June Event Review: 7 Deadly Sins — Lessons From Silicon Valley On How To Successfully “Cross The Chasm” with Michael Eckhardt, Managing Director of Chasm Institute
By Dan Galatin
June 2015 Event
Michael Eckhardt, managing director of Chasm Institute, presented at the June 3rd meeting of the SVPMA. Michael led a lively discussion of Chasm’s Tech Market Model 2.0 and how companies need to behave differently to ensure success once their market has evolved beyond a small set of early adopters.
Michael began by explaining the nature of the market model and the different stages of market maturity. The market model is validated by Chasm’s study of hundreds of companies over more than 25 years. Companies do not have control over which market stage they find themselves playing in; rather, they need to recognize where on the adoption curve a given product will land when it is launched, and plan accordingly.
Michael focused his discussion on the earlier lifecycle stages of the Tech Market Model:
Early Market: When customers are visionaries under the influence of technology enthusiasts. Current examples of products in this stage include 3D printing and big data. There may not be a large buying volume during this stage, which can last from two to four years.
The Chasm: Early customer commitments now absorb most of the company’s resources, so it can’t afford any more “specials” for visionary customers. But by the same token, more mainstream, pragmatic customers can’t easily see the evidence of product value. Sales cycles are extended during this stage, and most closed sales are for pilot projects. Current examples of products in this stage include artificial intelligence applications. The chasm is a bad place to be stuck for more than nine months or so.
Bowling Alley: The product is starting to gain traction with pragmatic customers in some segments, and about 15% of sales reps can start selling it.
The key is for companies to recognize the differences between what works in the early market versus what works to help products move beyond the chasm stage. A lean, almost one-off project-based approach is appropriate for the early market. By the chasm stage, however, the company is done selling to early adopters and needs a whole minimally viable product for normal customers. In order to get unstuck at this stage, Michael recommends a nine-point strategy checklist:
- Understand the target customer
- Articulate the customer’s reason to buy
- Deliver a whole product
- Work with partners and allies
- Have a sales strategy
- Have a pricing strategy
- Understand the competition
- Develop positioning and messaging (i.e. describe “why buy from us instead of the competition”)
- Plan the next move in the product strategy
Finally, Michael described the key mistakes, the 7 Deadly Sins, that companies make while trying to “cross the chasm”:
- Target customer mix-up: Early adopters don’t resemble the mainstream market, so it’s important to ask mainstream customers to product input at this point (they should constitute about two-thirds of customer interviews)
- Compelling reason confusion: Be careful not to confuse the compelling reason to buy with the compelling reason to sell. The customer cares only about the former. There are typically two or three compelling reasons to buy.
- Whole product perfectionism: Don’t wait to deliver the perfect product. Focus on the minimally viable product for the target segment. But do worry about the whole product: the core product plus the key enablers for pragmatic customers.
- Overdoing sales training: The entire sales force doesn’t need to be trained on breakthrough, chasm-crossing products! Fifteen percent of the sales force will bring in 80% of sales.
- Pricing misstep: There is limited price elasticity at this stage, so dropping prices will not have the same effect as it does a mature market. Early pragmatic customers fear adopting something new – they’re not as worried about the price.
- Weak messaging: The product’s value proposition should be able to be summarized in 75 words or less for business-to-business, or 20 words or less for business-to-consumer. Focus on what makes the product superior rather than what makes it unique, and avoid jargon and buzzwords. A suggested template:For [target customers]
who [have the following problem],
our product is a [new product category]
that provides [key problem-solving capability].
Unlike [reference competitor],
our product [key point of differentiation].
Messaging must be relevant, credible and true!
- The “vision thing”: Pragmatic customers don’t care about your vision. They want to hear about what you’re solving for them today.
Michael concluded by giving away copies of the current edition of Crossing the Chasm to a large enthusiastic audience.
Dan Galatin has over 20 years of combined experience in product management and software engineering. He is Co-Director of Communications for the SVPMA and can be contacted at firstname.lastname@example.org.