More on Moore (Cont.)
Because the dynamics of market tornados so reward the emergent leader, who is selected by word-of-mouth referencing among pragmatists, an aspiring gorilla must follow this prime strategic marketing directive:
Build a dominant presence in each bowling pin segment.
A dominant presence is defined as winning approximately 40 percent of the targeted segment in twelve to eighteen months. Pragmatists must know that you are the emerging winner, and such dominance assures that competitors must settle for second or third place.
Moore’s rationale for crossing the Chasm was inspired by military strategists who concentrate force on relatively weaker enemy positions, as in the Allied D-Day invasion at Normandy in World War II. According to Moore (CTC, pp. 65-66), by analogy, the strategy is to replicate D-Day:
“Our long-term goal is to enter and take control of a mainstream market (Eisenhower’s Europe) that is currently dominated by an entrenched competitor (the Axis). For our product to wrest the mainstream market from this competitor, we must assemble an invasion force comprising other products and companies (the Allies). By way of entry into this market, our immediate goal is to transition from an early market base (England) to a strategic target market segment in the mainstream (the beaches at Normandy). Separating us from our goal is the chasm (the English Channel). We are going to cross the chasm as fast as we can with an invasion force focused directly and exclusively on the point of attack (D Day). Once we force the competitor out of our target niche markets (secure the beachhead), then we can move out to take over additional market segments (districts of France) on the way toward overall market domination (the liberation of Europe).”
Because niche markets are more “tightly bounded” [homophilous, with strong ties and well-worn communication paths of reference and influence] Moore (p. 66) states, “the easier it is to create and introduce messages into it, and the faster these messages travel by word-of-mouth.”
Hence, the Bowling Alley Model applies the principles of world-of-mouth and whole product leveraging to selecting an array of target segments with a goal of target-market domination. The priorities in identifying target segments are: (a) the absence of in-place or potential competitors; (b) the presence of a compelling problem that urgently requires solution; (c) the ability to rapidly deploy a whole product solution tailored to meet the target’s specific needs; and (d) the ability to demonstrate that your approach can demonstrate superior returns on investment. The marketing focus is on the economic buyer because he feels the heat that your solution must relieve.
The segment array is selected to leverage both the powers of word-of-mouth referencing and of whole products. That is, word-of-mouth leverages new applications within self-referencing segments, and the whole product leverages the same or similar applications across new segments. The selection of the head pin and the pin-array ensures the overlap of self-referencing and whole product solutions for segments with similar problems.
Moore (ITT, p.99) contrasts the key differences in the marketing strategies for each segment:
Bowling Alley Tornado
Focus on the economic buyer and end user; Ignore the economic buyer and end
approach the infrastructure buyer late in user; focus exclusively on the
the sales cycle. the infrastructure buyer.
Emphasize return on investment as the Ignore return on investment. Focus
compelling reason to buy. on timely deployment of reliable
infrastructure.
Differentiate your whole product for a single Commoditize your whole product
for a single application. for general-purpose use.
Partner with a value-added distribution Distribute through low-cost, high-
channel to ensure customized solution volume channels to ensure
delivery. maximum market exposure.
Use value-based pricing to maximize Use competition based-pricing to
profit margins. maximize market share.
Avoid competition to gain niche market Attack competition to gain mass
share. Market share.
Position your products within vertical Position your products horizontally
vertical market segments. as global infrastructure.
Thus, just as the bowling alley requires a distinctive niche strategy to cross the chasm, distinctly different marketing strategies are required in bowling alley and tornado markets. Hence, Moore derived the principle that distinct marketing strategies, which are sometime counterintuitive and reverse the previous strategy, are required to win in each phase of the TALC.
Although you follow the principle of segmentation in strategic marketing, you also must understand that the market and company are coevolving, as if in a punctuated equilibrium. At each inflection point of sudden, rapid change in dynamics, market forces radically shift the fitness requirements for survival in the ecosystem. Only the most strategically adaptive firms can respond to newly created selection criteria that shift salient fresh objectives.
In the Early Market, technology enthusiasts “play with the product” to see if it works because of a deep interest in changing technology, but they don’t want to pay to play. Because visionaries see the potential value in new breakthrough paradigms, they want to use a discontinuous innovation to solve a compelling business problem and gain substantial competitive advantage. The marketing task with these first customers is to start market development by seeding as many visionaries as possible and making them as successful as possible to validate the new technology. Individual visionaries must be found, not market segments.
When these visionaries dry up, you must rapidly cross the Chasm or die because “first there is a market, then there is no market.”
In the bowling alley, marketing shifts to niche segment penetration where you must dominate the beachhead niche and expand the invasion to adjacent niches. Adoption depends on a tailored whole product solution that can produce a killer application in the niche and provide an excess return on investment. In contrast to the early market of visionaries, a focused strategy of carefully planned segmentation becomes strategically important to achieve niche dominance and to leverage across other segments.
This winning niche-focused-strategy is abandoned in the tornado in favor of generalizing the whole product solution and distributing it to as many customers as possible that become yours for the life of the category. Now the imperative is mass-market growth through opening new channels and expanding into new geographies in a winner-take-all market. Segmentation becomes counterproductive because your general-purpose platform has been self-selected by the industry that is self-organizing around your new self-selected infrastructure because of mutual self-referencing in which every pragmatist watches while being watched.
Yet, when the tornado has run its course, the strategy shifts once again from winning new customers to maximizing the profitability of the installed base. On Main Street, co-evolution between company and market requires niche expansion with whole product +1 marketing and offerings tailored to segmented sets of customers. Profitable revenues come from milking the installed base through 1-to-1 marketing and mass customization.
Just as the concept of the Chasm arose from observing “first-you-have-a-market, then- you-don’t,” the idea of reversing the winning strategy came from discovering the reversals in the need for segmentation from inconsequential in the Early Market to crucial in the Bowling Alley to counterproductive in the Tornado to deeply rewarding on Main Street.
Recently, Moore has been principally concerned with life beyond Main Street. The TALC models the adoption of discontinuous innovations. Although Main Street represents the end of the Technology Life Cycle, which ends with the assimilation of the technology into the culture, it does not represent the end of the Product Category Life Cycle (PCLC), which only ends when the next discontinuous innovation disrupts it. Potentially, the TALC represents only the beginning portion of the PCLC. Imagine the TALC as a smaller bell-shaped curve nested in the left-hand-section of a larger bell-shaped curve in which height represents all possible purchases of the product category, and length or persistence represents the time remaining until the next discontinuous innovation that replaces the category as a whole.
For instance, consider the PC market. Although the users of the PC have assimilated the technology, making it no longer a troubling discontinuity, but simply a part of everyday life, no one can predict how long this market will persist because we cannot predict when the next discontinuous innovation might occur that would replace very-large-scale-integration as the computing paradigm of choice. As long as the normal trajectory of Gordon Moore’s Law continues, Geoffrey Moore argues, the market for the PCLC of the PC remains in place. This distinction is essential to investors because, given the absence of a war between two gorillas in adjacent categories, CAP endures to the next discontinuous innovation.
First principles and mental models from Moore’s imagination can become yours, not from reading about them, but only if you choose to use them. So, put them to work.
[I hope this helps. Sorry, for the loss of formatting.]
Don |
