Diffusion of Innovation

1
Diffusion of Innovation
2.5
13.5
34
34
16
Innova- tors
Late Majority
Early Adopters
Early Majority
Laggards
Source Rogers Shoemaker,Communication of
Innovations
2
Product Life Cycle Diffusion of Innovations
20
Source Rogers Shoemaker,Communication of
Innovations
3
Early Adopters/Opinion Leaders

• More innovative ( talk about it more)
• More alike than unlike their followers
• Demographically similar
• More technically competent
• More socially accessible, gregarious
• More cosmopolitan
• Higher media exposure
• Normally OL's for several related product classes
  (46 of OL's in 2 product classes, 28 in 3)

Source Rogers Shoemaker,Communication of
Innovations
4
Stages in the Adoption Process
1. Awareness First learns of new product,but
unaware of benefits
Six Steps in the Consumer Adoption Process
6. ConfirmationContinues to seek
confirmationof adoption decision
Source Rogers Shoemaker,Communication of
Innovations
Source Everett Rodgers, Diffusion of Innovations
5
Factors Affecting Speed of Adoption

• Time
• Delivered value (relative advantage)
• financial
• time
• satisfaction
• entertainment, etc.
• Compatibility with existing values
• Complexity
• Trialability
• Communicability

Best new product?
Whats the relationship between value and
price?
6
Customer Value
Value Benefits - Price

• Benefits the sources of satisfaction provided
  by a product
• Price both financial and non-financial costs
• Sources of Benefits Product, Price, Promotion,
  Distribution at a level sustainably superior to
  competition

• Benefits the sources of satisfaction provided
  by a product
• Price both financial and non-financial costs
  (cost of using)
• Sources of Benefits Product, Price, Promotion,
  Distribution at a level sustainably superior to
  competition

7
Technologys Innovators

• Technology is a central interest in their lives,
  regardless of its function
• Are less interested in the application than the
  technology itself
• Pursue new technologies aggressively
• Sometimes buy even before formal marketing has
  been launched
• Intrigued by any fundamental technological
  advance
• Often buy just for the pleasure of exploring a
  new devices properties

Source Geoffrey Moore,Crossing the Chasm
8
So Why Have TheseInnovations Not Yet
Succeeded?Or taken so long to succeed?

• High definition TV
• RCAs video laser disk (LD)
• VCD , DVD
• LS120 floppy disks
• Unix, Linux, Geoworks, OS/2
• Electronic, on-line, banking
• Artificial Intelligence (now called expert
  systems and object-oriented programming)

9
The Adoption Chasm
13.5 Early Adopters
2.5Innova- tors
The Diffusion of Innovation cycle is not
continuous it is discontin-uous since the
different segments buy for different reasons
Source Geoffrey Moore,Crossing the Chasm
10
Technology's Early Adopters

• Are more interested in applications than
  technologies per se
• Are people who easily appreciate the benefits of
  new technology
• Are ready to buy whenever they find a strong
  match between application needs a technological
  solution
• Do not rely on well-established references in
  making buying decisions
• Are the key to opening up any high-tech market
  segment

Source Geoffrey Moore,Crossing the Chasm
11
Visionaries vs Pragmatists
Visionaries
Pragmatists
Intuitive Support revolution Contrarian Break
away from the pack Follow their own dictates Take
risks Motivated by future opportunities See what
is possible
Analytic Support evolution Conformist Stay with
the herd Consult with colleagues Manage
risks Motivated by present problems Pursue what
is probable
Visionaries See with their eyes closed
Pragmatists See with their eyes open
Source Geoffrey Moore,Inside the Tornado
12
Visionaries vs Pragmatists
When you have 80 of the solution to their problem
Pragmatists
Visionaries
Wait a minute-- arent you supposed to be
improving my productivity?
Great, lets get together build the other 20
together.
13
Technologys Early Majority

• Also somewhat interested in technology, but
• Driven by a strong sense of practicality
• Know that many new inventions end up as passing
  fads
• Take a wait see attitude toward buying
• Want to see well-established references before
  buying
• A large segment, so winning their business is the
  key to success

Source Geoffrey Moore,Crossing the Chasm
14
Technologys Late Majority

• Share all the concerns of the early majority
• But 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 buying
• They want to see lots of support before they buy
  and tend to buy from well-established companies

Source Geoffrey Moore,Crossing the Chasm
15
Technologys Laggards

• Dont want anything to do with new technology
• They will buy a technological product only when
  in is buried inside another product (e.g.,
  microprocessors in cars)
• They are generally not considered worth pursuing
  by technology firms

Source Geoffrey Moore,Crossing the Chasm
16
Technologys Adoption Cycle
Dont want anything to do with new
technology Will buy a technological product only
when buried inside another product They are
generally not considered worth pursuing by
technology firms
Share all the concerns of the early majority Not
comfortable with technology They buy when the
technology an established standard They want lots
of support buy from well-established companies
Interested in technology but... Strong sense of
practicality Fearful of tech-nology fads Wait
see attitude Want well-established references
before buying They are the key to success
Interested in applica-tions Appreciate benefits
of technology Buy when they find a strong
match Dont rely on established references Are a
key to penetration
Technology a central interest Uninterested in
appn Pursue new techs aggressively Buy
early Intrigued by any basic advance Buy to
explore a devices properties
Source Geoffrey Moore,Crossing the Chasm
17
The Competitive-positioning Compass
Supporters Low interest in technology
Visionaries
Conservatives
Generalists Low under- standing of technology
Specialists High under- standing of technology
Technology Enthusiasts
Pragmatists
Skeptics High interest in technology
Source Geoffrey Moore,Crossing the Chasm
18
The Competitive-Positioning Compass
Supporters Low interest in technology
Product-directed
Company-directed
Visionaries
Conservatives
Crossing theChasm
Developing the early market
Generalists Low under- standing of technology
Specialists High under- standing of technology
Developing the mainstream market
Technology Enthusiasts
Pragmatists
Market-directed
Technology-directed
Skeptics High interest in technology
Source Geoffrey Moore,Crossing the Chasm
Source Geoffrey Moore,Crossing the Chasm
19
The Competitive-Positioning Compass
Supporters Low interest in technology
Visionaries
Conservatives
Company-directed
Product-directed

• Revenue profits
• Strategic partners
• Top tier customers
• Full product line
• Business press coverage
• Financial analyst endorsements

• Benchmarks
• Product reviews
• Design wins
• Initial sales volumes
• Trade press coverage
• Visionary endorsements

The Chasm
Specialists High under- standing of technology
Generalists Low under- standing of technology

• Architecture
• Schematics
• Trial
• Technology press coverage
• Guru endorsements

• Market share
• 3rd part support
• Standards certifn
• Appns proliferation
• Vertical press covge
• Industry analyst endorsements

Market-directed
Technology-directed
Technology Enthusiasts
Pragmatists
Skeptics High interest in technology
Source Geoffrey Moore,Crossing the Chasm
20
Crossing the Chasm Requiresa Shift in Delivered
Values

• To Market-Centric Values
• Largest installed base
• Most 3rd party supporters
• De facto standard
• Cost of ownership
• Quality of support
• Meeting these values is essential to cross the
  chasm

• From Product-Centric Values
• Fastest/smallest/ lightest etc product
• Most elegant architecture
• Product price
• Unique product functionality
• Meeting these values is essential to obtain
  initial market penetration

21
Crossing the Chasm Requires a Shift fromthe Core
Product to the Augmented Product
Benefits Offered
Benefits Offered
Vision ofProductBenefits
Crossing the Chasm
Tangible Product Features
Brand 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.
22
The Technology Adoption Landscape
Chasm
Early Market
The Bowling Alley
Source Geoffrey Moore,Inside the Tornado
23
Bowling Alley Market Development
Why not justleap into thetornado?
Examples?

• For many main-stream customers, there is no
  reason tomove to your product.
• Though you have crossedprovided a whole
  productfor one niche, you have yet to prove that
  your product is generalizable

Seg 3App 1
Seg 2App 2
Seg 1App 3

• Bubble memory--now in compact flash cards
• Identronix modules
• Electronic shelf tags
• Pagers--doctors, on-call speople
• Cellular modems

Seg 1App 2
Seg 2App 1
Seg 1App 1
Product
Source Geoffrey Moore,Inside the Tornado
24
Key Bowling Alley Target Criteria

• Never attack a segment whose current expenditures
  on your product category is larger than your
  annual volume
• You want 40 of the segments purchases in the
  first year
• Choose a segment that
• has a compelling reason to buy
• is not currently well served by any competitor
• Focus your market development on the end-users,
  not on the IT department
• You want to capture the economic buyer
• The IT dept will resist your product it is a new
  paradigm means extra work for them

Source Geoffrey Moore,Inside the Tornado
25
Rewards from a Bowling Alley Strategy

• You can make money now
• Your priorities are to grow your business,
  increase profits, further develop your whole
  product
• You can accumulate credits toward being declared
  a market leader in a future tornado
• Your name will have become increasingly familiar,
  building equity in your product category

26
The Case Against a Bowling Alley Strategy

• People are in too much of a hurry to execute a
  bowling alley strategy
• Companies fall in love with their first niches
  forget all about the tornado
• E.g., pen-based computing, GIS
• Companies love the service revenues (like
  training classes) of their current niches
• Over time, these need to be designed into the
  product to reduce overall product cost
• Bowling alley strategies dont work with consumer
  markets
• Consumers like low-cost, commodity-oriented
  channels, not VARs

27
The Technology Adoption Landscape
TheTornado
Chasm
Early Market
The Bowling Alley
Source Geoffrey Moore,Inside the Tornado
28
The Bowling Alley vs The Tornado
Bowling Alley
Tornado
Focus on the economic buyer the end user
Ignore economic buyer user focus on
infrastructure buyer
29
Principles of Tornado Marketing

• Attack the competition
• Lose a customer you lose it for life
• Expand your distribution channels as fast as
  possible
• If you cant take the order someone else will
• Ignore the customer
• Dont customize ship your product as a
  commodity
• Focus shipping your product as quickly cheaply
  as possible

30
The Technology Adoption Landscape
Main Street
TheTornado
Chasm
Early Market
The Bowling Alley
Source Geoffrey Moore,Inside the Tornado
31
The Tornado vs Main Street
Tornado
Main Street
Sell to the infrastructure buyer focus on
infrastructure
Sell to the end user gratify their individual
needs
32
The Technology Adoption Landscape
Main Street
TheTornado
Chasm
Early Market
End of Life
The Bowling Alley
Source Geoffrey Moore,Inside the Tornado