Chasm n Dissonance

8/9/2019 Chasm n Dissonance

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Crossing The Chasm and BeyondGeoffrey A. Moore

Karen GaskillEmily GarnerEli El-Zoghbi


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Intro to Discontinuous Innovations

What is meant by discontinuous Innovations?New products or services

Require users and marketplace to change past behaviorsPromise new benefits

Different people react differently to discontinuousInnovationsTechnology Adoption Life Cycle is a model about howcommunities respond to discontinuous innovations


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Technology Adoption Life Cycle

Model grew out of social research in the 1950sModel predicts that when faced with discontinuousinnovations, Customers self-segregate along an axis of riskaversionFive communities are created:

Innovators (risk-immune)Early AdoptersEarly MajorityLate MajorityLaggards (Risk Allergic)


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Change

Technology Adoption Life Cycle


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Terminology was relabeled for High-Tech Industry:

Innovators : Technology EnthusiastsEarly Adopters : VisionariesEarly Majority : PragmatistsLate Majority : Conservatives

Laggards : skeptics

Technology Adoption Life CycleIn High-Tech Industry


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Market Development As Predicted By Model

Product TechnologyEnthusiasts

Visionaries Pragmatists

Once SatisfiedGood ReferenceTo Pragmatists

Conservatives

Bulk of Revenue Company Becomes Market Leader Product becomes more reliable Product becomes cheaper


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Introducing The Chasm

Model appears attractive in theoryDid not work very often in practice

Truth is that Visionaries

and

Pragmatists

are verydifferent

Communication between the two groups is almostimpossible

Therefore, Visionaries cannot make a good reference topragmatistsMarket development stalls past the visionary stageSuch a hiccup throws high-tech companies into the CHASM


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The Chasm

The Early Market

T e c

h n o

l o g y

E n

t h u s

i a s t s

V i s i o n a r

i e s

The Mainstream Market

P r a g m a t

i s t s

C o n s e r v a t

i v e s

S k e p

t i c s

Innovative High-Tech Product

TheCHASM

?


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Crossing The Chasm

Pragmatists want a 100% solution to their problem:They want the whole product

Thewhole Product

is defined as follows:The minimum set of products and services necessary to

ensure that the target customer will achieve his or hercompelling reason to buy

High-Tech companies unable or unwilling to takeproducts to this level of completionTherefore, High-Tech companies were prolongingtheir stay in the chasm


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Crossing The Chasm

The only safe way to cross the chasm is to put allyour eggs in one basketIdentify a single pragmatist cutomer

Accelerate the formation of 100% of their wholeproduct

Goal is to win a niche foothold in the mainstream asquickly as possible


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Example: Documentum

Documentum is in the document management softwarebusiness

Virtually unknown until 1994Spent early part of the 1990s in the chasmIn 1994, became dominant supplier of systems to thepharmaceutical industry

How?Began with specific niche of Computer Aided New Drug Approval(CANDA)Targeted specific pragmatists based on five criteria


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Documentum s Five Criteria

1. Is the target customer well funded and are theyreadily accessible to our sales force?

2. Do they have a compelling reason to buy?3. Can we today, with the help of partners, deliver awhole product to fulfill that reason to buy?

4. Is there no entrenched competition that could

prevent us from getting a fair shot at this business?5. If we win this segment, can we leverage it to enter

additional segments?


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Documentum End Result

1994: Documentum garnered 30 of their top 40 targetcustomers

Unquestioned market leader in this segmentFrom pharmaceutical industry perspective,Documentum cannot be allowed to go out of business

Such is the power of crossing the chasm


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Beyond The Chasm

TheCHASM

TheTornado

End of Life

The Early Market

M ain Street

The BowlingAlley

Business Strategy must changedramatically as marketplacesmove through these six stages


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Beyond the Chasm

1. The Early Market: Customers are technology enthusiastsand visionaries

2. The Chasm: Mainstream market still not comfortablewith the immaturity of the solutions available3. The Bowling Alley: A period of niche-based adoption in

advance of the general marketplace

4. The Tornado: A period of mass market adoption5. Main Street: A period of aftermarket development6. End of Life: Which can come too soon in high-tech


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STRATEGIC DISSONANCE

by Robert A. Bugelman and Andrew S. Grove


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DISSONANCE

Inconsistency between the beliefs one holdsor between one's actions and one's beliefs

Merriam-Webster Medical Dictionary, 2002 Merriam-Webster, Inc.

A harsh, disagreeable combination of sounds;discord. Lack of agreement, consistency, orharmony; conflict

The American Heritage Dictionary of the English Language, Fourth Edition.Copyright 2000 by Houghton Mifflin Company.


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QUESTION:How can top management inextremely dynamic environmentsdecide on the right strategic intent?


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KEY CONCEPTS

Strategic DissonanceStrategic Inflection PointStrategic RecognitionConceptual Framework


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STRATEGIC DISSONANCE

Differences between competence and thebasis of competition or strategy and action

Conflict is strategic when it signals impendingindustry or corporate transformationKey to moving the company out of strategicdissonance is top management s capacity touse the conflicting information generated byit to create new strategic intent


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STRATEGIC RECOGNITION

Top management s major tool fordealing with strategic dissonance and

an SIPPicks out the elements that can formthe basis for new, viable strategic goals

Enabled by the ability of internalselection environment


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CONCEPTUAL FRAMEWORK

Describes the evolving linkagesbetween company s core competencies

and the basis of competition in theindustry and its official corporatestrategy and strategic action


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FRAMEWORK from Exhibit 2, page 481

Basis of competitiveadvantage in the industry

Internal selectionenvironment

Distinctive competenceof the firm

Officialcorporatestrategy

Strategicaction


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SOURCES OF STRATEGIC DISSONANCE

Divergence of the basis of competitionand distinctive competence

Divergence between stated strategyand strategic action


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INTERNAL SELECTION ENVIRONMENT

Regulates the allocation of thecompany s scarce resources to strategic

action while the official strategy is influxCash, competencies, capabilities and sr.management attention

Time cushion for bringing corp strategyback in line with strategic action andkeeping company alive during SIP


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MANAGING STRATEGIC DISSONANCE

NewStrategicAction

NewDistinctive

Competence

NewBasis of

Competition

NewStrategic

Intent

Strategic Recognition

Old/NewStrategicAction

Old/NewDistinctive

Competence

Old/NewStrategic

Intent

Old/NewBasis of

Competition

StrategicDissonance

StrategicInflection Point

OldStrategicAction

OldDistinctive

Competence

OldStrategic

Intent

OldBasis of

Competition

*Exhibit 3: The Transformation Process (Page 484)


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MANAGING STRATEGIC DISSONANCE

Taking advantage of strategicdissonance and surviving an SIP depend

on the internal selection environmentand top management behaviorsInternal selection environment must

reflect external realityTop management must allow dissent


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NEW STRATEGIC INTENT

Formulate based on strategic recognitionDevelop a mental image of what the industry

will look like based on information generatedby strategic dissonanceChanging with the environment and theorganization (led by reality)Requires reinventing or rediscovering thecompany s identity


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STRATEGIC INTENTTO STRATEGIC ACTION

Reassigning resourcesMining of middle managers insights

Too little intellectual debate--vision is notclearly developed and march is not clearToo much paralyzes the company and

delays SARole of sr. management: encouragedebate, bring it to conclusion


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CULTURE IS THE KEY

Strong bottom-up and top-downforces

Two attributes:1) Tolerates-even encourages-debate2) Capable of making-and accepting-clear

decisions; with entire organizationcapable of supporting the decision


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IN CLOSING

Comprehensiveness, depth, and rigorof intellectual debate among middle and

top managers is the cultural featuremost telling of a company s long-termability to manage through SIPs.

Chasm n Dissonance

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