies innovate at every phase of their evolution

The Gorilla Game: Picking Winners in High Technology by Tom Kippola and Geoffrey Moore

About the Author

Geoffrey Moore is the Managing Director of TCG Advisors. He has dedicated his career to the understanding and exploitation of disruptive technologies. He consults on strategy and transformation challenges.