Workshop on Crossing the Chasm

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Workshop on Crossing the Chasm

• Raj Echambadi

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Product Life Cycles from Marketing
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U.S.Cellular Phones
http//en.wikipedia.org/wiki/Bass_diffusion_model
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CROSSING THE CHASM
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Adopter Categories
Traditional Adoption Model
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The Chasm
The Early Market
The Mainstream Market
The Chasm
Skeptics
Pragmatists
Technology Enthusiasts
Visionaries
Conservatives
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Technology Adoption Life Cycle
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Market Development Model
Put the technology on the map
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Market Development Model
EarlyMarket
Chasm
Form the first persistent value chain. Remember
the way to a mass-market is always through a
niche market!
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The Bowling Alley
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Market Development Model
EarlyMarket
Chasm
Scale for volume! Fight for market share!
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Market Development Model
EarlyMarket
Chasm
Dominant Design! Serve an established market!
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Generate volumes and experience so products
become reliable and cheap to meet demands of
conservatives
The Adoption Stairway
Find a niche. Serve this market well! Gain bulk
of revenue by serving pragmatists ideally by
becoming market leader and setting de
facto standards
Capture interest of visionaries Make them
satisfied customers Serve as good references for
pragmatists
Seed enthusiasts with new products Help them
educate visionaries
Leave skeptics to their own devices
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Conventional wisdom

• Most companies focus on matching and beating
  their rivals along the same dimensions.
• They think like their competition does.
  Competitive convergence. RED OCEAN strategy.
• Where is the element of surprise????? You need to
  create new spaces. BLUE OCEAN strategy.

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Prospect Theory
What drives behaviors are psychological reactions
to gains and losses .not objective gains or
losses
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Rules from Prospect Theory

• Individuals are sensitive to gains and
  lossesrelative to a reference point not
  absolute.
• Losses loom larger than gains.

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Endowment Effect

• People value items in their possession more than
  they value items not in their possession. Duh!
• Most innovations demand change. Giving up things
  we have and receiving things we dont have.
• Benefits being given up loom larger than benefits
  being received.

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Scenario 1

• Net benefits for both the incumbent and the
  innovation are the same.
• The innovation is far cheaper than the incumbent.
• What happens?

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Scenario 2

• The innovation offers all of the benefits of the
  innovation and much more (say, Google) with no
  additional costs.
• What happens?

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Scenario 3

• Simultaneous consideration of both gains and
  losses.
• Electric car
• Online groceries
• More than the overweighting of losses, the nature
  of the innovation exacerbates the tradeoffs.
• Timing (immediate loss vs. delayed gratification)
• Certainty of the losses
• Ability to quantify losses

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Psychology of the Innovator The developers
curse!

• Who innovates? The believers. So the developers
  evaluations of the features may not match the
  mainstream consumers evaluations. Curse of
  knowledge.
• What is the status quo for the developer?
• V( New / Old) lt V (new) lt V (New / New)

Customer
Firm
Andy Grove of Intel says that an innovation has
to be 10 times better than the incumbent product.
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What should a firm do?

• Brace for the Long Haul.
• Develop a 10X advantage.
• Eliminate the old, if possible. Cannibalize
  yourself.