Sunday, September 09, 2007

Book review: Crossing the Chasm

I wish I had read Crossing the Chasm (Geoffrey Moore, 1999) sooner. Not only does it give some good advice to technology (specifically software) companies but it also explains a lot about the technology and software market place. I guess I’ve known the basic argument Crossing the Chasm makes so I’ve never felt compelled to read it until recently. However I’ve missing out on so much more.

The basic premise is that for any technology product the buyers can be divided into five types. Initially the product sells to Innovators, then Early Adopters. While these groups will buy the product early they are quite small. Many companies sell to these segments and it looks like success but they are only addressing a fraction of the potential market.

The challenge facing a technology company is to break out of these two groups and sell to the much bigger Early Majority and then the Late Majority. These groups are so much bigger they represent the big money. (There is also a small Laggard group bringing up the rear but this is another small market so its not worth bothering with.)

The problem facing companies is that selling to the Early Majority segment requires a different approach and different strategy to selling to the Innovators and Early Adopters. In fact, while selling to these two groups can be profitable continued success here can harm your attempt to break into the Early Majority. This is where the Chasm comes from. Moore says that the difference between the first two and the third group is a Chasm, it is absolutely massive.

What Moore does is explain this problem and sets out a solution to overcoming it. The solution will be familiar to anyone who has followed my arguments on product management. The argument is also familiar from a bunch of other books too. The familiarity of this argument can probably be traced back to Moore anyhow. And the solution is...

To decide who you want to be your customers. To understand their problems. To craft a product that directly addresses your customer problems. To designate yourself the market leader in the field and make you solution utterly compelling.

It might seem an odd idea to declare yourself the market leader but what Moore says is: find a niche with your customers, define the niche so that you are the only people in it, then the niche is yours. It doesn’t matter if the niche is small to start off with - in many ways the smaller the better. The trick is to win one niche, one vertical market, then move onto the next. Over time you roll up the markets one by one.

I’ve worked with many software technology companies and I’ve seen many of them try to do this. Some successfully, most less so. Some of them knew they were following Moore's advice but I think most of them were following it by default; i.e. they find their product fills a niche but don’t set out to do that. In these cases the companies have trouble moving from one niche to the next.

The main problem I see with companies following Moore’s advice is the need to say No. To select and dominate a niche companies need to focus on this niche. Most companies find it impossible to say no to a potential sale. The company’s software can be used for many things, the idea of turning a potential sale down is just not possible. Consequently they end up being all things to all men. Sure they take the sale for good reason - its money - but the short term fix damages the long term strategy.

And there you go. There is the link. You need a strategy. You need your sales-force and your development efforts to follow the strategy. Not to sell outside the niche and to develop products with features which directly assess the niche. Once again this is the role of product management. You need someone to do this.

So, if you are in the tech business, and especially if you are trying to create a successful technology company read this book. It is well written and easy to read. It might not be the strategy you follow but you should at least understand it. If you don’t follow Moore’s strategy you should know why you are not and why your strategy is right for your company in your market.