Geoff Moore Launches 3rd Edition of "Crossing the Chasm" at Mohr Davidow Ventures
On Tuesday night, February 11th, more than 80 enterprise executives packed into Mohr Davidow Ventures’ Sand Hill office for a strategy session on “Crossing the Chasm: What’s New, What’s Not?” with bestselling author and MDV venture partner Geoff Moore. Kicking off with good wine and conversation, Moore walked attendees through the third edition of his bestselling book, “Crossing the Chasm,” with panelist anecdotes from Richard Frankel, President and Founder of Rocket Fuel, Clate Mask, CEO and Co-Founder of Infusionsoft, Keerti Melkote, Co-Founder and CTO of Aruba Networks, Sam Schillace, SVP of Engineering of Box, and Rob Tarkoff, President and CEO of Lithium Technologies. The book framework is its original, but the third edition incorporates next-gen companies.
The genesis of Moore’s best selling book was the realization that high-tech marketing is fundamentally different from marketing within traditional, established businesses. Whereas McKinsey and other consultancies are reliant on fact-finding missions, in early stage technology ventures, there are more high-risk unknowns, low data, and no best practices upon which to rely. Furthermore, there’s often social resistance to change. While one cannot chart a direct path through this early stage landscape, there are foundations, practices, and methodologies that help. Chasm theory is one such paradigm.
The technology adoption life cycle, and the challenge facing any disruptive innovation, navigates how to get from innovators and early adopters to widespread adoption by majority users. Early adopters will be enthusiasts, but it’s a risk to assume they’re the norm.
To highlight the unique sense of tech adventure inherent in the earliest of adopters, Moore characterized them by saying “These are the people who play polo on Segweys. That’s what they do.” In short, they are not the normal user (outside the Valley).
Innovators and early adopters break away and create the early market, but companies run into trouble when they expect that they can take these early users to be emblematic, and expand sales to immediately go after the majority without realizing there is a chasm. Across the “Chasm,” coined by Moore in his seminal book to describe the gap between the adoption patterns and preferences of different user segments, “Pragmatists” and later adopters who tend toward skepticism and slower adoption will question the relevance of innovation and say, “I’m not sure this is ready for prime time.” They seek other opinions, but are subject to confirmation bias. “You’re not doing this thing are you? Ok, me neither.”
“It’s the classic junior high dance problem,” Moore said to nervous laughter, with the majority of the room sheepishly reflecting on their wallflower, nerdy youths.
“If you can get the dance going and you secure a beachhead, you can enter the tornado,” Moore said. On the other side of the chasm are mainstream users, where repeat business models live, sales teams can knock out one “bowling pin” after another, the tornado ensues, stock prices go crazy, and you finally meet main street. It’s where fact-based McKinsey methodologies begin to become relevant again. “And if you’re a VC and you get into the tornado, this is where you begin to think you’re a genius. You were in the right place.”
“Early on there are two types of deals,” Moore proclaimed. “There are BHDs and SLDs. Big hairy deals, and ‘silly’ [sic] little deals,” highlighting that startups must prioritize, focus on a few deals that can work as beachheads to get them across the chasm, but to look out for landmines that take up too much of their time and resources.
“With early adopters it’s about giving people gain. Once you cross the chasm it’s about pain. You’re solving a pain point. You know you’re across the chasm when your clients stop talking about gain, and start talking about what pain you’re alleviating.”
Moore then took some time to talk about what’s new in technology adoption. Here he focused on the absence of inertia in spinning up digital services, especially ones that go direct to consumers, and how this has led to an alternative path to tornado growth, one charted out early on by Steve Blank in his Four Steps to an Epiphany and then popularized by Eric Ries in The Lean Start-up. Moore described his own contribution to that paradigm by presenting a growth model called the Four Gears.
Moore then began engaging the experts around the room, asking panelists from Box, Infusionsoft, Lithium, Aruba Networks, and RocketFuel to apply his “Four Gears” framework to their own startups. In Moore’s Four Gears, the starter motor is driven by acquiring traffic, then ramping engagement, then converting to monetization, and finally enlisting evangelists. These four gears speaking in synchronous union drive the creation of the tornado. By focusing quarterly on which gear is performing most slowly, and alleviating this bottleneck, startups can keep the gears ramping up to escape velocity.
Rob Tarkoff, CEO of Lithium Technologies, described how companies spending $338 billion business process outsourcing (BPO) market slowly came to realize the value of social, how all their customers were on Facebook or Twitter and not calling into call centers. “Once they realized that if they didn’t have a peer-to-peer community they were going to fall behind, they said I have to have that, and I knew we’d begun to cross the chasm.”
Kerti Melkote, CTO of Aruba Networks, described their “beach head” strategy in crossing the chasm. He went from building LAN switches at Cisco to realizing the rise of WiFi. “We found that education as the first segment beach head was our way across the chasm. Universities have students with laptops who expect the same experience at work as at home. We focused on how university spaces needed to be mobility based, free for students.” This beachhead allowed Aruba to cross the chasm into the tornado of the WiFi enterprise world of the iPad.
Richard Frankel, President of Rocket Fuel, talked about how their technology-enabled ad optimization solution “sling-shot” them over the chasm when working with ad agencies who were beholden to the fast, capricious needs of advertisers, but they’re beginning to see that their next evolution is direct selling to Fortune 500s. With their IPO behind them he said, “We’re across one chasm with the agencies but just at the beginning of another chasm engaging directly with the advertisers themselves. Once we start acquiring direct Fortune 500 customers, and getting across that new chasm, we could enter another tornado, and 20x the company.”
In closing summary, Moore talked about how the “Digital as a Service” phenomenon is revitalizing virtually every industry and reinventing almost every business process. There are varying levels of inertia with “as a service” companies, but the next decade will be about combining “systems of engagement” to “systems of record.” It’ll be about enterprising inheriting a fully digital consumer world, and understanding how this applies, and will disrupt every industry.
In a closing jest, Stanford engineering professor and director of Stanford Technology Ventures Program (STVP) which runs the prestigious Mayfield Fellows program polled the crowd, “I teach the people you’re going to hire. Should I keep teaching this book?”
Every hand in the room went up.