Como crear y desarrollar un startup
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1. Inicio -En el inicio -Dando forma al negocio -Donde Empezar 2. Desarrollo Comercial -Desarrollo Comercial -Marketing para Startups 3. Crecimiento -Como se desarrollan los mercados -Estrategia de Desarrollo del Mercado
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Como crear y desarrollar un startup
- 1. Cómo Crear y Desarrollar un Startup
- 2. Inicio En el inicio Dando forma al negocio Dónde Empezar
- 23. Desarrollo Comercial Desarrollo Comercial Marketing para Startups
- 47. Crecimiento Cómo se Desarrollan los Mercados Estrategia de desarrollo del mercado
Notas do Editor
- To properly identify the right initial target for an innovation (which not necessarily follow demographics or traditional segments), it helps to identify jobs to be done by customers, and look for ways to allow them to do something they were already trying to accomplish by matching products to circumstances with jobs that customers want to get done. Look at the following elements: Jobs-to-be-done What fundamental problem is your customer trying to solve? Using the jobs-to-be-done concept requires first understanding the problems a customer faces — whether at work or in daily life. We find it helpful to push for as much specificity as possible when describing a job. Complete a job statement that looks like the following: [Customer] wants to [solve a problem] in [this context] Identifying the context is particularly important. For example, trying to access the latest news while you are on an airplane is a fundamentally different problem than trying to access the latest news while sitting in front of your television or commuting to work. Objectives What objectives do your customers use to evaluate solutions? It is vital to understand the objectives a customer applies in choosing between solutions. Typically, the objectives will relate to how the customer uses the product or service. For example, the objectives of a teenager whose job to be done is to try to engage with other teens might include a solution that is very inexpensive, impresses her friends, and allows immediate interaction. Think beyond dimensions of functional objectives to consider emotional and social ones as well. The teen might want a solution that exudes “cool,” and is “not her parents’ technology.” Barriers What barriers limit your customers’ ability to use your solution? The flip side to objectives is the barriers that place some solutions beyond consideration. Barriers are typically functional and leave little room for interpretation. For instance, a mobile phone might need to be operated with only one hand. Barriers can place limits on the size of your potential market. Eliminating barriers such as wealth (the cost is too high), skills (the solution is too complex so I can’t use it), access (I cannot obtain the solution) or time (I don’t have the time to learn or use the solution) can unlock entirely new segments of a market. Solutions What solutions do your customers consider? Look at the different ways in which customers can get the job done. Candidates can include products, services, or compensating behaviors — workarounds that customers follow because no existing solution adequately gets the job done. If you can pinpoint an important job that isn’t being done adequately by an available solution, you have found an opportunity to drive growth through innovation.
- Disruptive innovation Disruptive innovations are simple, convenient, low-cost innovations for customers ignored by industry leaders. They can create new markets or reshape existing ones, and work because leading companies are not interested in lower margins and innovations that don’t address the needs of their best customers. Why disruptive innovation happens: Companies innovate faster than customers’ lives change, so companies end up with products that are too good, too expensive and too inconvenient for many customers, overshooting less demanding customers who are willing to take the basics at reasonable prices, or ignoring non-consumers who desire to get job done but lack skills, wealth or ability. This opens the door to new entrants with simpler, more convenient, lower-cost products for customers that don’t need to keep up with the technological change. Low-end of market & non-consumption To position a disruptive innovation, look at the low-end of the market and non-consumers, as 1) it will be more readily accepted and 2) established competitors won’t be motivated to fight.
- Disruptive innovation Disruptive innovations are simple, convenient, low-cost innovations for customers ignored by industry leaders. They can create new markets or reshape existing ones, and work because leading companies are not interested in lower margins and innovations that don’t address the needs of their best customers. Why disruptive innovation happens: Companies innovate faster than customers’ lives change, so companies end up with products that are too good, too expensive and too inconvenient for many customers, overshooting less demanding customers who are willing to take the basics at reasonable prices, or ignoring non-consumers who desire to get job done but lack skills, wealth or ability. This opens the door to new entrants with simpler, more convenient, lower-cost products for customers that don’t need to keep up with the technological change. Low-end of market & non-consumption To position a disruptive innovation, look at the low-end of the market and non-consumers, as 1) it will be more readily accepted and 2) established competitors won’t be motivated to fight.
- Depending on the type of market it enters, a startup can have very different rates of customer adoption and acceptance and their sales and marketing strategies would be dramatically different. Even more serious, startups can have radically different cash needs. A startup in a New Market (enabling customers to do something they never could before,) might be unprofitable for 5 or more years, (hopefully with the traditional hockey stick revenue curve,) while one in an Existing Market might be generating cash in 12-18 months. Market Type changes how you evaluate customer needs, customer adoption rate, how the customer understands his needs and how you should position the product to the customer. Market Type also affects the market size as well as how you launch the product into the market. As a result different market types require dramatically different sales and marketing strategies. Existing Markets Existing Market: Faster or better product, aimed at the high end. Resegmented Markets Resegmented Market: Niche product driven by marketing and branding, or a cheaper product aimed at the low end. New Markets New Market: A cheaper and good enough product that can create a new class of product or customer, or an innovative product that has never existed before.
- Business models There are a number of successful business models. Finding the right one can determine whether an innovation is successful or not. The following are some used by technology companies: SaaS: These companies sell their product to customers via the web, and don’t bother with a “try before you buy” product. Freemium: These companies give away a free product, and then try to upsell more sophisticated features or solutions on top of that. Sell Installed App: These companies are actually selling software that is licensed and physically installed. Gather/sell eyeballs: This might be called “advertising” model or “audience aggregation”. Often, companies doing this initially have other models in mind once they reach a critical mass but can’t use that approach early on because they don’t have enough scale. Marketplace: These companies try to aggregate buyers and sellers, and generally take commissions or service fees for providing the marketplace. Lead Generation: These companies often provide a valuable free service, and then provide qualified leads to buyers. This is very similar to the Freemium model, except that the upsell is not more software, it’s other services or software provided by someone else. Virtual Goods: This model typically involves providing a game or other interesting virtual environment and then selling virtual goods in that environment. Crowdsourcing: These companies use the power of a large distributed workforce, often to do things that computers can’t do automatically or efficiently. Typically they ultimately deliver a service to the customer. Content Production: These companies create content and then attract an audience for that content, typically selling advertising inventory targeted at the audience or subscriptions. Enterprise 2.0: Companies that take web 2.0 consumer technologies and apply them to enterprise settings. Professional open-source: Develop (free) open-source software and charge for extra services and/or support. Business model innovation Business model innovation consists in being distinctive in one or more of its components: the customer value proposition, the profit model, key resources, or key processes (think Dell vs. Compaq). Business model innovation makes it possible to pursue opportunities to address the needs of groups for which current products are expensive and complicated, commercialize new technologies, or use existing technologies in new markets, or shift the basis of competition. Value innovation Value innovation consists in making the competition irrelevant by innovating on one dimension while keeping the others at a good enough level. So look at the different dimensions of a product and identify the ones that can be made dramatically different and the ones that only need to be kept at a level hat the customers will accept.
- A fully developed idea contains several elements, which form the basis of the business plan. However, it is important to note that these are all hypotheses that will need to be tested and adjusted by speaking to real customers: Product: Product features / Product benefits / Intellectual property / Dependency analysis / Product delivery schedule / Total cost of ownership/adoption Customer & Problem: Types of customers / Customer problems / A day in the life of your customer / Organizational map and customer influence map / ROI (return on investment) justification / Minimum feature set Distribution & Pricing: Distribution Channel Alternatives / Criteria for selecting a sales channel: 1) Does the channel add value to the sales process? 2) What are the price and the complexity of the product? 3) Are there established customer buying habits/practices? Demand Creation: How will you create demand to drive them into the channel you have chosen (including who are the influencers who can affect your customer’s opinions)? Market type: Existing Market / Resegmented Market / New Market Competition: Existing/resegmented markets: compete on attributes – how is it better? New markets: compare vs. surrounding markets.
- Distinct phases of product & company growth There are four stages of growth any startup goes through. They are Customer Discovery (when you’re just trying to figure out if there are any customers who might want your product), Customer Validation (when you make your first revenue by selling your early product), Customer Creation (akin to a traditional startup launch, only with strategy involved), and Company Building (where you gear up to Cross the Chasm). The four phases provide a useful roadmap that can orient you to what’s going on as your job and company changes. Learning and iteration vs. linear execution The first two steps and the last two steps represent two very different approaches. In the beginning, startups are focused on figuring out which way is up. They really don’t have a clue what they should be doing, and everything is guesses. In the old model, they would probably launch during this phase, failing or succeeding spectacularly. Only after a major, public, and expensive failure would they try a new iteration. Most people can’t sustain more than a few of these iterations, and the founders rarely get to be involved in the later tries. The root of that mistake is premature execution. The major insight of the Customer Development Process is that startups need time spent in a mindset of learning and iterating, before they try to launch. During that time, they can collect facts and change direction in private, without dramatic and public embarrassment for their founders and investors. It is a disciplined approach to make sure this period doesn’t last forever, and clear criteria for when you know it’s time to move to an execution footing: when you have a repeatable and scalable sales process, as evidenced by early customers paying you money for your early product. Getting out of the building Very few startups fail for lack of technology. They almost always fail for lack of customers. Yet surprisingly few companies take the basic step of attempting to learn about their customers (or potential customers) until it is too late. True, there are the rare products that have literally no market risk; they are all about technology risk (”cure for cancer”). For the rest of us, we need to get some facts to inform and qualify our hypotheses (”fancy word for guesses”) about what kind of product customers will ultimately buy. And this is where we find the maxim that “In a startup no facts exist inside the building, only opinions.” Most likely, your business plan is loaded with opinions and guesses, sprinkled with a dash of vision and hope. Customer development is a parallel process to product development, which means that you don’t have to give up on your dream. We just want you to get out of the building, and start finding out whether your dream is a vision or a delusion. Surprisingly early, you can start to get a sense for who the customer of your product might be, how you’ll reach them, and what they will ultimately need. Customer development is emphatically not an excuse to slow down or change the plan every day. It’s an attempt to minimize the risk of total failure by checking your theories against reality. Different market types There are three fundamental situations that change what your company needs to do: creating a new market (the original Palm), bringing a new product to an existing market (Handspring), and resegmenting an existing market (niche, like In-n-Out Burger; or low-cost, like Southwest Airlines). If you’re entering an existing market, be prepared for fast and furious competition from the incumbent players, but enjoy the ability to fail (or succeed) fast. When creating a new market, expect to spend as long as two years before you manage to get traction with early customers, but enjoy the utter lack of competition. Finding the right market for the product The goal of listening to customers is not to talk to as many customers as possible, and build them as many features as they asked as possible. This is a common mistake; the goal in product development is to find the minimum feature set required to get early customers. In order to do this, the customer development team works hard to find a market, any market, for the product as currently specified. The idea is not to just abandon the vision of the company at every turn; instead, it’s to do everything possible to validate the founders’ belief. The nice thing about this paradigm is it sets the company up for a rational discussion when the task of finding customers fails. You can start to think through the consequences of this information before it’s too late. You might still decide to press ahead building the original product, but you can do so with eyes open, knowing that it’s going to be a tough, uphill battle. Or, you might start to iterate the concept, each time testing it against the set of facts that you’ve been collecting about potential customers. You don’t have to wait to iterate until after the splashy high-burn launch.
- The Customer Development Process is designed to turn Market Risk/Product Fit hypotheses into facts in four main phases (First Iteration, then Execution) : -Discovery: Test hypotheses i.e. problem and product concept -Validation: Build a repeatable and scalable sales process -Creation: Create end-user demand and fill the sales pipeline -Building: Scale via relentless execution Customer Discovery 1) Hypothesis 2) Test problem hypothesis 3) Test product concept 4) Iterate & expand -Stop selling, start listening: There are no facts inside your building, so get outside -Test your hypotheses: Two are fundamental: problem and product concept Exit Criteria: -What are your customers’ top problems? How much will they pay to solve them? -Does your product concept solve them? Do customers agree? How much will they pay? -Draw a day-in-the-life of a customer – Before & after your product -Draw the org chart of users & buyers Customer Validation 1) Get ready to sell 2) Develop sales roadmap 3) Validate with orders 4) Business model verified -Develop a repeatable and scalable sales process -Only earlyvangelists are crazy enough to buy Exit Criteria: -Do you have a proven sales roadmap? Organizational chart? Influence map? -Do you understand the sales cycle? ASP, LTV, ROI, etc. -Do you have a set of orders ($’s) validating the roadmap? -Does the financial model make sense? Customer Creation 1) Set objectives 2) Positioning 3) Launch 4) Create demand -Creation comes after proof of sales -Creation is a strategy not a tactic Exit Criteria: -Which startup strategy are you executing? -Positioning tested & complete? -Launch strategy match startup type? -Demand creation activities match startup type? -Year 1 objectives match startup type? Company Building 1) Earlyvangelist to mainstream customer transition 2) Review management/mission-centric culture 3) Transition development team to departments 4) Build fast-response departments -Move from earlyvangelists to mainstream customers -(Re)build your company’s organization & management Exit Criteria: -Does sales growth plan match market type? -Does spending plan match market type? -Does the board agree? -Is your team right for the stage of company? -Have you built a mission-oriented culture?
- The Customer Development Process is designed to turn Market Risk/Product Fit hypotheses into facts in four main phases (First Iteration, then Execution) : -Discovery: Test hypotheses i.e. problem and product concept -Validation: Build a repeatable and scalable sales process -Creation: Create end-user demand and fill the sales pipeline -Building: Scale via relentless execution Customer Discovery 1) Hypothesis 2) Test problem hypothesis 3) Test product concept 4) Iterate & expand -Stop selling, start listening: There are no facts inside your building, so get outside -Test your hypotheses: Two are fundamental: problem and product concept Exit Criteria: -What are your customers’ top problems? How much will they pay to solve them? -Does your product concept solve them? Do customers agree? How much will they pay? -Draw a day-in-the-life of a customer – Before & after your product -Draw the org chart of users & buyers Customer Validation 1) Get ready to sell 2) Develop sales roadmap 3) Validate with orders 4) Business model verified -Develop a repeatable and scalable sales process -Only earlyvangelists are crazy enough to buy Exit Criteria: -Do you have a proven sales roadmap? Organizational chart? Influence map? -Do you understand the sales cycle? ASP, LTV, ROI, etc. -Do you have a set of orders ($’s) validating the roadmap? -Does the financial model make sense? Customer Creation 1) Set objectives 2) Positioning 3) Launch 4) Create demand -Creation comes after proof of sales -Creation is a strategy not a tactic Exit Criteria: -Which startup strategy are you executing? -Positioning tested & complete? -Launch strategy match startup type? -Demand creation activities match startup type? -Year 1 objectives match startup type? Company Building 1) Earlyvangelist to mainstream customer transition 2) Review management/mission-centric culture 3) Transition development team to departments 4) Build fast-response departments -Move from earlyvangelists to mainstream customers -(Re)build your company’s organization & management Exit Criteria: -Does sales growth plan match market type? -Does spending plan match market type? -Does the board agree? -Is your team right for the stage of company? -Have you built a mission-oriented culture?
- The Diffusion of innovations is a social process The Technology Adoption Life Cycle model describes the adoption of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups. Its underlying thesis is that technology is absorbed into any given community in stages corresponding to the psychological and social profiles of various segments within that community. This process can be thought of as a continuum with definable stages, each associated with a definable group, and each group making up a predictable portion of the whole. Technology Adoption profiles The process of adoption over time is typically illustrated as a classical normal distribution or “bell curve.” The model indicates that the first group of people to use a new product is called “innovators,” followed by “early adopters.” Next come the early and late majority, and the last group to eventually adopt a product are called “laggards.” The roots of the technology-adoption life cycle lie in the different responses that each group of people and organizations can make whenever a disruptive innovation is introduced into their midst. Essentially they are the following: Underlying Drivers in Growth Markets – Technology-Adoption Strategies: Innovators/Techies: Just try it! Early adopters/Visionaries: Get ahead of the herd! Early majority/Pragmatists: Stick with the Herd! Late majority/Conservatives: Stick with what’s proven! Laggards/Skeptics: Just say no!
- The Diffusion of innovations is a social process The Technology Adoption Life Cycle model describes the adoption of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups. Its underlying thesis is that technology is absorbed into any given community in stages corresponding to the psychological and social profiles of various segments within that community. This process can be thought of as a continuum with definable stages, each associated with a definable group, and each group making up a predictable portion of the whole. Technology Adoption profiles The process of adoption over time is typically illustrated as a classical normal distribution or “bell curve.” The model indicates that the first group of people to use a new product is called “innovators,” followed by “early adopters.” Next come the early and late majority, and the last group to eventually adopt a product are called “laggards.” The roots of the technology-adoption life cycle lie in the different responses that each group of people and organizations can make whenever a disruptive innovation is introduced into their midst. Essentially they are the following: Underlying Drivers in Growth Markets – Technology-Adoption Strategies: Innovators/Techies: Just try it! Early adopters/Visionaries: Get ahead of the herd! Early majority/Pragmatists: Stick with the Herd! Late majority/Conservatives: Stick with what’s proven! Laggards/Skeptics: Just say no!
- The Chasm The five responses—Just try it, Get ahead of the herd, Stick with the herd, Stick with what’s proven, and Just say no—represent the universe of alternative reactions, and the area of the total curve they occupy is proportional to their frequency of occurrence. Most people find themselves drawn to one of the five more than the others, and to the degree this is true, they can accurately categorize themselves with the labels in the diagram. But every category represents a new choice, and people can be late adopters in some and early adopters in others. In the Technology Adoption Life Cycle model, there is a chasm between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). This is because visionaries and pragmatists have very different expectations, and there are specific techniques to successfully cross the “chasm,” including choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, choosing the most appropriate distribution channel and pricing. How Markets Develop In the actual development of any specific market, individual choices are masked in the statistics of the group, and what we see are these five strategies interacting to create a pattern described by the technology-adoption life cycle. There are different stages in the unfolding of the model, and each stage represents in some sense a rebellion against and a repudiation of the prior stage. Here’s how it plays out: Early market: When a disruptive innovation is first introduced, it initially attracts the attention of technology enthusiasts (who see it as cool) and visionaries (who see it as potentially disruptive). The latter fund projects to see if they can exploit the disruptive capabilities with a view toward gaining a dramatic competitive advantage over their peers. Pragmatic buyers are curious about these efforts but are far too cautious to actually participate in them. They are on the other side of the chasm. When these early adopting projects bear fruit, the press, fascinated, writes glowing articles describing the technology as the next big thing. A new category is named, but in truth it is not yet clear if it will be for real or just a flash in the pan. The Chasm: The chasm represents a betwixt-and-between state. Having now been in the marketplace for some time, the offer has lost its novelty, and visionaries no longer see it as a source of dramatic competitive advantage. They pursue their search for disruptive opportunities elsewhere. At the same time, there has not been the kind of widespread adoption necessary to convince pragmatists that it would be safe to purchase. Pragmatists with their stick-to-the-herd strategy need to see other pragmatists buying before they buy. As a result, the market is stalled. Crossing the Chasm: The only reliable way to exit the chasm is to target on the other side a niche market made up of pragmatists united by a common problem for which there is no known solution. Such “pragmatists in pain” are motivated to help the new technology cross the chasm if, and only if, it is packaged as a complete solution to their problem, what is called a whole product. Bowling Alley: In this phase of category maturity, the technology has gained acceptance among pragmatists in multiple-niche markets where it enables genuine solutions to uncommon problems. Wherever one niche adopts, adjacent niches become more susceptible—hence the bowling-pin metaphor. Within adopting niches, the new paradigm builds a loyal following among customers and value-chain partners who see a market in the making. Outside these niches it is becoming more widely known and accepted—but not yet adopted—by the general public. Tornado: The technology has proved its usefulness in niche markets, and in the process, a killer app has emerged, something that makes it both broadly applicable and highly attractive to a mass market. Overnight it becomes perceived as necessary and standard. All the pragmatists who were hanging back from committing rush into the market to make sure they aren’t left behind. Competition to capture this influx of new customers is fierce. Revenues grow at double- or even triple-digit rates, with investors bidding up the stock of every company that can participate in the category. Main Street: The initial surge of hypergrowth subsides, leaving behind a market-share pecking order that is likely to persist for a long time to come. Customers have selected their vendor of choice and are now focused on deploying the technology more broadly. At the same time, they expect to see systematic improvements in the offerings and reward each with an uptick in purchasing. The technology-adoption life cycle comes to an end once the marketplace has completely assimilated the disruption that triggered it. In the case of automobiles, this happened sometime between the First and Second World Wars; in the case of television sets, in the 1960s; in the case of cell phones, in the past decade. Until this end is reached, the influence of technology-adoption forces is so dominant that it suppresses other dynamics.
- The Chasm The five responses—Just try it, Get ahead of the herd, Stick with the herd, Stick with what’s proven, and Just say no—represent the universe of alternative reactions, and the area of the total curve they occupy is proportional to their frequency of occurrence. Most people find themselves drawn to one of the five more than the others, and to the degree this is true, they can accurately categorize themselves with the labels in the diagram. But every category represents a new choice, and people can be late adopters in some and early adopters in others. In the Technology Adoption Life Cycle model, there is a chasm between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). This is because visionaries and pragmatists have very different expectations, and there are specific techniques to successfully cross the “chasm,” including choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, choosing the most appropriate distribution channel and pricing. How Markets Develop In the actual development of any specific market, individual choices are masked in the statistics of the group, and what we see are these five strategies interacting to create a pattern described by the technology-adoption life cycle. There are different stages in the unfolding of the model, and each stage represents in some sense a rebellion against and a repudiation of the prior stage. Here’s how it plays out: Early market: When a disruptive innovation is first introduced, it initially attracts the attention of technology enthusiasts (who see it as cool) and visionaries (who see it as potentially disruptive). The latter fund projects to see if they can exploit the disruptive capabilities with a view toward gaining a dramatic competitive advantage over their peers. Pragmatic buyers are curious about these efforts but are far too cautious to actually participate in them. They are on the other side of the chasm. When these early adopting projects bear fruit, the press, fascinated, writes glowing articles describing the technology as the next big thing. A new category is named, but in truth it is not yet clear if it will be for real or just a flash in the pan. The Chasm: The chasm represents a betwixt-and-between state. Having now been in the marketplace for some time, the offer has lost its novelty, and visionaries no longer see it as a source of dramatic competitive advantage. They pursue their search for disruptive opportunities elsewhere. At the same time, there has not been the kind of widespread adoption necessary to convince pragmatists that it would be safe to purchase. Pragmatists with their stick-to-the-herd strategy need to see other pragmatists buying before they buy. As a result, the market is stalled. Crossing the Chasm: The only reliable way to exit the chasm is to target on the other side a niche market made up of pragmatists united by a common problem for which there is no known solution. Such “pragmatists in pain” are motivated to help the new technology cross the chasm if, and only if, it is packaged as a complete solution to their problem, what is called a whole product. Bowling Alley: In this phase of category maturity, the technology has gained acceptance among pragmatists in multiple-niche markets where it enables genuine solutions to uncommon problems. Wherever one niche adopts, adjacent niches become more susceptible—hence the bowling-pin metaphor. Within adopting niches, the new paradigm builds a loyal following among customers and value-chain partners who see a market in the making. Outside these niches it is becoming more widely known and accepted—but not yet adopted—by the general public. Tornado: The technology has proved its usefulness in niche markets, and in the process, a killer app has emerged, something that makes it both broadly applicable and highly attractive to a mass market. Overnight it becomes perceived as necessary and standard. All the pragmatists who were hanging back from committing rush into the market to make sure they aren’t left behind. Competition to capture this influx of new customers is fierce. Revenues grow at double- or even triple-digit rates, with investors bidding up the stock of every company that can participate in the category. Main Street: The initial surge of hypergrowth subsides, leaving behind a market-share pecking order that is likely to persist for a long time to come. Customers have selected their vendor of choice and are now focused on deploying the technology more broadly. At the same time, they expect to see systematic improvements in the offerings and reward each with an uptick in purchasing. The technology-adoption life cycle comes to an end once the marketplace has completely assimilated the disruption that triggered it. In the case of automobiles, this happened sometime between the First and Second World Wars; in the case of television sets, in the 1960s; in the case of cell phones, in the past decade. Until this end is reached, the influence of technology-adoption forces is so dominant that it suppresses other dynamics.
- The Chasm The five responses—Just try it, Get ahead of the herd, Stick with the herd, Stick with what’s proven, and Just say no—represent the universe of alternative reactions, and the area of the total curve they occupy is proportional to their frequency of occurrence. Most people find themselves drawn to one of the five more than the others, and to the degree this is true, they can accurately categorize themselves with the labels in the diagram. But every category represents a new choice, and people can be late adopters in some and early adopters in others. In the Technology Adoption Life Cycle model, there is a chasm between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). This is because visionaries and pragmatists have very different expectations, and there are specific techniques to successfully cross the “chasm,” including choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, choosing the most appropriate distribution channel and pricing. How Markets Develop In the actual development of any specific market, individual choices are masked in the statistics of the group, and what we see are these five strategies interacting to create a pattern described by the technology-adoption life cycle. There are different stages in the unfolding of the model, and each stage represents in some sense a rebellion against and a repudiation of the prior stage. Here’s how it plays out: Early market: When a disruptive innovation is first introduced, it initially attracts the attention of technology enthusiasts (who see it as cool) and visionaries (who see it as potentially disruptive). The latter fund projects to see if they can exploit the disruptive capabilities with a view toward gaining a dramatic competitive advantage over their peers. Pragmatic buyers are curious about these efforts but are far too cautious to actually participate in them. They are on the other side of the chasm. When these early adopting projects bear fruit, the press, fascinated, writes glowing articles describing the technology as the next big thing. A new category is named, but in truth it is not yet clear if it will be for real or just a flash in the pan. The Chasm: The chasm represents a betwixt-and-between state. Having now been in the marketplace for some time, the offer has lost its novelty, and visionaries no longer see it as a source of dramatic competitive advantage. They pursue their search for disruptive opportunities elsewhere. At the same time, there has not been the kind of widespread adoption necessary to convince pragmatists that it would be safe to purchase. Pragmatists with their stick-to-the-herd strategy need to see other pragmatists buying before they buy. As a result, the market is stalled. Crossing the Chasm: The only reliable way to exit the chasm is to target on the other side a niche market made up of pragmatists united by a common problem for which there is no known solution. Such “pragmatists in pain” are motivated to help the new technology cross the chasm if, and only if, it is packaged as a complete solution to their problem, what is called a whole product. Bowling Alley: In this phase of category maturity, the technology has gained acceptance among pragmatists in multiple-niche markets where it enables genuine solutions to uncommon problems. Wherever one niche adopts, adjacent niches become more susceptible—hence the bowling-pin metaphor. Within adopting niches, the new paradigm builds a loyal following among customers and value-chain partners who see a market in the making. Outside these niches it is becoming more widely known and accepted—but not yet adopted—by the general public. Tornado: The technology has proved its usefulness in niche markets, and in the process, a killer app has emerged, something that makes it both broadly applicable and highly attractive to a mass market. Overnight it becomes perceived as necessary and standard. All the pragmatists who were hanging back from committing rush into the market to make sure they aren’t left behind. Competition to capture this influx of new customers is fierce. Revenues grow at double- or even triple-digit rates, with investors bidding up the stock of every company that can participate in the category. Main Street: The initial surge of hypergrowth subsides, leaving behind a market-share pecking order that is likely to persist for a long time to come. Customers have selected their vendor of choice and are now focused on deploying the technology more broadly. At the same time, they expect to see systematic improvements in the offerings and reward each with an uptick in purchasing. The technology-adoption life cycle comes to an end once the marketplace has completely assimilated the disruption that triggered it. In the case of automobiles, this happened sometime between the First and Second World Wars; in the case of television sets, in the 1960s; in the case of cell phones, in the past decade. Until this end is reached, the influence of technology-adoption forces is so dominant that it suppresses other dynamics.
- The Chasm The five responses—Just try it, Get ahead of the herd, Stick with the herd, Stick with what’s proven, and Just say no—represent the universe of alternative reactions, and the area of the total curve they occupy is proportional to their frequency of occurrence. Most people find themselves drawn to one of the five more than the others, and to the degree this is true, they can accurately categorize themselves with the labels in the diagram. But every category represents a new choice, and people can be late adopters in some and early adopters in others. In the Technology Adoption Life Cycle model, there is a chasm between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). This is because visionaries and pragmatists have very different expectations, and there are specific techniques to successfully cross the “chasm,” including choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, choosing the most appropriate distribution channel and pricing. How Markets Develop In the actual development of any specific market, individual choices are masked in the statistics of the group, and what we see are these five strategies interacting to create a pattern described by the technology-adoption life cycle. There are different stages in the unfolding of the model, and each stage represents in some sense a rebellion against and a repudiation of the prior stage. Here’s how it plays out: Early market: When a disruptive innovation is first introduced, it initially attracts the attention of technology enthusiasts (who see it as cool) and visionaries (who see it as potentially disruptive). The latter fund projects to see if they can exploit the disruptive capabilities with a view toward gaining a dramatic competitive advantage over their peers. Pragmatic buyers are curious about these efforts but are far too cautious to actually participate in them. They are on the other side of the chasm. When these early adopting projects bear fruit, the press, fascinated, writes glowing articles describing the technology as the next big thing. A new category is named, but in truth it is not yet clear if it will be for real or just a flash in the pan. The Chasm: The chasm represents a betwixt-and-between state. Having now been in the marketplace for some time, the offer has lost its novelty, and visionaries no longer see it as a source of dramatic competitive advantage. They pursue their search for disruptive opportunities elsewhere. At the same time, there has not been the kind of widespread adoption necessary to convince pragmatists that it would be safe to purchase. Pragmatists with their stick-to-the-herd strategy need to see other pragmatists buying before they buy. As a result, the market is stalled. Crossing the Chasm: The only reliable way to exit the chasm is to target on the other side a niche market made up of pragmatists united by a common problem for which there is no known solution. Such “pragmatists in pain” are motivated to help the new technology cross the chasm if, and only if, it is packaged as a complete solution to their problem, what is called a whole product. Bowling Alley: In this phase of category maturity, the technology has gained acceptance among pragmatists in multiple-niche markets where it enables genuine solutions to uncommon problems. Wherever one niche adopts, adjacent niches become more susceptible—hence the bowling-pin metaphor. Within adopting niches, the new paradigm builds a loyal following among customers and value-chain partners who see a market in the making. Outside these niches it is becoming more widely known and accepted—but not yet adopted—by the general public. Tornado: The technology has proved its usefulness in niche markets, and in the process, a killer app has emerged, something that makes it both broadly applicable and highly attractive to a mass market. Overnight it becomes perceived as necessary and standard. All the pragmatists who were hanging back from committing rush into the market to make sure they aren’t left behind. Competition to capture this influx of new customers is fierce. Revenues grow at double- or even triple-digit rates, with investors bidding up the stock of every company that can participate in the category. Main Street: The initial surge of hypergrowth subsides, leaving behind a market-share pecking order that is likely to persist for a long time to come. Customers have selected their vendor of choice and are now focused on deploying the technology more broadly. At the same time, they expect to see systematic improvements in the offerings and reward each with an uptick in purchasing. The technology-adoption life cycle comes to an end once the marketplace has completely assimilated the disruption that triggered it. In the case of automobiles, this happened sometime between the First and Second World Wars; in the case of television sets, in the 1960s; in the case of cell phones, in the past decade. Until this end is reached, the influence of technology-adoption forces is so dominant that it suppresses other dynamics.
- Stage in the TALC The first step to define a Market Development Strategy is identifying stage of category in TALC, since it affects all the relevant variables. The Market Development Strategy Checklist The Market Development Strategy checklist requires covering the following variables: Market creation variables: 1. Target Customer – Source of money 2. Compelling Reason to Buy – Source of demand 3. Whole product – To fulfill the compelling reason to buy Market attractiveness variables: 4. Partners and Allies – Needed for whole product 5. Distribution – Function of whole product and integration complexity 6. Pricing – Function of perceived value Market penetration variables: 7. Competition – For customer’s money 8. Positioning – Relative to competition 9. Next Target – Next move
- 1. Target customer Is there a single, identifiable economic buyer for this offer, readily accessible to the sales channel we intend to use, and sufficiently well-funded to pay the price for the whole product? In the absence of such a buyer, sales forces waste valuable time evangelizing groups of people trying to generate a sponsor. Sales cycles drag on forever, and projects can be shut down at any time. 2. Compelling reason to buy Are the economic consequences sufficient to mandate any reasonable economic buyer to fix the problem called out in the scenario? If pragmatists can live with the problem for another year, they will. But they will continue to be interested in learning more. So your sales people will be invited back again and again—they just won’t return with purchase orders. Instead, they will report that the customer said, “Great presentation!” What the customer was really saying was, “I learned some more and I didn’t have to buy anything.” 3. Whole product Can our company with the help of partners and allies field a complete solution to the target customer’s compelling reason to buy in the next three months such that we can be in the market by the end of next quarter and be dominating the market within twelve months thereafter? The clock is ticking. We need to cross now, which means we need a problem we can solve now. Any thread left hanging could be the one that trips us up.
- 4. Partners and allies Do we already have relationships begun with the other companies needed to fulfill the whole product? If you do, it is typically from a single early-market project, or else you are just lucky. Pulling together this partnership is a major challenge for the whole product manager. 5. Distribution Do we have a sales channel in place that can call on the target customer and fulfill the whole product requirements put on distribution? Calling on the line-of-business side of the house requires some fluency in the language of the target niche, and established relationships with individuals accelerates this process dramatically. Lacking this, companies typically hire a well-connected individual out of the target industry and charter her to lead the sales force back in. 6. Pricing Is the price of the whole product consistent with the target customer’s budget and with the value gained by fixing the broken process? Do all the partners, including the distribution channel, get compensated sufficiently to keep their attention and loyalty? Note here that it is the whole product price, not the price of the product per se, that matters. Services will often take as much or more of this total as product.
- 7. Competition Has this problem already been addressed by another company such that they have crossed the chasm ahead of us and occupied the space we would be targeting? Dick Hackborn, the HP executive who led the move into laser printers, had a favorite saying: “Never attack a fortified hill.” Same with beachheads. If some other company got there before you, all the market dynamics that you are seeking to make work in your favor are already working in its favor. Don’t go there. 8. Positioning Is the company credible as a provider of products and services to the target niche? At the outset, the answer is typically, Not very. One of the delights of niche marketing, however, is the speed at which this resistance can be overcome if only one truly commits to a whole product that fixes the broken process. 9. Next target customer If we are successful in dominating this niche, does it have good “bowling pin”potential? That is, will these customers and partners facilitate our entry into adjacent niches? This is an important issue of strategy. Chasm-crossing is not the end, but rather the beginning, of mainstream market development. It is important that we have additional follow-on niches that can be lucratively addressed. Else the economics of niche marketing simply do not hold up.