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Chasm & TornadoHigh-Tech Strategic MarketingWhat are we going to Learn?How high-tech Market DevelopTechnology Adoption Life CycleSpecifying Market DevelopmentGo-to market programs in light of the various life cycle stages.Common Ground & BasicsResep inti: is to find a market you can dominate & then do it as fast as you can.Market Place Power = Dominant Market Share.New Economy:

INFORMATIONECONOMYKNOWLEDGEECONOMYFOUNDATION OF POWER : SHARING OF THE ECONOMIC OBJECTSBack to Basic FocusFocus the entire company on the product/service marketing plan.Ensure the execution is flawless based on basic go to market imperatives.Direct these impreatives toward dominating a target marketIn order to increase market-share power for the companyThereby creating a sustainable platform for increasing shareholder value for investors

How High Tech Market DevelopMarket ValueGAP: Competitive Advantage GapIs the value of your companys diffrerentiated offerings when compared with those of your direct competitiors.CAP: Competitive Advantage PeriodIs the length of time that investors anticipate you can sustain that differentiated advantage.

Competitive advantage Hierarchy:Differentiated offering offer powerMarket Segment Domination customer powerValue Chain Leadership industry powerNew category participation category powerCompetitive Advantage HierarchyDifferentiationMarketsValue ChainsTechnologiesINCREASING IMPACTCATEGORYPOWERGAPCAPINDUSTRY POWEROFFER POWERCUSTOMER POWERValue ChainValue chain domination holds forth the promise of immense competitive advantage sustainable over long periods of time.Driving force of the valuation of Cisco, Microsoft, Intel, SAP.When the focus is value chain domination, investors sought news of emerging partnership announcements value chain formation. accumulating market place power.Becareful Partners do not pay money, customers doDiscontinuous innovationsDriver of fastest growing sectors in modern economiesRepresent radical departures from the status quoNot merely different from what preceded itReshaped & are reshaping fundamentally the field of human endeavor (revolutionize)Render what preceded them to be obsolete/irrevelvant

Mesin tik vs. PC/Laptop vs. Hybrid PDA/Laptop/HP

Discontinuous innovations contContinuous Innovation Change very little to the benefit of userBuilt upon the infrastructure & standards already in place.. A better laundry detergent..

Discontinuity shockD/I require fundamental change in end user & marketplaceD/I Disrupt current value chains.

Technology Adoption Life Cycle (TALC)Technology Adoption Life Cycle (TALC)

Early MarketsBowling AlleyTornadoMain StreetTotal AssimilationLets Begin the Journey1. The Early MarketOne has to look out for engineers they begin with sewing machine and end up with the atomic bomb.MARCEL PAGNOL

How do you make God laugh? Tell him your plans.WOODY ALLENFundamental flaws in the Early MarketFail to build proper foundations for actually going to marketExpectations do not align with planned investmentCan we articulate, deliver & sustain the real value such atat it stands a good chance of winning over visionaries in sufficient numbers as to warrant our efforts in the first place?Planning: Lesson from the PastPlanning Flaws:The market identified in the plan isnt good enoughThe company lacks strong entrepreneurial vision and driveThe plan is sent to the wrong kind of VC (Venture Capital)

Prescription:Evaluate realistically whether or not the innovation truly is a breakthrough.If it is a breakthrough, killer application must be pursued relentlessly, sponsored by visionaries.If it is not, expectations must be reset and existing business model must be examined and leveraged as appropriate.Positive note on PlanningWho is the First set of customer?What do these customers need to know to become interested in or attracted to the new technology and product?How will the new product create and deliver value?Positive note on PlanningWho is the First set of customer?Tech enthusiast looking to test the technology, followed by Visionaries gauging whether or not tech can be tamed, mastered & utilized to put them out front.

Techies: commitment & influenceVisionaries: real money & real influence

Early market = individual customer NOT segmentThey do not wish to be herded. Need to differentiate.What do these customers need to know to become interested in or attracted to the new technology and product?How will the new product create and deliver value?Positive note on PlanningWho is the First set of customer?To Develop the Early Market, What do these customers need to know?Techies: interested for the sake of technology itself. Because its cool and spend time & energy to investigate. Who knows? It could be useful

Visionaries:- Does it deliver value over what is available?- Is it a head start? Give competitive advantage by creating barriers to entry because of its complexity?- Is there commitment to advance the innovation?- Can I have personal influence on the direction?- Will other people whom I respect adopt it as well?How will the new product create and deliver value?Positive note on PlanningWho is the First set of customer?What do these customers need to know to become interested in or attracted to the new technology and product?How will the new product create and deliver value?

NEXT SLIDEService ProvidersCustomersProduct ProvidersHigh Tech Value ChainProduct & ConsumablesTechnologyApplicationsSales & SupportConsultingCustomer ServiceEnd UsersTechnicalBuyersEconomicBuyersPurveyors of innovation must concern themselves with:Developing a novel technologyForming a product out of this technologyBuilding an application and/or system that exploits the features and benefits of the technology and product.Delivering the new application, determining how it will be sold, supported and nurtured. The four boxes can be considered as vendor domain.

Customer domainTechnical buyer, who takes title to the application and systematizes it further such ahat end users can use it.The end user who will actually use the application.The economic buyer who sponsors the acquisition of the new application and commits the funds for its purchase.

Consist of three potential buyers, all of whom can be one and the same person or three separate peopleEconomic Return on the total Original InvestmentEarly market form when, and only when, new technologies become solutions that can be delivered, supported and sustained through an appropriate channel and economic buyer receive demonstrated ROI through the successful deployeent of the innovation.Return on Investment-ROI is calculated for the sum total of the investment necessary to botain a given benefit.-Example:ROI for PC application incl. cost of PC, cost of s/w application and ongoing support that I may require to use the application.Total cost consideration = crucial factor when we consider move toward mainstream market.

Continuous innovations leverage existing value chains to sustain themselves, D/I must form new value chains in order to be adoptedThe stronger the existing value chain, the more difficult to dislodge that chain.Learning to work BackwardKey to High-Tech market wisdom is to learn to read the value chain like Hebrew/Arabic text.First goal should be to follow the moneyThen we endeavor to move it to our own pockets. The only way to do it is to earn it through value creation.The closer to the right, the better your chance for getting your share of it.The journey from the left is exhausting & depressing on the marketing side.Victory in the Early MarketIdentify economic buyer who is either losing money or missing out money making opportunity.Once that become your focus, you can map a path back to the technologies that can correct this customer condition.Marketers must truly understand the dynamics of value creationg:Understand the true nature & scope of customers current problem.Effort for true solution creation.2. The ChasmTHE CHASMWhat is Chasm?Pronounced kasm, like kitchenFor any D/I, an early market will develop +/- as expectedfollowed by a period during which sales may stall, recede, even plummet.Followed, in turn by a period where sales will resume.This recovery period will not be at an expected/ hoped for rate.It is a gap separating techies +visionaries (early market) from pragmatist, conservatives & skeptics (mainstream market).TALC & The ChasmTALC is not about time.Time is an implied dynamic throughout the TALC; the model itself references population distribution and psychographic attributes associated w/ various segments that comprise a population.It is only our own impatience to develop a market for our new widget quickly and efficiently that leads us down this path.FUD SpecterInside Chasm, FUD scepter raise (fear, uncertainity and doubt)We did not plan the chasmCompetitors preserving status quoThe largest impact is on the future customer.The Chasm can play two way:Obscurity of D/I or Bowling AlleyIt is a war of perception between the visionaries and the pragmatist.Visionaries & PragmatistIntuitiveSeek revolutionary advancesContrarianSelf-referencing

Avoid the herdRisk-takingMotivated by future opportunitiesSeek what is possibleWill seek best technology

AnalyticSeek evolutionary advancesConformistReference other perceived as similarStay with the herdRisk-averseMotivated by current problems

Pursue what is probableWill seek best solution/vendorWe shall cross the chasm when D/I can function inside the battle of differences of characters between visionaries and pragmatistVisionaries & PragmatistWe shall cross the chasm when D/I can function inside the battle of differences of characters between visionaries and pragmatistWait a minute-- arent you supposed to be improving my productivity?Great, lets get together & build the other 20% together.When you have 80% ofthe solution to their problemLets RecapChasm periods to not always develop during life cycle of new tech. But the more D/I, the more it deviates status quo, the more likely the chasm will occur.Chasm affect all market entrants sponsoring products that manifest the discontinuity.Chasm can persist for indefinite periods. Product categories that remain in the chasm > 2 yrs = lost.Chasm are not the result of bad tech/products but rather the incomplete tech/prod. This inhibits the creation of value chain attract market investment to advance ROI projection/actual can be understood & forecasted.Chasm do result because the customers who adopted the product rearly on simply do not serve as satisfactory references to people who have yet to adopt.Crossing the Chasm Requiresa Shift in Delivered ValuesFrom Product-Centric:Fastest/smallest/ lightest etc productMost elegant architectureProduct priceUnique product functionalityMeeting these values is essential to obtain initial market penetrationTo Market-Centric:Largest installed baseMost 3rd party supportersDe facto standardCost of ownershipQuality of supportMeeting these values is essential to cross the chasmBenefitsOfferedBenefitsOfferedCrossing the ChasmBrand Image, Warranty & Services, LargeInstalled Base, 3rd Party Support, Low Ownership Cost, Plug & Play, Quick Learning Curve, Add-on Hardware & Software,System Integration, Training &Support, Installation &Debugging, etc.Tangible ProductFeaturesVision ofProductBenefitsAfter the Chasm3. The Bowling AlleyMarketing is like bowling, except you wear better shirt.Geoffrey A. Moore

It is here where we will develop & execute our market penetration strategy into the pragmatist heartland.Why Bowling Alley? The first pragmatist segment to be won over as a kind of headpin. Hit the headpin right the more pin fall the more points you receive.Bowling Alley ModelSeg 1App1Seg 2App1Seg 1App 2Seg 3App 1Seg 2App 2Seg 1App3Whole ProductLeverage:- Same application- New segments

SHARED APPLICATIONSWord of Mouth Leverage:- Same segments- New application

WORD OF MOUTH REFERENCINGSense of SegmentationDemographicGenderAgeRaceEthnicityEducationIncomeScience of grouping people by attributesPsychographicValuesBehaviorsBeliefsLifestyles

Attempts to aggregate consumer segmentConsumer Marketing seek to understand the various demographic and psychographic attributes of their customers and prospectsA SegmentIs: Any self-referencing group of people with common needs, wants, problems or aspirations that could and would be likely to use a common or similar application.Pragmatist refer each other in high tech market as a way of managing & mitigating risk.Visionaries as a way of managing & increasing possibilities.Four forms of Risk in high tech marketAdoption RiskSolution RiskMarketing RiskBusiness Risk

Four forms of Risk in high tech market of a chosen solution/applicationAdoption Riskrisk that it will not be useful or deliver positive ROI because it is difficult to use, requires too much behavioral change or its benefits are not substantial enough.Solution Riskrisk that it will not be able to be easily replicated, supported and sustained because it is hard to assemble, deploy, or otherwise does not integrate well into existing systems. Marketing Riskrisk that it will be difficult to source, purchase or obtain support for.Business Riskrisk that a chosen vendor will remain viable and thus able to advance the innovation beyond its early versions.Before we BowlProspects, pragmatist & conservatives reference people they trust and those they perceive to be most like them.Risk mitigation is not strictly a function of price.We seek out people like us who have gone before us to be able to predict & account for those 4 risk.Demographic & Psychographic data alone do not offer sufficient insights. To be able to get the birds to flock together. Our first segment/The headpin determine our initial approach.The remaining bowling pins is derived from our headpin based on the attributes associated w/ that segment.

Lets go BowlingOur goal in the bowling alley is to continue chasm-crossing strategy in the hopes our new product can win adoption in market niches.If successful to attract these niches, we have a chance at winning widespread adoption w/ potentially all pragmatists.Our ultimate goal is THE TORNADO.Why cant we go directly to TORNADOPragmatists remain w/ current value chains/paradigms until they are no longer viable or they are forced to move.While a group of pragmatist believe in the product, other pragmatist will askWhat is in it for us?. Not finding immediate answer, they remain at rest waiting for generalized product than can/will be adopted by the pragmatist group as a whole.Characteristics of Niche MarketNeed highly tailored applications based on specific requirements.Do not weigh alternative solution on the basis of the strenght of the technology or product itself, but rather on how complete each alternative is compared to each of the others.Evaluate alternatives based on demonstrable measures. ROI

Niche Market PragmatistsI do not care about all the technical mumbo jumbo or which product is supposed tobe better. I just want to know that whoever we choose knows something about our business... can prove it through their proposed solution... and has done it before successfully, in situations just like ours.

If we ignored this characteristics you can get frustrated

Becoming a Leader: Initiating the Power of InfluencePragmatists herd mentality begin to emergeYou are now, have an innovative product, highly prized by current customer base techies & visionaries.In order to win over pragmatist, segment by segment focus your efforts on those you can persuade first to solve a pressing problem that they now experience.if ignored will cause greater pain forward.Earn this groups business by replacing its aging, crippled application/system/value chain for your own.Word gets around! Become vendor of choice for this application. You are now a leader in a specific application. You are a future product leader in training. Only Product leader compete in the TORNADO

Power of Leadership 1/3Pragmatists are interested in pursuing evolutionary approaches to business & tech.They prefer markets that are self-organizing & self-selecting, resulting in a market leader.Conversely, market w/o clear leader are anathema/disliked because such market appear as unstable, unpredictable & unattractive.Power of Leadership 2/3Once a category market leader emerge, it serves to validate not only the market leader itself but also the category in general.Evidence:3rd parties ensuring offering compatible w/ leaderExpert/Gury praise the merit of this new marketPragmatist like theseA new functioning value chain attracts more playersOther vendors become marginalized because pragmatists are herding about their chosen market leader.

Power of Leadership 3/3Build a dominant presence in each bowling pin segment.Very important in the Tornado.Guideline:Dominant share = 40% of target in 12-18 mo.Assurance that competitor are not able to achieve this number.Dont become 2nd or 3rd invoke word of mouth pragmatists need to know youre the winner to feel safe buying its what they tell their friends.

Pick & ChoosePick the right customer segment to start withRecognize them by: their compelling reason to buy product NOT reason to sell product.Absence of any other vendor making a concerted effort to serve the real needs of that segment.Attack the CAUSE not the SYMPTOMS

Principles in the Bowling AlleySegment your intended market to determined a practical If not optimal bowling pin array. Determining the array:How easily your whole product solution migrate from segment to segment?How likely and readily will one segment reference another segment?Segments should be identified in priority based on:How compelling their problem is degree of urgency to move to alternative paradigm?Whether they are currently served by other/potential competitors?How rapidly you can deploy a whole product solution tailored to the specific needs of the segment in question?How demonstrable superior returns on investment can be realized by your new approach? Principles in the Bowling AlleyThe customer domain of the value chain must be considered, specifically the economic buyer. It is them who will ultimately put up the money to solve the problem and will ultimately suffer the consequences should the problem persist.The goal is segment/niche domination. Measure by market share. The larger the segment the more difficult it will be to dominate, as in both time & resource allocation.B/A market development does not result in immediate gratification for vendors, is difficult to plan for and execute in a time driven business culture typically avoided. This can offer opportunity for others willing to expend patience & resources for the niche market.Tornado4. Tornado, Mainstreet & Assimilation13.5%EarlyAdopters2.5%Innova-tors34%EarlyMajority34%LateMajority16%Laggards

The PragmatistAlso somewhat interested in technology, but Driven by a strong sense of practicalityKnow that many new inventions end up as passing fadsTake a wait & see attitude toward buyingWant to see well-established references before buyingA large segment, so winning their business is the key to successThe ConservativesShare all the concerns of the early majorityBut also, while the Early Majority is comfortable with technology, the Late Majority is not, so They wait until the technology is an established standard before buyingThey want to see lots of support before they buy and tend to buy from well-established companiesThe LaggardsDont want anything to do with new technologyThey will buy a technological product only when it is buried inside another product (e.g., microprocessors in cars)They are generally not considered worth pursuing by technology firmsWhat causes the TornadoPragmatists PrinciplesWhen it is time to move, let us all move togetherWhen we pick the vendor to lead us to the new paradigm, let us all pick the same oneOnce the move starts, the sooner we get it over with, the betterPost-TornadoMarket SharesPost Tornado Result

GORILLAChimpsmonkey100%The GorillaTechnology is about standards. To succeed with consumers, one firm's gadget often has to work with other gadgets from other firms. Technology moves so quickly that standards set by committees usually come too late. Instead, the industry organizes itself around de-facto standards championed by single firms with the clout to make them stick. For instance, as Intel has done with microprocessors. By bringing order to an otherwise chaotic marketplace, the standard can serve as a foundation from which many firms can sell compatible products, strengthening the industry as a whole.

The GorillaAs long as the technopoly puts most of its effort into expanding the overall market (as Intel has with PCs), the rest of the industry is happy. And if a technopoly uses its dominance to charge too much, then its customers are quick to rebel. When IBM began to plunder the mainframe-software market in the mid-1980s, it only accelerated the move towards networked PCs; ever since the early 1990s, Big Blue has had to cut prices. One of the beauties of technology is that even a seemingly well-entrenched monopoly can be overthrown by a challenge from outside its market. Where a technopoly's empire is not built on proprietary standards its ability to throw its weight around is even more limited. Both Cisco and Intuit gained an early lead in their markets by offering better products than their peers.

The GorillaThe technology industry's propensity to coalesce around one winner has left both firms with enormous market shares and, in Cisco's case, a huge stockmarket valuation (it is worth as much as General Motors). However, their products are accepted as "standards" only in that most people who use Internet routers or financial software would rather stick with what they know than change to something else. Their position depends on their ability to out-innovate their peers

Principles of Tornado MarketingAttack the competitionLose a customer & you lose it for lifeExpand your distribution channels as fast as possibleIf you cant take the order someone else willIgnore the customerDont customize ship your product as a commodityFocus shipping your product as quickly & cheaply as possible

The Competitive-positioning CompassSupportersLow interestin technologySkepticsHigh interestin technologyGeneralistsLow under-standing oftechnologySpecialistsHigh under-standing oftechnologyVisionariesTechnologyEnthusiastsPragmatistsConservativesThe Competitive-positioning CompassSupportersLow interestin technologySkepticsHigh interestin technologyGeneralistsLow under-standing oftechnologySpecialistsHigh under-standing oftechnologyVisionariesTechnologyEnthusiastsPragmatistsConservativesProduct-directedMarket-directedCompany-directedTechnology-directedDeveloping theearly marketCrossing theChasmDeveloping themainstream marketThe Competitive-positioning CompassSupportersLow interestin technologySkepticsHigh interestin technologyGeneralistsLow under-standing oftechnologySpecialistsHigh under-standing oftechnologyProduct-directedMarket-directedCompany-directedTechnology-directedArchitectureSchematicsTrialTechnology press coverageGuru endorsementsRevenue & profitsStrategic partnersTop tier customersFull product lineBusiness press coverageFinancial analyst endorsementsMarket share3rd part supportStandards certifnAppns proliferationVertical press covgeIndustry analyst endorsementsVisionariesTechnologyEnthusiastsPragmatistsConservativesThe ChasmBenchmarksProduct reviewsDesign winsInitial sales volumesTrade press coverageVisionary endorsementsFocus on the economic buyer & the end userIgnore economic buyer & user; focus on infrastructure buyerEmphasize ROI as the compelling reason to buyIgnore ROI; focus on developing infrastructureDifferentiate your whole product for a single applicationTurn your product into a commodity for genl purpose usePartner w/a value-added distn channelDistrib. thru low-cost, high-vol. channels to get max exposureUse value-based pricing to maximize marginsUse competition-based pricing to maximize shareAvoid competition; gain niche market shareAttach competition to gain mass market sharePosition products within vertical market segmentsPosition your products horizontallyBowling Alley vs. TornadoTornado vs. MainStreetSell to the infrastructure buyer; focus on infrastructureSell to the end user; gratify their individual needsTurn whole product into a commodityDifferentiate your productDistribute through low-cost, high-vol. channelsKeep same channels, but focus on merchandisingDrive price points lower to maximize sharePromote value to be able to raise marginsAttack competitors to gain market shareCompete against your own low-cost productsPosition horizontallyPosition yourself in niche markets, based on their pref.Value Disciplines & Life Cycle

ProductLeadership OnlyProduct Leadership+Customer IntimacyProduct Leadership+Operational ExcellenceOperational Excellence+Customer IntimacyStrategies in the Life Cycle

Strategy 1: Deal-driven MarketingStrategy 2:Niche MarketingStrategy 3:Mass MarketingStrategy 4:Mass CustomizationKey Priority: Design & build thewhole productPartnering Priority: Complementarytechnologies & services to form thewhole product and win dominantsegment shareDistribution Priority: Find someevangelists for Early market and Crusaders for Bowling AlleyKey Priority: Simplify and extend the whole product

Partnering Priority: Complementary skills and resources in marketing and distribution to succeed in identifying newniches

Distribution Priority: Find some hunters for the Tornadoand farmers for the Main StreetInnovation Product Life CycleMarket Development EvolutionEarly Market

First CustomersStart Market development validate technology & productBowling Alley

Niche penetrationDominate first niche then adjacent nicheTornado

Mass Market growthGrow Horizontally new channels & geographiesMain Street

Niche expansionGrow profitable revenue from installed base through 1 to 1 marketing and mass communicationTechnology vs. Product Life CycleInnovations LandscapeCategory Maturity LifecycleTimeRevenue GrowthTechnology AdoptionLife CycleEarly Main StreetMature Main StreetDeclining Main StreetIndefinitely elasticmiddle periodEnd of LifeAFaultLine!EDCB

Broad Universe of Innovation TypesDifferent Types Get Traction at Different PointsDisruptiveInnovationApplicationInnovationProductInnovationPlatformInnovationEnhancementInnovationIntegrationInnovationExperientialInnovationProcessInnovationMarketingInnovation

Value MigrationInnovationLine ExtensionInnovationValue EngineeringInnovationHarvest& ExitRenewal InnovationOrganicRenewalAcquisitionRenewalManaging InnovationFour Innovation ZonesDisruptiveInnovationApplicationInnovationProductInnovationPlatformInnovationEnhancementInnovationIntegrationInnovationExperientialInnovationProcessInnovationMarketingInnovationBusiness ModelInnovationLine ExtensionInnovationValue EngineeringInnovationHarvest& ExitRenewal InnovationProductLeadershipZoneOperationalExcellenceZoneCustomerIntimacyZoneValueRenewalZone