Rick, I hope you don't mind, but your post from the Yahoo Ballard thread on the "chasm" sung sweet music to my ears, and helps describe some of that is going on here, to those that are interested, so I am forwarding it to this thread.
Book Review: The Gorilla Game - a review of this superb Investor's Guide to Picking Winners in High Technology
investingcanada.miningco.com
Geoffrey Moore is chairman of The Chasm Group, a marketing consultant to high tech
companies like Microsoft, Cisco, Hewlett-Packard and others. Recently named by
Upside magazine as one of the "Elite 100 leading the digital revolution" he is the author
of two previous books on the high technology industry, Crossing the Chasm and Inside
the Tornado.
His cohorts on this latest effort are also engaged in the high tech market. Johnson is
senior technology analyst with BancAmerica Robertson Stephens, a high tech
investment banker, and also an adjunct professor of finance at Columbia University.
Kippola is a partner in the Chasm Gorup and a professional investor. He is on the
advisory board of Internet Capital Group, a venture capital company.
This new book builds on the theories about the high technology marketplace Moore
developed in his earlier books. And in case you missed those, because they are so
crucial to the game, he recaps them here.
The high tech market, argues Moore, is not the same as the regular market. The old
rules about investing don't apply here. Today many people are amazed and alarmed at
the high valuations placed on stocks in today's stock market. In the high tech market
such valuations are common. But Moore says this is not an anomalie, but the nature of
this particular beast.
The technology market is based on something Moore calls discontinuous innovation.
This isn't simply a question of tweaking existing products to make them better. A car is
improved by adding electronic fuel injection, better suspension, airbags and so on. But
a car is still a car. The innovations are continuous.
A discontinuous innovation, by contrast, introduces a whole new paradigm. It
means "not compatible with the existing systems". Fuel injection is an
innovation. The Ballard Power Cell is a discontinuous innovation as it would
require a massive change in infrastructure. It cannot be fully adopted until there
is a willingness to change from gas stations to hydrogen supply depots, until
there are plants built to generate the hydrogen needed to power millions of
vehicles. The people investing in Ballard are betting on Ballard becoming a
"gorilla" in Moore's terminology. And if they're right, $10,000 invested in
Ballard may well be worth a million dollars in ten years, even though now it is
trading at over 1400 price to earnings.
So what's a gorilla? Moore et al explain that when a new discontinuous
innovation is introduced into the marketplace, there is a recognizable pattern to
the market's adoption of the change, what they call the Technology Adoption Life
Cycle. First there are several competing companies promoting the technology,
each of them offering a variation of the same idea. The technology is first
embraced by technology enthusiasts who are willing to pay the higher initial
prices. Then the visionaries jump in. These are usually corporate executives
looking for ways to give their company a competitive advantage by adopting a
new discontinuous innovation.
But the mass market has not yet been reached. The mass market is the
pragmatists. They don't want to experiment, but they don't want to be left behind.
They conform to the herd and when they sense or see the herd adopting a
technology, then they jump in too.
Between the adoption of new technology by the visionaries and the pragmatists
looms the chasm. The chasm is "the consequence of the polar opposition
between the visionary, who is deliberately going ahead of the herd, and the
pragmatist, who is just as intent on staying with the herd." The chasm is the point
at which the visionaries start losing interest but the pragmatists aren't quite ready
to jump in yet. You might call it the calm before the storm.
And that is because the next phase in the development in a high tech market is the
storm, or, as Moore calls it, the tornado. The tornado is the hypergrowth stage of
the new high tech market. The herd dynamics that had all the pragmatists holding
back at the chasm, now has them leap that chasm and jump in with a vengeance.
The tornado phase of the market can generate growth of "300% per year in the
very early going, 'slowing down' to 100% a year over a longer period."
Gorilla Game website
by: Rickmas
gorillagame.com |
