1. 1 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Key Question: Who is Adopting? Early Market Bowling Alley TornadoMain Street Total Assimilation The Chasm Techies I have to try it! Conservatives Is it a commodity yet? Skeptics Is there no way to avoid it? Visionaries We can drive huge competitive advantage Pragmatists Have my peers bought it? Pragmatists cast the deciding vote

2. 2 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Early Market Visionary LOB executives going ahead of the herd Driven by competitive advantage Will help pay for new paradigm Demand“whatever it takes” commitment Rely on their own judgment Deal-driven marketing prevails Breakthrough technology gets center stage Senior service partner leads behind the scenes Think whole project not product

3. 3 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Model Breaks Down at Key Transition Visionaries Adventurous Think big Go it alone Spend big Think pragmatists are pedestrian vs. Pragmatists Wait-and-see Play safe Stay with the herd Spend to budget Think visionaries are dangerous Pragmatists don’t trust Visionaries as references

4. 4 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Beware the Pragmatist in Drag! They read the books, attend the seminars/demos... They talk the talk: “we’re looking to gain strategic competitive advantage, blah, blah, blah…” They flirt with investing in the new technology But... They will always ask “So, who else is doing this?”... They have no bona-fide project in mind... They do pilots to avoid making a serious commitment. Failure to understand the difference wastes precious resources. Key goal: Attract them using different strategies. Failure to understand the difference wastes precious resources. Key goal: Attract them using different strategies.

5. 5 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Discovering the Chasm Visionaries don’t see enough of a head start Pragmatists don’t see others doing it Early Market Mainstream Market Chasm

6. 6 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Crossing the Chasm Problem Get the first pragmatists to move Solution Target a segment under stress Deliver the whole product Win 40% of the segment in 12-18 months

7. 7 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Identifying a Good Beachhead Accessible, Well-Funded Target Customer Compelling Reason to Buy Feasible Whole Product Known Partners & Allies Effective Whole Product Distribution Attractive Whole Product Pricing No Entrenched Competition Consistency with Current Positioning Good Follow-on Segment Potential = Critical Success Factors

8. 8 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Bowling Alley Pragmatist departmental managers adopting before the herd Fix a broken mission-critical business process Must have complete whole products Rely on customer references Niche marketing prevails Value-added reselling Healthy price margins Restricted competition Think whole product not product

9. 9 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Tornado Pragmatist infrastructure managers adopting with the herd Transition to the new infrastructure Must have standards Rely on market share Mass marketing prevails Streamlined one-size-fits-all whole product Low-touch, high-volume distribution Margin-based competitions Think standard product

10. 10 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Main Street Installed base customers driving the after- market Want better values, no disruption Two paths: commodity vs. differentiation Rely on trial Mass customization prevails Standard core for price-sensitive sales Customizable surface for differentiated offers High-touch, high-volume distribution direct to end users Think end-user experience not product

11. 11 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Dominant Themes along the Life Cycle Hot technology for a few visionaries. Whole product solution for a specific target niche market. Standard product for every market. Price & availability for all markets, or productivity gains for various niches.

12. 12 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Critical Success Factors along the Life Cycle Technological brilliance, evangelical salesmanship, intense focus on individual customers, project management discipline, technology-centric messages Customer industry domain expertise, recruiting and management of solution partners, intense focus on targeted niche markets, customer-centric messages Aggressive distribution, streamlined, easy-to-replicate solution templates, intense focus on competition, branding and competitive messages Imaginative marketing programs, rigorous cost reduction, focus on installed base of end users, customer-centric messages, imagery

13. 13 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Three Market Growth Models Mass market growth: Provide standard offerings to grow installed base as fast as possible…Expand into new channels and geographies The Tornado Niche penetration: Dominate first niche… then go after adjacent niches The Bowling Alley Niche expansion: Grow profitable revenue from installed base through 1-to-1 marketing and mass customization Main Street

14. 14 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Target Customer End Users Departmental Manager Lead End Users Economic Buyers LOB Executive Financial Executive Technical Buyers IT Director Technology Evaluator Early Market Bowling Alley Main Street Tornado

15. 15 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Compelling Reasons to Buy Go ahead of the herd for competitive advantage. Go ahead of the herd to fix a broken business process. Go with the herd to get on the new infrastructure. Go after the herd to get better values.

16. 16 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Basis for Positioning Strength Thought leader in a new category “Owns” one or more market niches Continually makes great new offers Desired target positions for each life-cycle stage. Has market share in a hypergrowth market

17. 17 Chasm Group LLC, Copyright 2001 Updated 09/06/01 Marcom Programs along the Life Cycle Techies emphasize PR for techies... technology white papers technology articles Product reviews & awards panels at tech conferences Show techies that the technology is hot and can work! Visionaries emphasize PR for visionary customers white papers on paradigm shift PR and articles on visionary projects seminars and workshops on “leading-edge” panels on gaining strategic competitive advantage PR in technology sections of WSJ, other bus.pubs editor/analyst education Pragmatists emphasize PR for target customers on whole product focus all marcom on target customer business-problem focused PR/ads in target customer’s favorite journals workshops on how problem solved detailed customer success stories reference sites direct (e)mail: newsletters customer advisory council Pragmatists emphasize product/brand PR/advertising global advertising customer success stories customer co- op marcom broad PR coverage emphasize results major tradeshows Conservatives emphasize brand/institution al advertising emphasize add- on products, services, support communicate financing options, other “delighters” direct(e)mail to installed base target new niches constantly repeat mini- chasm process for each niche, build awareness Skeptics emphasize co.’s financial perf.; price/availabilit y create compelling event to transition customer to new product Early MarketBowling AlleyTornadoMain StreetTotal Assim.