Geoffrey Moore on finding your beachhead, crossing the chasm, and dominating a market
25 Jan 2024 (8 months ago)
Geoffrey’s background
- Jeffrey Moore is the author of the influential book "Crossing the Chasm".
- He emphasizes the importance of getting very narrow with the initial audience and using the "bowling pin strategy" to get past early adopters.
- Moore discusses the specific go-to-market playbook for each stage of the adoption lifecycle and the seven deadly sins of trying to cross the chasm incorrectly.
- He also provides insights on selling products to different personas and why focusing on the problem and pain is not necessary when selling to early adopters.
What people often get wrong about Crossing the Chasm
- People often misunderstand the concept of a beachhead segment and target the Fortune 500 instead of a focused market.
- Moore emphasizes the importance of looking at the market from an outside-in perspective rather than an inside-out lens.
Finding your beachhead segment
- In an emerging category, it's crucial to create enough power to navigate the future on your own.
- Getting a lighthouse customer can put a company on the map and attract attention.
- To cross the chasm, a viable and repeatable business is needed, which requires an ecosystem of partners.
- Ecosystems form around market leaders, so it's important to consolidate a market segment where the company can be a big fish in a small pond.
- The fish-to-pond ratio concept suggests targeting a segment where the company can achieve a significant market share within a few years.
- Focusing on multiple segments simultaneously is not advisable, as it dilutes efforts and reduces the chances of becoming a market leader.
- Pragmatic people buy what they see their peers buying, so establishing a clear market leader is crucial for market adoption.
The four inflection points of the technology adoption lifestyle
- The four inflection points of the technology adoption life cycle are:
- Early Market
- Crossing the Chasm
- Main Street
- Tornado
Geoffrey’s bonfire and bowling alley analogies
- The bonfire analogy:
- Taking a match and running it back and forth under a log will not start a fire.
- To start a fire, you need to put a little kindling and hold the match in one place until the fire starts.
- The bowling alley metaphor:
- Explains how to win your first segment and then increasingly move forward to win more segments.
- Adjacency is important in the bowling alley metaphor.
Steps to take before trying to cross the chasm
- Before trying to cross the chasm, ensure you have a marquee customer that puts you on the map.
- The formula for a target segment is:
- Big enough to matter (potential to reach $100 million in revenue within five years).
- Small enough to lead (be a big fish in the pond).
- A good fit with your crown jewels (compelling use case that starts the fire).
- A segment is defined by:
- Same geography.
- Same industry.
- Same profession.
Signs you’re ready to cross the chasm
- You have a major account who's gone all in with you on the new technology and who is willing to talk about it.
- You have the domain expertise to really understand the problem and it's a really compelling problem.
- The executive sponsor is a visionary who is looking for people that are more visionary like them and wants to be different.
Advice for startups on where to start
- Start with projects that are customer-led and be willing to adjust your roadmap based on customer feedback.
- Try to get to cash flow break-even on your own money before seeking venture capital.
- Venture capital is not necessary for every startup, and there are benefits to bootstrapping.
Thoughts on venture capital
- Not all VC-funded companies succeed, and you may not make as much money as you could if you bootstrapped.
A general timeline for crossing the chasm
- With a single round of funding, you should be able to cross the chasm and dominate a single use case in a single market within 18 to 24 months.
- You don't need to discount your product or service, but you do need to make a guaranteed commitment to solving the problem.
What exactly is the “chasm”?
- The chasm is the gap between the early adopters (Visionaries) and the mainstream market (Pragmatists).
- Pragmatists will not accept Visionaries as references and they don't have any peers that have tried the product yet, so they are hesitant to adopt it.
The difference between visionaries and pragmatists
- Visionaries are those who come up with new ideas and innovations, while pragmatists are those who focus on the practical aspects of implementing those ideas.
- Pragmatists often have to clean up the messes left behind by visionaries.
- Visionaries are often represented as Steve Jobs, while pragmatists are represented as business people in suits.
- Most people are pragmatists, but one can be a visionary with some things, a pragmatist with others, and a conservative with others.
- The Junior High dance problem is a metaphor for how much of a product needs to be built at each stage of the product life cycle.
Finding the compelling reason to buy
- A compelling reason to buy is essential for convincing pragmatists to adopt a new product.
- It should address a significant pain point or problem that the target customers are facing.
- Examples of compelling reasons to buy include ransomware, struggling kids in school, healthcare issues, and office space challenges.
- The compelling reason to buy is not the same as the compelling reason to sell, which is often misunderstood.
- The key to finding a compelling reason to buy is to focus on the customer's pain points and needs, rather than on the product itself.
The Early Market playbook
- In the early market, the focus is on the technology itself.
- Key responsibilities include having a technology expert, being able to demo the technology, and creating a vision that articulates the trapped value that the innovation can release.
- Airbnb is an example of a company that successfully unlocked trapped value by leveraging people's homes and cars as a free labor force.
The Bowling Alley playbook
- Focus on understanding the problem domain and building your go-to-market strategy around it.
- Use lead generation to identify potential customers with specific pain points.
- Conduct diagnostic calls to understand the customer's challenges and goals.
- Use active listening and note-taking to show that you are engaged and understanding their concerns.
Different sales approaches for early market and bowling alley
- In the early market, you focus on creating budget for your solution.
- In the bowling alley phase, you redirect budget from existing solutions to your own.
- Crossing the chasm involves changing the state of your company from a cool possibility to a going concern.
- A going concern is a company that is expected to continue existing in two years, with a loyal customer base, established partners, and a clear operating model.
Changing the value state of the company
- The goal of crossing the chasm is to reach a point where you don't need to raise more venture capital.
- Cash flow positivity is more important than accounting profit at this stage.
- Venture capitalists categorize risk based on the stage of the company: angel investors take on the risk of creating something, crossing the chasm investors take on the risk of company viability, and bowling alley investors expect a journey from $10 million to $100 million with a growth rate that meets the rule of 40.
The Tornado playbook
- In the tornado phase, budgets are established as a category goes horizontal and everyone wants the new technology.
- The market share battle is intense, and whoever gets the most customers early on gains an advantage.
- If you're not number one in the tornado, you may need to retreat into a niche and become a "chimp" instead of a "gorilla."
Why combining playbooks doesn’t work
- Using the wrong playbook in the wrong phase can have the opposite effect of what you intend.
- Qualifying the customer on budget before making a sales call is critical in Main Street but not in the early market or bowling alley.
- Bringing a project model to the bowling alley won't scale, while bringing a solution model to the early market is over-investing.
Using generative AI in different market phases
- Generative AI can be used in different market phases, from the early market to Main Street.
- In the tornado phase, generative AI can be used for sales, marketing, and customer service.
- In the bowling alley phase, generative AI can be used for education and training.
- On Main Street, generative AI can be used for a variety of tasks, such as writing legal opinions and designing visual images.
The risks of discounting
- Discounting before crossing the chasm is not recommended as it does not reduce risk and may even increase it.
- Discounting can lead to reduced support, extra charges, and changes in scope.
Other “deadly sins” of crossing the chasm
- Target customer mixup: It is important to identify the right target customer who controls access to the market and can sponsor the deal.
- Compelling reason confusion: Instead of focusing on the compelling reason to sell, entrepreneurs should focus on the compelling reason to buy, which addresses the pain points of the target customers.
- Positioning: When crossing the chasm, the positioning formula is the same every time. Companies should position themselves as technology leaders who are specialized and committed to solving a specific problem in a particular domain.
Positioning in crossing the chasm
- Positioning is crucial when crossing the chasm.
- The positioning formula involves identifying the incumbent vendor, technology competitors, and the company's unique value proposition.
- Companies should emphasize their technology leadership, domain expertise, and commitment to solving the specific problem of the target customers.
Product-led growth and crossing the chasm
- Product-led growth requires telemetry and communication with users to identify compelling reasons for purchase.
- Product-led growth is effective in the land and expand phases of the market, but not for crossing the chasm.
- Product-led growth companies eventually build sales teams, especially for enterprise deals.
- Enterprise salespeople are not good chasm crossers; domain expert narrow model salespeople are better suited for this role.
The challenges of software and entrepreneurship
- Martin Cassado argues that life after crossing the chasm is not easy and involves endless pain and suffering.
- Geoffrey Moore agrees that life never becomes easy, but the problems change.
- Software development faces challenges such as different user expectations, competition, funding, and technological shifts.
- Entrepreneurs should be prepared for new headaches every week.
- Founders should only start a company if they can't not start a company.
How Geoffrey’s thinking has evolved
- Geoffrey Moore's model is optimized for B2B markets with federated decision-making around high-risk buying decisions.
- The rise of consumer computing and mobile apps has shifted the core of innovation to B2C.
- Crossing the chasm is not designed for B2C problems; entrepreneurs building consumer apps should not focus on it.
- Geoffrey Moore believes that people are reinventing many of his theories from 30 years ago.
The importance of entrepreneurship and impact
- Geoffrey Moore encourages entrepreneurship as a means to solve world problems.
- He suggests not making becoming a billionaire the goal, but rather focusing on making an impact.
- Entrepreneurs with the ability to start software companies are scarce resources and should not waste their potential.
His book The Infinite Staircase
- Geoffrey Moore's book, The Infinite Staircase, explores how to live a good and meaningful life.
- The book combines complexity theory and the secular creation story to support traditional ethics.
- The message of the book is that doing good is not because of obedience to a divine creator, but because mammals nurture their young and are gifted with unconditional love.
- Ethical values are built into humans and can be integrated into their lives.