The Use of Geoffrey Moore’s ‘Crossing the Chasm’ for High-Tech B2B-innovations in 2008

The Use of Geoffrey Moore’s

2

The Use of Geoffrey Moore’s ‘Crossing

the Chasm’ for High-Tech

B2B-innovations in 2008

By Stephan van Ee

August 2008

Stephan van Ee

Faculty of Economics and Business, University of Groningen Master Thesis August 2008 1e Pijnackerstraat 99A 3035 GP Rotterdam 06-14991469 stephanvanee@hotmail.com Student number: s1271385 Supervisors:

 R. Menko, MsC MBA (Erasmus University Rotterdam)  Dr. J.A. Voerman (University of Groningen)

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Management Summary

Geoffrey Moore’s book ‘Crossing the Chasm’ is a highly respected book about bringing high-tech disruptive innovations to a mainstream market. Two critiques however question whether Crossing the Chasm still deserves its leading status. The first critique is that it has been 17 years since the book was first published and does not address important developments in the market for high-tech innovations that occurred in the past 17 years. The second critique is that Crossing the Chasm does not pay attention to whether Crossing the Chasm can be used for B2B-products just as good as for B2C-products. Therefore, this report will answer the following research question:

‘Which strategies discussed in Crossing the Chasm can still be used in 2008 to bring high-tech B2B-innovations to the mainstream market?’

This question is answered by testing all strategies in Crossing the Chasm on their usefulness for bringing high-tech B2B-products to the mainstream market in theory (literature review) and practice (case study research). In the case study, Adjustables, a startup located in Rotterdam that is currently trying to bring innovative online in-video advertising software to the market, is used. Furthermore, in both analyses suggestions for improvement are identified for Crossing the Chasm and Adjustables.

A distinction is made between three ‘core principles’ and several ‘lower level strategies’ discussed in Crossing the Chasm. The conclusion of the research is that all lower level strategies in Crossing the Chasm can be perfectly used for bringing high-tech B2B-products to the market in 2008. The usefulness of the core principles is only confirmed in theory. Only the usefulness of one core principle is confirmed in practice because the other two core principles were not used as strategies by Adjustables.

The following recommendations for Crossing the Chasm are most noteworthy:

 ‘True’ technology enthusiasts do not exist for B2B-products. Therefore, the first group in the Technology Adoption Lifecycle to target with a B2B-product is the visionaries.

 Market segmentation must be based on data, instead of on informed intuition.

 A distinction between big companies and small/medium-sized companies must be addressed because they show big differences in their willingness and capability to innovate or adopt innovations.

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Preface

This report is the result of approximately six months of seeing, learning and experiencing the dynamic world of online video advertising. A market of which I had no idea of its existence or the enormous possibilities it offers, but also a market that is highly competitive and often restrained when it comes to adopting new technologies.

After the first month, I finally thought I had taken the right approach in my research, only to find out 1.5 months later that the focus was too detailed and therefore could never meet the criterion that results of the thesis have to be generalizable. Although large parts of the research could be used in ‘Approach 2’ a lot of work appeared to be useless. A period of very hard working followed with working during offices hours, but also in the evening and sometimes even at night. Therefore, I am more than pleased to finally present the final version of my report. After six months of working, I can finally say thanks to everybody who has supported and pay special attention to several people.

First of all, I want to thank Mr. Menko for his support during the writing of my thesis. I admire him for his really entertaining skeptical look with regards to Adjustables’ product. Although I believe he is still not convinced about the usefulness of the product, he turned me in the right direction when I lost sight of what I was doing. It is interesting to realize that his sometimes somewhat vague and abstract advices kept me on track of what I was doing, and still made me find out everything myself. In this light I also want to thank Liane Voerman for her insightful comments on the final draft version.

Furthermore, I would like to thank Menno Biesiot for making my internship possible and supporting me throughout writing the thesis. His open attitude towards me with regard to almost everything that was going on at Adjustables, really simplified writing performing this research. It was really inspiring to get a sense of the enthusiasm young entrepreneurs with a great idea have. Therefore, it would be unfair not also to thank my other colleagues at Adjustables for their support and the great and inspiring time I had with them.

Let the next page inform you about different topics that crossed my mind the past six months and let it be a teaser to start reading my thesis immediately.

Stephan van Ee

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6

Table of Contents

Management Summary ...3

Preface ...4

Tagcloud ...5

Table of Contents ...6

Introduction ...10

0.1.2 Bringing high-tech product to the market... 10

0.2 Research Proposal ... 11

0.2.1 Problem definition ... 11

0.2.2 Structure of the report ... 12

0.2.3 Research constraints ... 12

0.3 Scientific and Social Relevance ... 13

Chapter 1

Summary ‘Crossing the Chasm’ ...14

1.1 Introduction ... 14

1.2 Rogers’ Diffusion of Innovation ... 14

1.3 Moore’s Crossing the Chasm ... 16

1.3.1 Introduction ... 16

1.3.2 Reaching and capturing the technology enthusiasts & visionaries ... 17

1.3.3 Reaching and capturing the pragmatists (crossing the chasm) ... 17

1.3.4 Conclusion ... 20

Chapter 2

Review ‘Crossing the Chasm’ ...21

2.1 Introduction ... 21

2.2 The Usefulness of Strategies in Crossing the Chasm in 2008 ... 21

2.3 The Applicability of Crossing the Chasm to B2B-products ... 23

2.3.1 Introduction ... 23

2.3.2 Differences between B2C and B2B-products ... 23

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2.3.4 Visionaries ... 25

2.3.5 Pragmatists ... 25

2.4 Conclusion ... 29

Chapter 3

Review Marketing Strategies for High-tech Innovations ...30

3.1 Introduction ... 30

3.2 Market Orientation ... 30

3.2.1 Introduction ... 30

3.2.2 Big, established companies ... 32

3.2.3 Small companies/startups ... 32

3.2.4 Conclusion ... 33

3.3 Operationalizing a Market Orientation: Marketing Strategies and Tactics ... 33

3.3.1 Introduction ... 33

3.3.2 Marketing Strategies ... 34

3.3.3 Conclusion ... 36

3.3.4 Wrap-up ... 36

3.4 Customer Relationship Management ... 37

3.4.1 Introduction ... 37

3.4.2 Need for CRM and use of CRM ... 37

3.4.3 Use of CRM in Crossing the Chasm ... 38

3.4.4 Conclusion ... 38

Chapter 4

Conclusion of the Literature Review ...39

Chapter 5

Research Design Empirical Research ...40

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Chapter 6

Results of the Case Study ...44

6.1 Introduction ... 44

6.2 Quality of the Research Measures ... 44

6.2.1 Validity ... 44

6.2.2 Reliability ... 44

6.3 Results of the Interviews... 44

6.3.1 Introduction ... 44

6.3.2 Technology enthusiasts ... 45

6.3.2 Visionaries ... 45

6.3.3 Pragmatists ... 48

6.3.4 Conservatives and Skeptics ... 50

6.4 Conclusion of the Results of the Empirical Research ... 51

Chapter 7

Conclusions and Recommendations ...52

7.1 Introduction ... 52

7.2 Conclusion of the Research Question ... 52

7.3 Recommendations for Crossing the Chasm ... 53

7.3.1 Recommendations only resulting from the literature review ... 54

7.3.2 Recommendation only resulting from the empirical research... 56

7.3.3 Recommendations resulting from the literature review and resulting from the empirical research ... 57

7.4 Recommendations for Adjustables ... 58

7.5 Reflection ... 59

7.5.1 Generalizability ... 59

7.5.2 Recommendations for further research ... 59

References ...60

Appendices ...64

Appendix 1: About Adjustables ...64

Appendix 2: Results Factor-analysis Easingwood et al. (2006) ...66

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Introduction

0.1

Background

0.1.1 Adjustables

This report was written during an internship at Adjustables. Adjustables is a software company founded in 2006 and headquartered in Rotterdam, the Netherlands. The company also has a small office in Sunnyvale, California (Silicon Valley) and a team of engineers and programmers in Kiev. Adjustables is funded by venture capitalists (Prime Technology Ventures). Two seasoned Internet and broadcasting professionals, Jan van Ottele and Menno Biesiot founded Adjustables. Van Ottele was also founder of Yarosa, a company that provides television stations with SMS-formats. Biesiot worked at Yarosa before Van Ottele and he founded Adjustables. Adjustables’ core business is providing publishers of online video (which are video sites such as YouTube.com and Uitzendinggemist.nl) with software that allows them to display advertisements inside online videos. In Appendix 1 a graphical explanation of this technology and several showcases about Adjustables can be found. Adjustables’ software is ready and was first sold mid 2007, but big success is yet to come. R&D costs have taken a considerable amount of the initial funding, which leaves a limited budget for marketing activities. Adjustables is struggling to find the most effective and efficient way to design and execute its marketing strategy. Therefore, the goal of this research with regard to Adjustables is to provide Adjustables with a suitable marketing strategy to bring their high-tech innovation successfully to the market. The next section will elaborate on this topic.

0.1.2 Bringing high-tech product to the market

The dream of many entrepreneurs is to get rich with a really innovative high-tech product. For example, Microsoft launched ‘Windows’ and became one of the biggest companies in the world. Apple launched the iMac, iPod and the iPhone, which all became big hypes. Although often innovative Consumer (B2C) innovations draw most attention, also several Business-to-Business (B2B) innovations have gained enormous successes. High-tech innovations are launched almost on a daily basis, but few make it to the ‘mainstream’ market’, when an innovation is adopted by the majority of the market.

11 Program, said Crossing the Chasm is ‘still the bible for entrepreneurial marketing 15 years later’ (Byers 2006). Crossing the Chasm could form the perfect basis for Adjustables’ marketing strategy.

However, the first version of Crossing the Chasm was published in 1991. Although the book has been revised a few times since 1991 (in 1999 and 2002), there are some reasons to doubt the applicability of Crossing the Chasm 17 years later. For example, the most important development in the market for high-tech products in the past 17 years has been the internet, which is not thoroughly discussed in Crossing the Chasm. Furthermore, the complexity and diversity of high-tech products has increased enormously since 1991. Another point of critique about the applicability of Crossing the Chasm is that the author does not make an explicit distinction between applying his strategies to B2C or B2B-products. The differences between B2B and B2C-products can have great implications for marketing strategies for each type of product.

These two critiques are critical to determine to what degree Crossing the Chasm can be used by a company that wants to bring a high-tech B2B-innovation to a mainstream market in 2008.

0.2

Research Proposal

0.2.1 Problem definition

Resulting from the discussion in paragraph 0.1, the objective of the research in this report is:

‘‘To determine which strategies discussed in Crossing the Chasm can be used for bringing high-tech B2B-innovations to the mainstream market in 2008, in order to create clarity on whether or not Adjustables can use Crossing the Chasm as a basis for its marketing strategy to bring their high-tech B2B-innovation to the mainstream market.’

This research-objective leads to the next research question:

‘Which strategies discussed in Crossing the Chasm can still be used in 2008 to bring high-tech B2B-innovations to the mainstream market?’

This research question is divided into the following sub-questions:

1) What are the key elements and insights in Crossing the Chasm?

2) What are the key critiques about Crossing the Chasm, with regard to its usefulness in 2008 and usefulness for B2B-products?

12 4) What are the key insights from applying the strategies discussed in Crossing the Chasm to a

company that is currently bringing a high-tech B2B-product to the market?

The primary objective of the research described in this report is to test the usefulness of an existing theory. To give a good impression, the usefulness of Crossing the Chasm for bringing high-tech B2B-products to the mainstream market will be independently discussed in theory (sub-questions 2 and 3) and in practice (sub-question 4). This means that the outcomes of the literature review are not relevant as input for the empirical research and vice versa. In the conclusion of this report, the results of both analyses (the literature review and empirical research) will be compared and will ultimately lead to a final conclusion that will answer the main research question. When analyzing an academic book, it is also worthy to pay attention to possible suggestions for improvement to this book. Therefore, in the conclusion also possible recommendations, resulting from the suggestions for improvement for Crossing the Chasm from both analyses, will be provided.

Finally, sub-question 3 also addresses other literature about bringing high-tech products to the market. Strategies resulting from this literature which are not addressed in Crossing the Chasm, but are useful for bringing high-tech B2B-products to the market in 2008, give clear indications about the current usefulness of Crossing the Chasm for bringing high-tech B2B-products to the market. Furthermore, this literature can lead to suggestions for improvement for Crossing the Chasm.

0.2.2 Structure of the report

First, a literature review will take place. This literature review will consist of a summary and review of Crossing the Chasm and a review of other literature about marketing strategies for high-tech products. Second, empirical research will be designed and performed. Third, the data that were collected in the empirical research will be evaluated and analyzed. Finally, based on the outcomes of the literature review and empirical research, conclusions and recommendations will be provided.

0.2.3 Research constraints

 The first edition of Crossing the Chasm was published in 1991 and it was revised in 1999 and 2002. The most important differences between the three versions, is that the last two versions use more up-to-date examples and very briefly discuss the internet. The book used in this research is a 2006 edition that has the same contents as the 2002-revised edition.

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0.3

Scientific and Social Relevance

Crossing the Chasm is a widely used and recommended book about marketing high-tech products. Crossing the Chasm served as the basis for Moore’s successful subsequent books; ‘Inside the Tornado’ (1995), ‘Living on the Fault Line’ (2000) and ‘Dealing with Darwin’ (2005). Crossing the Chasm was published in 1991. The problem is that Crossing the Chasm has not been substantially modified ever since. This means Crossing the Chasm does not address important developments in the past 17 years, for example the influence of the internet on the market for high-tech disruptive innovations. Moore (2006) mentioned a new version of Crossing the Chasm will be published within a few years (Iskold 2007). Moore writes that he also acknowledges the fact that Crossing the Chasm needs to be updated, with a special focus on the internet. Until Moore presents this revised edition of Crossing the Chasm, this research can give a valuable contribution to the applicability of the Crossing the Chasm in 2008.

Furthermore, it is unclear whether Crossing the Chasm can be used for B2B and B2C-products in the same way because Moore (2006) did not address this distinction explicitly in his book. Therefore, this research can contribute to the question whether Crossing the Chasm can be used for B2B-products.

Finally, the research is highly relevant for Adjustables. The market for ‘digital media’ is highly innovative and under financial pressures. The competition among ‘high-tech’ startups is intense and R&D costs are high because these startups need to sell really unique software to distinguish them from the competition. The economic recession in the United States and the burst of the internet bubble caused venture capitalist to be weary to fund new initiatives (Richtel and Stone 2008). Woning and Arts (2008), identified four problems startups experience in using the right marketing strategy in their article about the need of good marketing strategies for ‘technostarters’:

 Startups have limited resources.

 Startups often lack good marketing strategies because of their technical orientation.

 There is a ‘chasm’ between the early adopters and the early majority of an innovation due to big differences between both groups, which is a major topic in this research.

 Potential customers experience the FUD-factor; they experience a relative big amount of Fear, Uncertainty and Doubt when buying an innovation.

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Chapter 1 Summary ‘Crossing the Chasm’

1.1

Introduction

This paragraph will provide an overview of the most important strategies discussed in Crossing the Chasm. This chapter provides the basic knowledge about Crossing the Chasm necessary for a good comprehension of the topics that will be discussed later in the report. First, the history and contents of the underlying model (the Technology Adoption Lifecycle) used in Crossing the Chasm will be discussed and second the different strategies discussed in Crossing the Chasm will be discussed.

1.2

Rogers’ Diffusion of Innovation

Joe M. Bohlen and George M. Beal (1955) introduced the famous Technology Adoption Lifecycle when looking at the influence psychological and demographical differences between individuals have on adopting new ideas. Bohlen and Beal (1955) identified five different groups based on psychological and demographical characteristics of individuals related to their attitude towards taking risk associated with adopting new ideas. These groups are the innovators, early adopters, early

majority, late majority and laggards.

Everett Rogers (1962) used the Technology Adoption Lifecycle for marketing and selling innovations. According to Rogers (1962), innovations spread through society in an S-curve. When cumulative sales are used, the S-curve becomes a Bell-curve, representing the sales per time period (see Figure 1).

In this curve, the horizontal ‘axe’ represents time and displays the different groups that adopt an innovation throughout time. The heights of the colored spaces in Figure 1 represent the height of sales each group generates throughout time. For example, the early and late majority generate the highest amount of sales halfway the Technology Adoption Lifecycle. The innovators account for 2.5%

In n o va to rs Ea rly A d o p te rs Ea rly M ajo rit y La te M ajo rit y La gg ar d s

15 of the total market, the early adopters for 13.5%, the early and late majority both for 34% and finally the laggards account for 16% of the total market.

As discussed above, Bohlen and Beal (1955) and Rogers (1962) used the Technology Adoption Lifecycle for different purposes. The characteristics of the customers in each group of the Technology Adoption Lifecycle discussed by Bohlen and Beal are ‘sociological’ characteristics. Rogers (1962) related the characteristics of these different customers to marketing and selling innovations. Roger’s (1962) approach is more relevant for this report and therefore his typology of the different groups in the Technology Adoption Lifecycle will be discussed here. Below the most important characteristics of the groups are summarized (Slater and Mohr 2006:29):

 Innovators. Innovators appreciate innovations for their own sake. They are motivated by the

idea of being a change agent in their reference groups. They are willing to tolerate initial glitches and problems that may accompany an innovation that is just coming to the market and they are willing to help finding solutions for these problems.

 Early adopters. Early adopters look to adopt and use innovations to achieve a revolutionary

improvement. They are attracted by high risk-high reward projects. Because early adopters envision great gains from adopting innovations, they are not price sensitive. Early adopters may demand personalized solutions, a quick-response and highly qualified sales and support.

 Early majority. Rather than looking for revolutionary changes, early adopters are motivated

by evolutionary changes, which are changes to enhance their productivity. They are averse to disruptive change and want proven applications, reliable service and results. The early majority wants to reduce the risk of adoption the innovation.

 Late majority. The late majority is risk averse and technology shy which makes them price

sensitive. The need completely assembled, bulletproof solutions. They adopt innovation just to ‘stay even’ and often rely on a single trusted advisor to help to make sense of the technology.

 Laggards. Laggards only want to maintain the status quo. They tend to believe that

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1.3

Moore’s Crossing the Chasm

1.3.1 Introduction

Geoffrey Moore (2006) elaborates on Roger’s (1962) theory in his book ‘Crossing the Chasm’ by focusing on high-tech disruptive innovations. Because of the high-tech focus in Crossing the Chasm, Moore (2006) names the different groups in the Technology Adoption Lifecycle differently. The characteristics of Moore’s (2006) groups are the same as the characteristics of Rogers’ (1962) groups and are used in this report. These groups are technology enthusiasts (Roger’s innovators), visionaries (Roger’s early adopters), pragmatists (Roger’s early majority), conservatives (Roger’s late majority) and skeptics (Roger’s laggards). Moore (2006) summarizes the technology enthusiasts and visionaries as the ‘early market’ and pragmatists and conservatives as the ‘mainstream market’.

The ultimate goal of each company when launching an innovation is to reach the mainstream market. This is financially the most interesting group. An innovation has to be adopted by a group before it can proceed to the next group because each group needs references about the innovation from the previous group. An innovation does not smoothly flow from one group to the other, but ‘gaps’ exist because of differences between the groups. ‘Each gap represents the opportunity for marketing to lose momentum, to miss the transition to the next segment” (Moore 2006:16). The differences can be so big, that serious problems can occur if a company does not follow the right strategy. The biggest challenge is to get from the visionaries to the pragmatists, in order to reach the mainstream market. Moore identifies this gap as ‘the Chasm’ (see Figure 2).

The chasm exists because there are big differences between the visionaries and the pragmatists. The most important difference is that ‘early adopters expect a radical discontinuity between the old ways and the new ways (...).The early majority wants to buy a productivity improvement for existing operations (...).Because of these incompatibilities, early adopters do not make good references for

In n o va to rs / Te ch n o lo gy E n th u sia st s Ea rly A d o p te rs / V is io n ar ie s Ea rly M ajo rit y/ P ra gm at is ts La te M ajo rit y/ C o n se rv at iv es La gg ar d s/ Ske p tic s Chasm

17 the early majority’ (Moore 2006:20). Solid references are critical for the pragmatists. ‘The only suitable reference for an early majority (...) is another member of the early majority, but no upstanding member of the early majority will buy without first having consulted with several suitable references’ (Moore 2006:20). In other words, cross-market communication is extremely difficult between the visionaries and pragmatist. Moore’s (2006) quotes used in this section still refer to the ‘early adopters’ and ‘early majority’ because Moore (2006) turns to his typology of the groups in the Technology Adoption Lifecycle after he discusses the existence of the Chasm.

The next section discusses the several strategies that are proposed in Crossing the Chasm to reach and capture each group in the Technology Adoption Lifecycle.

1.3.2 Reaching and capturing the technology enthusiasts & visionaries

The technology enthusiasts are reached by placing the product in their various networks, for example via the internet. Technology enthusiasts do not want to spend money on the innovation, but want to ‘check out’ the new technology, which should be made as easy as possible. They give a valuable contribution to improving the innovation’s technology and can form the basis for word-of-mouth, an important marketing strategy in Crossing the Chasm. The big difference between technology enthusiasts and visionaries is that the latter are interested in the technology, but also see the

strategic opportunity the innovation offers. Therefore, visionaries are willing to invest in the

innovation and want to work on a ‘pilot’ basis, meaning the product is tailored to their specific needs.

1.3.3 Reaching and capturing the pragmatists (crossing the chasm)

After capturing the early market, the chasm must be crossed by trying to reach and capture the pragmatists. Pragmatists have completely different characteristics than visionaries (which were also discussed in paragraph 1.3.1), which makes it extra difficult to reach them:

 They are not interested in technology, but in pragmatic solutions;  They only want to buy from the market leader;

 Their primary buying information are good references which means they are heavily relying on word-of-mouth;

 They can only be satisfied with a ‘whole product’, which is the complete set of products and services needed to reach the desired result (Levitt 1982).

18 Word-of-mouth communication is more effective in a niche because the message spreads faster through a smaller number of potential customers. Finally, the smaller the market is, the easier it is to become a market leader.

A company must dedicate all its resources to capture a niche. An often-made mistake when launching an innovation is to focus all company efforts solely on generating as much sales as possible. This is fatal because a company needs the resources devoted to this sales driven strategy to capture the niche. Once captured, the niche will serve as a ‘beachhead’ from which the company can expand further. The niche gives the company the references from satisfied customers needed to be adopted by the rest of the pragmatists. Moore (2006) compares this to the invasion of Normandy in 1944. The allied forces first needed to secure the Normandy beachhead. From Normandy they could slowly expand to other regions and finally defeat the Nazi-regime. Moore (2006) proposes the following steps to reach the pragmatists:

Step 1: Segmenting the pragmatists’ market and choosing a niche. Due to the newness of the

market there is little to no data about the market available. Segmentation can therefore not be based on data and ‘informed intuition’, or, ‘Target-Customer Characterization’ should be used instead. In other words, in Crossing the Chasm a market is segmented based on clear characterizations of potential customers (or: ‘Images’). The goal is to identify as many characterizations as possible. Reducing all characterizations creates a prioritized list of desirable market segment opportunities.

The next step is to evaluate each segment to choose one segment as the most appropriate niche to focus on. First, all segments are rated against four ‘showstopper’ issues (Moore 2006:99);

1) Are the customers in the segments identifiable, reachable and willing to pay the price of the innovation?

2) Do they have a compelling reason to buy the innovation?

3) Can the company offer a whole product to this segment to satisfy their needs?

4) Are competitors already serving this segment?

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Step 2: Determine the configuration of the product. Pragmatists adopt an innovation because it

offers them a pragmatic solution, not because it has innovative technology. To create maximum satisfaction for the customers in the niche, a company must determine the exact product characteristics based on the customers’ wishes. Moore uses Levitt’s (1983) ‘Whole Product Model’ for this purpose, which identifies four types of products:

1) The Generic Product. The product shipped in the box and covered in the contract. This is the product sold to the early market.

2) The Expected Product. The product the consumer thought he or she was buying, the configuration of products and services necessary to have any chance on satisfaction.

3) The Augmented Product. The product providing the maximum chance on satisfaction, because it contains a variety of products and services.

4) The Potential Product. The room to enhance the product with new developments.

It is at the augmented level the competition in a market generally takes place (Keller 2008), in which offering the best augmented product leads to market leadership.

Step 3: Identify the competition and determine the positioning. Pragmatists want a product that

has proved itself in the market and preferably is the market leader. Therefore, they want to see

competition. There may be no direct competition because of the newness of the product. The

competition must therefore be created by identifying two different types of competitors:

1) The market alternative. The company from which the target group has been buying for years. 2) The product alternative. A company that also has a disruptive innovation (possibly the same

as the company’s innovation) and is also positioning itself as a technology leader.

The positioning against this competition should consist of a thorough naming and framing (categorization) of the product, purpose and target group and a comparative context. The goal of this competition and positioning is to make it easier for customers to buy the product.

Step 4: Launch the whole product. The last step is to launch the whole product to the niche:

 Getting attention. The launch of the product to the pragmatists is not ‘new news’, because it

is in fact the generic product that was already launched to the technology enthusiasts, with added features and services. Therefore, the focus when launching the whole product should

not be on the product, but on the ‘hot new’ market in which it will be launched. The best way

20  Providing it through the right channels. The best channel to penetrate a niche is by using direct sales. This gives the company complete control over its own destiny. Once the

company is the leader in the niche, the most efficient channel must be determined and used.

 Selling it for the right price. The pricing of the product should always be customer-oriented

(not vendor-oriented) because the focus should be external, customer-oriented. For the pragmatists the best pricing model is competition based. The pragmatists expect to pay a premium price. The company’s product has proved itself to be the best offering which keeps whole products costs for customers relatively low.

1.3.4 Conclusion

These are the four most important ‘core principles’ in Crossing the Chasm:

 five different groups can be distinguished in a product’s lifecycle and each group has to be captured before focusing on the next group.

 The most difficult group to reach is the pragmatists, which is caused by the ‘Chasm’. These are the two most important strategies to cross this chasm:

o Focus on a niche inside the pragmatists that will serve as a solid base for capturing the rest of the pragmatists.

o Do not become sales driven when crossing the chasm because all the company’s efforts are needed to satisfy the chosen niche.

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Chapter 2 Review ‘Crossing the Chasm’

2.1

Introduction

In this chapter, the question which strategies in Crossing the Chasm can be used to bring high-tech B2B-products to the market in 2008 will be answered by reviewing Crossing the Chasm.

2.2

The Usefulness of Strategies in Crossing the Chasm in 2008

Several developments in the past decade in the market for high-tech products can be identified:

 Increased amount of innovations/competition. An early market needs to devote time and

attention to each innovation before adopting it, but is overwhelmed with new high-tech innovations (Iskold 2007). This narrows the ‘window of opportunity’; while a high-tech innovation gets its one chance to established itself, new high-tech innovations are waiting in the wings (Mohr 2000). This results in a high risk of technology enthusiasts and visionaries switching to a more interesting high-tech innovation before adopting the innovation. This means important competition takes place when capturing the early market. It is important to draw the early market’s attention, but also to hold this attention to the company’s product and transform the attention into adoption.

 Increased speed of adoption. The speed of adoption of high-tech innovations has increased in

the past decade because innovations are available more easily (due to, for example, the rise of the internet as a distribution channel) and innovations have become less expensive. However, the chance on adoption has decreased due to more competition as discussed above. This means, an innovation has ‘less time to scream louder’.

 Increased speed of diffusion of messages. The increased interconnectivity between people

has strengthened viral marketing effects. Messages spread faster and easier through social networks. This moderates the effects of the increased amount of innovations leading to a higher speed of adoption. The reason for this is that references about a product are available much easier and faster which makes it also easier and faster to adopt an innovation.

If these developments are related to each other, one thing that they all have in common is that they

are threatening the chance of adoption by the early markets. The increased amount of innovations

22 of useful references. These developments threatening the chance of adoption by the early markets are not addressed in Crossing the Chasm.

The internet can be identified as the driving force behind these three developments. The internet created the possibility to create web-based innovations and increased the speed by which innovations could be adopted (downloading, online buying). Finally, online social networks increased the speed of diffusion of messages in social networks.

The problem outlined in this paragraph is that companies have to fight for a small piece of the early markets’ attention and that it is difficult to transform this small piece of attention into adoption. The AIDA-model (Strong 1925) identifies 4 steps in an advertising expression; Attention, Interest, Desire and Action. Although this problem cannot be identified as an advertising expression, the AIDA-model can give valuable insights in the process of getting attention and transforming attention into action (or: Adoption). The biggest problem is that the early market is paying attention and interest to the product, but is then distracted by a more interesting innovation. This implies the first two steps, Attention and Interest, are taken. In the next step, Desire, the customer evaluates the product and determines whether or not he or she has a favorable attitude towards the innovation. The problem is that even though the early market might have a favorable attitude towards the innovation, step 4 (Action) is not taken, because the early market’s attention is drawn to a, seemingly, more interesting innovation. In other words, step 3, Desire, is taken, but the process does not complete the last step, Action.

Strategies in Crossing the Chasm are especially focused on creating Attention and to satisfy the customers while and after Action (or: adoption) and more or less do not address how to transform the early markets’ attention into adoption. Moore (2006) only focused on the technological

innovativeness of the product to capture the early market. Visionaries however also see the strategic opportunities of the innovation. Therefore, the best strategy to increase the level of interest and to

benefit from the increased speed of adoption is to make the emphasis on the technological

innovativeness and the new strategic opportunities of the innovation more specific. In other words,

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2.3

The Applicability of Crossing the Chasm to B2B-products

2.3.1 Introduction

This paragraph will answer the question which strategies in Crossing the Chasm to reach and capture the different groups in the Technology Adoption Lifecycle can be used for B2B-products. First, an important difference between B2C and B2B-products regarding the existence of buying roles will be discussed as this forms an important basis for the discussion in the latter part of this paragraph. Then, the different groups in the Technology Adoption Lifecycle are discussed, together with the strategies from Crossing the Chasm to reach and capture each group. These strategies will be related to the characteristics of B2B-products.

2.3.2 Differences between B2C and B2B-products

Customers for B2C-products are consumers and customers for B2B-products are companies. Although for B2C-products several people can play a role in the buying process (for example, the choice of a holiday destination), a buying process for B2B-products is much more complex because in general more people are involved with different functions and responsibilities. Webster and Wind (1972) identified five different buying roles in buying processes in companies and Bonoma (1982) added a sixth buying role. These buying roles are the initiator, influencer, decider, buyer, user and gatekeeper. Together these buying roles form the Buying Center or Decision Making Unit (DMU). The biggest benefit of identifying buying roles in a customer’s organization is that marketing and sales activities can be better targeted to individuals within the organizations. Although all buying roles in the Decision Making Unit are important to focus on (especially the decider and user), the most important individuals to use for introducing the product to the customer’s organization are the Initiator and Influencer. The characteristics of Markham and Aiman-Smith’s (2001) ‘product champion’ are highly similar to these two buying roles.

A product champion is the first to introduce an innovation in a customer’s organization and also sees the significant potential (or: Strategic advantage) of an innovation. This means that a product champion has the role of a technology enthusiast and visionary inside a customer’s organization. A product champion (Markham and Aiman-Smith 2001):

 Recognizes a new technology or market opportunity as having significant potential;

 Commits personally to the project;

24  Advocates vigorously for the project.

When targeting a customer, a company should therefore always first focus on product champions inside the customer’s organization. ‘Organizational inertia’ and the resistance to new ideas and new technology (Schon 1963) make the role of the product champion extra important for B2B-products. Product champions can have a big influence in ‘breaking’ this inertia and resistance to adopt. Although using a product champion does not guarantee new product success, they are associated

with new product success (Markham and Aiman-Smith 2001). Schon (1963) is more convinced about

product champions; ‘The new idea either finds a champion or dies’ (1963:84). It is important to notice that although Markham and Aiman Smith (2001) describe product champions as individuals to stimulate internal innovation processes in companies, the concept can also be used to analyze how ‘external’ innovations are adopted by and diffuse in organizations.

A comparison between Von Hippel’s (1986) ‘lead users’ and Moore’s (2006) ‘visionaries’ supports the use of product champions. Lead users are people currently experiencing needs which are still latent to the public (in this case, the organization) and benefit greatly if they obtain a solution to these needs. ‘I suspect that Von Hippel's Lead Users and Moore's Visionaries are mostly the same people viewed with different perspectives shaped by time and technology. Moore saw visionaries as ‘early adopters’, people who are eager consumers of brand new products. Von Hippel's studies visionaries as innovators, people who not only consume but customize products’ (Osofsky 2005). Product champions also show similarities with lead users, technology enthusiasts and visionaries. Concluding, companies should find individuals within organizations who:

 Experience needs in an organization which are still latent needs in the organization they work for. Chapter 3 will elaborate on the importance of using customer’s latent needs.

 See a new technology as a solution for these needs, before other people in the organization see it;

 Are highly interested in new technologies and are willing to use new technologies;

 Are willing to commit to this technology and see it as a personal project to make this technology a success in their organization by influencing other people in the organization.

25 strategies in Crossing the Chasm for B2B-products, the potential customers in the different groups in the Technology Adoption Lifecycle must be seen as companies. An important finding in this sub-paragraph is that the decision to adopt an innovation is made by the Decision Making Unit in the customer’s organization. This means that the attitude of a customer towards innovations and the decision to adopt innovations result from the characteristics of the individuals that are part of the Decision Making Unit in that customer’s organization. The next paragraph will discuss the applicability of different strategies in Crossing the Chasm to B2B-products.

2.3.3 Technology enthusiasts

According to Moore (2006), technology enthusiasts are only interested in the technological features of the innovation and do not care whether the innovation works flawlessly or not. These characteristics are consumer characteristics. Companies do not buy innovations solely because they are really interested in the technological features of an innovation. Companies adopt innovations because they are business solutions, a need-to-have instead of a nice-to-have. Therefore, true technology enthusiasts do not exist as customers for B2B-products.

2.3.4 Visionaries

According to Moore (2006), the most important reason for visionaries to adopt an innovation is the strategic leap forward an innovation can give them. It is not logical consumers adopt an innovation for strategic purposes. This is supported by Judson (Lunn 2007), who says companies are typically faster adopters of new technology and more likely to spend money on valuable, new services as opposed to consumers. Lunn (2007) adds that visionaries are more often found for B2B than B2C-products. Another reason why Crossing the Chasm can be applied to B2B-products is that visionaries want to work on a pilot-base or project-base. This is especially suitable for high-tech, often complex, B2B-innovations that also generally have room for customization.

2.3.5 Pragmatists

Pragmatists are reached and captured by first focusing on a niche inside the pragmatists’ market. The strategies discussed below are focused on identifying, choosing and capturing this niche.

Segmenting the pragmatists’ market and choosing a niche. The segmentation-strategy in Crossing

26 human personality characteristics to companies which makes segmentation based on informed intuition not suitable for B2B-products.

Furthermore, segmentation based on informed intuition is not widely supported in academic literature. Although an innovation might create a new market, reliable segmentation data can always be extracted from market alternatives. Informed intuition is a subjective segmentation strategy and it is dangerous to generalize characterizations to a whole segment. In Crossing the Chasm segmentation must be based on data, for example data about the value different potential customers place on the product’s characteristics. This will be further discussed below. Besides using data as the basis for segmentation, Crossing the Chasm also does not address some unique characteristics of segmentation strategies for B2B-products.

Market segmentation for B2B-products is often referred to as ‘industrial market segmentation’. The macro-segmentation Wind and Cardozo (1974) suggest in their article about industrial market segmentation, focuses on the characteristics of the buying organization. The most useful way of market segmentation is based on ‘benefit segmentation’ which uses the product’s economic value to the customer (Hutt and Speh 2001). It ‘recognizes that customers buy the same products for different reasons, and place different values on particular product features’ (Webster 1991). These data must be collected by investigating the (potential) customers’ needs.

Returning to Crossing the Chasm, after the market segmentation Moore (2006) proposes a data-based method of selecting the most appropriate niche to focus on. Each segment is ranked data-based on several criterions (see also page 18). The criterion used (for example, are the customers in the niche identifiable reachable and willing to pay the price for the innovation?) can be perfectly applied to customers for B2B-products (or: companies). A final remark is that Moore (2006) does not address a niche can also be a sub-segment in a segment. This means sometimes an extra step in the segmentation is required.

27 expensive to satisfy a niche. Often venture capitalists do not have the patience to accept this decline in revenues and profits and to wait for real revenues once the chasm is crossed. They often replace marketing executives within the company in order to get the company more sales-focused (Iskold 2007). This can be a fatal decision, because it makes capturing the niche very difficult. Capturing the niche is the starting point for an innovations’ success in the mainstream market. Therefore, it is important to convince venture capitalists of the need to focus on a niche now, in order to generate substantial revenues later.

Determine the configuration of the product. Moore (2006) advocates a market orientation, which

means the configuration of the product is based on customers’ needs. B2B-products on average are very complex and have more possibilities for customization, which makes a market orientation for B2B-products very important.

Identify the competition and determine the positioning. The difference between B2B and

B2C-products is that the first is a business solution and the latter is a means to satisfy a personal need. The most important consequence of this difference is the role emotional and functional benefits of a product play between adopting B2C and B2B-products. On average, emotional benefits are more decisive in a buying process for B2C-products and functional benefits for B2B-products. Of course, this does not mean emotional benefits are not important for B2B-products. An emphasis on functional benefits for B2B-products allows a more objective comparison between competitors which simplifies identifying the competition. The strategy in Crossing the Chasm to identify the competition is limited to identifying the product and market competitor. Both competitors are identified based only on their functional benefits which makes the way of determining the competition in Crossing the Chasm suitable for B2B-products.

Positioning is about emphasizing the distinctiveness of a product vis-à-vis the competition. Well-known concepts with regard to this topic are POD’s (Points of Differences), USP (Unique Selling Point) and Unique Functional Benefits. The positioning statement in Crossing the Chasm contains a claim vis-à-vis the market and product competitor based on the product’s technological distinctiveness or unique functional benefit, the key problem-solving capability and key whole product features. This positioning is based on functional benefits and does not address emotional benefits. This makes Crossing the Chasm again suitable for B2B-products.

Launch the whole product. According to Moore (2006), effective launching tactics to reach the niche

28 Furthermore, B2B-products on average have a few, but very important customers. This makes it useful to use vertical media and business press that focus on individual customers.

In Crossing the Chasm, Moore (2006) elaborates on different pricing strategies that are related to the different characteristics of groups of customers in the Technology Adoption Lifecycle. For visionaries a value-based pricing strategy is appropriate, for pragmatists a competition-based pricing strategy and for conservatives a cost-based pricing strategy is appropriate. Moore assumes that a company can easily change the price of the product to make it fit with the characteristics of the group of customers that are adopting the product. This might work for highly standardized high-tech products because it is easier to make a reliable forecast about the costs of the product and to anticipate on the effect different pricing strategies will have on the profitability of the company. High-tech B2C-products are often highly standardized B2C-products. B2B-B2C-products however, are generally are more complex and less standardized which also makes determining the right price for B2B-products more complex. ‘The price is determined on the basis of numerous factors and specifications, all of which take significant time to calculate and add greatly to selling costs’ (Francis Marketing 2008). This makes B2B-products more limited in their ‘freedom’ to adjust the prices to the characteristics of their customers. Of course, B2B-products evolve over time which makes them more standardized, but B2B-products will always be more complex than B2C-products. Moore (2006) does not discuss this complexity with regard to pricing for B2B-products. Crossing the Chasm must elaborate on how companies with a high-tech B2B-product must deal with a high complexity in determining the right price for their product in combination with the specific pricing demands by the different groups in the Technology Adoption Lifecycle.

29 1) According to Moore there is a price point below which direct sales are not cost efficient,

which is $75.000. B2B-products are often priced higher than $75.000.

2) Direct sales are only worth their high costs in case of a small group of potential customers who individually can generate high revenues. B2B-products have a smaller amount of customers who need more attention per customer.

3) B2B-products are more complex and have more room for customization than B2C-products, which requires personal assistance in the buying process. High-tech B2B-products are almost never standardized packages.

2.4

Conclusion

It can be concluded that most strategies in Crossing the Chasm are still perfectly useful in 2008. Only an increased competition for the early market’s attention, especially cause the internet, is not addressed by Moore (2006). The best way to win this competition is to create a clear positioning for the early markets which emphasizes an innovation’s technological innovativeness and strategic advantage. Furthermore, it can be concluded that most strategies in Crossing the Chasm can be perfectly used for B2B-products. Only the following four insights are not addressed in Crossing the Chasm and could form bases for improvements for Crossing the Chasm:

 The customer’s attitude towards B2B-innovations is determined by the characteristics of the individuals in the Decision Making Unit in the customer’s organization. Identifying these ‘buying roles’ (especially product champions) allows for better targeted marketing strategies.

 True technology enthusiasts do not exist as customers for B2B-products.

 Market segmentation in Crossing the Chasm must be based on data about customer’s needs, not informed intuition.

 The pricing strategy in Crossing the Chasm does not address the complexity in determining the price for B2B-products due to a higher complexity of B2B-products.

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Chapter 3 Review Marketing Strategies for High-tech Innovations

3.1

Introduction

In this chapter the question what key insights from discussing other literature about bringing high-tech products to the market might contribute to the usefulness of Crossing the Chasm in bringing high-tech B2B-products to the market, is answered. Chapter 2 already discussed some other literature related to this topic. However, the strategies discussed in this chapter are all ‘general’ marketing strategies, not strategies that are specifically related to the different groups in the Technology Adoption Lifecycle. Therefore, the discussions in this chapter were not integrated in the previous chapter, but are discussed separately. Crossing the Chasm is a marketing strategy for high-tech products and therefore this chapter takes different strategic market orientations as a starting point. A strategic market orientation is about what drives decision making in an organization, or, the main focus of decision making in an organization.

3.2

Market Orientation

3.2.1 Introduction

Moore (2006) does not address how to create an innovation before entering the market nor the capacities required to innovate. This capacity consists of appropriate resources and capabilities but, more important, the right strategic market orientation. A commonly used strategic market orientation is a marketing orientation. Homburg and Pfesser (2000) identified two research streams with regard to this topic, the research stream discussed by Kohli and Jaworksi (1991, 1993) being the most relevant here. Kohli and Jaworksi (1991, 1993) explain market orientation in terms of specific behaviors related to an organization wide generation of marketing intelligence pertaining to current and future customer needs, dissemination of this intelligence across departments and organization-wide responsiveness. In other words, a company has to carefully listen to its customers’ current and

future needs and use this information throughout the entire organization to serve customers in the

best possible way. ‘Future needs’ is a rather vague concept, it is better to identify these needs as

latent needs which are hidden, dormant or inactive needs. Moore (2006) only discusses customer’s

current needs and does not focus on customers’ latent needs. Latent needs are essential for having a market orientation and are crucial for the capacity to innovate and the success of an innovation. This will be further discussed in this paragraph.

31 Langerak et al. (2004), who also suggest a tactic to discover customer’s latent needs is to stimulate them to suggest new product ideas. This helps them to discover their latent needs and directly provides a company with right information to develop these products. Current and latent needs can be linked to the distinction between two types of innovations discussed by Bower and Christensen (1995) and Christensen and Overdorf (2000) which are sustainable and disruptive innovations:

‘A sustainable innovation maintains a steady rate of product improvement (Bower and Christensen 1995), (…) for mainstream customers’ (Christensen and Overdorf 2000). Only focusing on current customer needs is the best strategy to create pragmatic product improvements for the pragmatists and conservatives. ‘A disruptive innovation often sacrifices performance along dimensions that are important to current customers and offers a very different package of attributes that are not (yet)

valued by those customers’ (Bower and Christensen 1995). ‘Disruptive innovations create entirely new markets’ (Christensen and Overdorf 2000). Disruptive innovations are products that uncover

latent needs, because disruptive innovations focus on attributes not (yet) valued by customers and therefore create new markets. The highly innovative character of disruptive innovations makes these innovations very suitable for technology enthusiasts and visionaries.

As an innovation moves from the technology enthusiasts to the pragmatists, the innovation transforms from a generic product into a whole product (Levitt 1983, Moore 2006). The experiences collected from technology enthusiasts and visionaries as well as the specific needs of the pragmatists in the niche are used to create a pragmatic solution for the pragmatists and conservatives. This means disruptive innovations transform into sustainable innovations when reaching the mainstream market. This is not explicitly addressed in Crossing the Chasm.

32

3.2.2 Big, established companies

According to Bower and Christensen (1995) and Christensen and Overdorf (2000) big companies often lack innovating capacities because they are focused too much on current customers and current

business because they are satisfied with current results. Because the company stays too close to its

current customers, a company develops processes and incentive systems that are geared only toward satisfying those customers (Christensen 1997).

In line with this reasoning is the fact that disruptive innovations might generate disappointing results in the beginning, but high revenues later on. Especially sales managers too often have a short-term view and only focus on activities which are currently profitable. ‘Risk is reduced and careers are safeguarded by giving known customers what they want’ (Bower and Christensen 1995:48). Christensen and Overdorf (2000:73) propose capabilities which can be created to improve an organization’s willingness and capacity to innovate. The core of these capabilities is to find a way to isolate a ‘taskforce’ from the organization so that this taskforce can operate without the structural innovating limitations of current business processes (‘organizational inertia’ (Schon 1963)). This could mean startups that do not have or are still developing such processes have better innovating capacities than established companies. ‘Their market research and resource allocation processes allow managers to proceed intuitively; every decision need not be backed by careful research and analysis’ (Christensen and Overdorf 2000:73). Therefore, established companies must act like startups and facilitate taskforces to develop innovating capacities.

It is interesting to notice here that apparently beside venture capitalists (chapter 2) also sales managers in big, established companies are often purely sales driven. The difference however is that venture capitalists make it difficult to bring an innovation to the mainstream market and sales managers in big, established companies prevent the company currently operating in the mainstream market from developing innovations.

3.2.3 Small companies/startups

33 the mainstream market and offer their products at a lower price to reduce the financial risk associated with adopting the innovation (Slater and Mohr 2006:32). These tactics support strategies in Crossing the Chasm, which also emphasize the need to show product advantage over competitors when crossing the chasm and the need to lower the price when reaching the mainstream market. The proposed distribution channel in Crossing the Chasm, direct sales, is also very useful to clearly demonstrate the advantage of an innovation over existing solutions.

3.2.4 Conclusion

This paragraph is written from a vendor’s point of view. In other words, it focuses on strategies companies must pursue without addressing the dynamics in the customers’ market. The reason for this is that Crossing the Chasm mostly takes a buyers’ point of view. Moore (2002) discusses how companies must respond to the characteristics of different customers in the market. He focuses less on the internal strengths companies can develop. Therefore, this paragraph took a vendor’s point of view to add strategies which strengthen a company's internal competencies when developing and introducing a disruptive innovation.

The introduction of this paragraph stated that a right strategic orientation is part of the capacity to innovate. This paragraph proved the importance of a market orientation, focusing on customer’s current and latent needs. It showed that small companies/startups are better capable of focusing on customers’ latent needs which allows them to create truly disruptive innovations that are especially suitable for early markets. However, they lack capacities to serve mainstream markets, which big, established companies do have. This is the core issue in Crossing the Chasm. The strategies proposed in this paragraph to introduce a disruptive product that was successful in early markets also to mainstream markets are all addressed in Crossing the Chasm and confirm the usefulness of Crossing the Chasm. Summarized, having a market orientation is key in developing truly disruptive innovations and a distinction between small companies/startups and big companies is important because they differ in their capacity to innovate and to serve early and mainstream markets.

3.3

Operationalizing a Market Orientation: Marketing Strategies and Tactics

3.3.1 Introduction

34 Crossing the Chasm. The articles by Easingwood and Koustelos (2000) and Easingwood et al. (2006) discussed in paragraph 3.3.2 were chosen because they add new insights to Crossing the Chasm.

3.3.2 Marketing Strategies

Easingwood and Koustelos’ (2000) marketing strategy consists of four steps; market preparation, targeting, positioning and execution. Easingwood and Koustelos (2000) and Easingwood et al. (2006) proposed several tactics to accomplish each step. These different tactics were used in a factor analysis (Easingwood et al. 2006). This factor analysis led to five different ‘strategic orientations’ to be used in a marketing strategy. The strategic orientations discussed in the previous paragraph and in this paragraph must not be confused. The market orientation discussed in the previous paragraph is an overall strategic orientation, the strategic orientation by Easingwood and Koustelos (2000) consists of operational strategies or, strategies directions to be used in a marketing strategy:

Factors Strategies

Factor 1: Alliances  Form strategic alliances

 Create unique distribution channels  Focus on channel partners

 Exploit tactical alliances  Use reference sites

Factor 2: Targeted Low Risk  Emphasize low risk

 Offer different version targeted at different buyers  Use opinion leaders

 Have trial programs

 Cultivate a winner image (winning mindset)

Factor 3: Low-Price OEM  Supply to OEMs to incorporate other products  Create unique distribution channels

 Target high value users  Emphasize low price

Factor 4: Broadly Based Market Preparation  Provide clear product information to the market  Educate the market to understand new uses

Factor 5: Niche-Based Technology Superiority  Emphasize technology superiority  Concentrate on niches

Table 1: ‘Strategic Orientations and Underlying Strategies’ (Easingwood et al. 2006:503)

The five factors identified by Easingwood et al. (2006) explain 52% of the original variance. Factors 2, 3, 4 and 5 all explain approximately 10% of the total variance. The only exception is factor 1, which explains almost 14% of the total variance. Factor 1 is therefore the most ‘powerful’ factor; the other factors do not differ significantly in importance. The complete results of the factor analysis can be found in Appendix 2. In Table 2, the tactics that are already used in Crossing the Chasm are marked yellow, tactics that should not be used are marked red and tactics that are currently not used but should be used in Crossing the Chasm are marked green.

35 (2006:503). Forming alliances is not addressed in Crossing the Chasm and can be a useful contribution to Crossing the Chasm. Two of the underlying tactics in Factor 2, Targeted Low Risk, are addressed in Crossing the Chasm and their usefulness is supported by this factor-analysis. Emphasizing a low risk of adoption is a good strategy to deal with the FUD-factor (Fear, Uncertainty and Doubt) that is present among potential customers for high-tech innovations (Woning and Arts 2008). The three green-marked tactics are not used in Crossing the Chasm and form straightforward contributions to Crossing the Chasm. Factor 3 is the only strategy that is not positively correlated with performance (Easingwood et al. 2006). Focusing on low prices is also not addressed in Crossing the Chasm. The underlying tactics in Factor 4 are not addressed in Crossing the Chasm but can be very important. Truly disruptive innovations create new markets and the market needs to understand and learn about the use and usefulness of the innovation. Therefore, also ‘providing clear product information to the market’ and ‘educate the market to understand new uses’ can be useful for Crossing the Chasm. Finally, the usefulness of Factor 5 (Niche-Based Technology Superiority) will be discussed. According to Moore, when Crossing the Chasm, a company must focus on a niche, however not with a technological superior product, but with a pragmatic solution. According to Moore, when capturing the early markets (especially the technology enthusiasts) the company must demonstrate technology superiority while focusing on the complete early market, not on a niche in the early market. In other words, both parts of Factor 5 (Niche-Based & Technology Superiority) are used in Crossing the Chasm, but not simultaneously. This strategy cannot be completely used to cross the chasm, because companies are not looking for a technological superior product. Niche-Based Technology Superiority can however be used to capture the early market by focusing on a niche in the early market. Chapter 2 discussed the decreased chance of adoption by the early market because of the difficulty in getting the early markets’ attention and transforming this attention into adoption. Focusing on a niche in an early market makes it possible to completely dedicate all efforts to capture all customers in a niche in this market. In other words, by focusing on a niche in the early market, a company benefits from the same advantages as the benefits resulting from focusing on a niche in the pragmatists’ market.