Crossing the Chasm: A Book Review by Bob Morris

Crossing the Chasm
Geoffrey A. Moore
Harper Business (1991)

In my opinion, Crossing the Chasm (1991) and Inside the Tornado (1995) are most valuable when read in combination. In fact, I strongly recommend that they be read at least once a year, in combination, because Moore’s insights in both will become even more relevant as a global marketplace that both exands in terms of scope and depth and contracts in its of terms of engagement, especially focus on localities, niches, and analytics. Moreover, the relevance includes but is not limited to the high tech community.

Chasm “is unabashedly about and for marketing within high-tech enterprises.” It was written initialky for  he entire high tech community “to open up the marketing decision making during this [crossing] period so that everyone on the management team can participate in the marketing process.” In Chasm, Moore isolates and then corrects what he describes as a “fundamental flaw in the prevailing high-tech marketing model”: the notion that rapid mainstream growth could follow continuously on the heels of early market success.

Moore defines a market as a set of actual or potential customers for a given set of products or services who have a common set of needs or wants, and who reference each other when making a buying decision. The final point may be the least intuitive, but Moore says, “the notion that part of what defines a high-tech market is the tendency of its members to reference each other when making buying decisions– is absolutely key to successful high-tech marketing.”

Many business plans are based on a traditional Technology Adoption Life Cycle, a smooth bell curve of high tech customers, progressing from Innovators, Early Adopters, Early Majority, Late Majority, and finally Laggards. In turn, this model becomes the foundation for a high-tech marketing model which says the way to develop a market is to work the curve from left to right, progressively winning each group of users, using each “captured” group as a reference for the next. Moore demonstrates that in fact, there are cracks in the curve, between each phase of the cycle, representing a disassociation between any two groups; that is, “the difficulty any group will have in accepting a new product if it is presented the same way as it was to the group to its immediate left.” The largest crack, so large it can be considered a chasm, is between the Early Adopters and the Early Majority. Many (most) high tech ventures fail trying to make it across this chasm.

Early Adopters are the rare breed of visionaries “who have the insight to match an emerging technology to a strategic opportunity driven by a ‘dream’. The core dream is a business goal, not a technology goal, and it involves taking a quantum leap forward in how business is conducted in their industry or by their customers…Visionaries drive the high-tech industry because they see the potential for an ‘order-of-magnitude’ return on investment and willingly take high risks to pursue that goal. They will work with vendors who have little or not funding… As a buying group, visionaries are easy to sell but very hard to please… because they are buying a dream…They want to start out with a pilot project, which makes sense because they are ‘going where no man has gone before’ and you are going with them. This is followed by more project work, conducted in phases with milestones, and the like.”

According to Moore, “You can succeed with the visionaries, and you can thereby get a reputation for being a high flyer with a hot product, but that is not ultimately where the dollars are. Instead, those funds are in the hands of more prudent souls who do not want to be pioneers”

The Early Majority are pragmatists who “care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get… Pragmatists tend to be ‘vertically’ oriented, meaning that they communicate more with others like themselves within their own industry than do technology enthusiasts and early adopters… It is very difficult to break into a new industry selling to pragmatists. References and relationships are very important…Pragmatists won’t buy from you until you are established, yet you can’t get established until they buy from you….”

Moore notes that, “On the other hand, once a startup has earned its spurs with the pragmatist buyers within a given vertical market, they tend to be very loyal to it, and even go out of their way to help it succeed. When this happens, the cost of sales goes way down, and the leverage on incremental R&D to support any given customer goes way up. That’s one of the reasons pragmatists make such a great market: “They like to see competition… Pragmatists want to buy from proven market leaders because they know third parties will design supporting products around a market- leading products… aftermarket…

“Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in magazines they read. You need to be installed in other companies in their industry. You need to have developed applications that are specific to their industry. You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service.

In my opinion, the best sources for those with a special interest in disruptive technologies are the books that Clayton Christensen has authored or co-authored, notably The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, The Innovator’s Solution: Creating and Sustaining Successful Growth, and Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change.

“You Cannot Do More Than One Thing At A Time” – Science Comfirms The Advantage Of “Single-Tasking”

This is from a recent interview by Terry Gross on Fresh Air.  (Listen, and read transcript, here).  I did not hear it live, and my wife “encouraged” me to listen to it.  (I wonder why?!)

The interview is with NY Times technology journalist Matt Richtel, who writes the series Your Brain on Computers, and his latest column is Digital Devices Deprive Brain of Needed Downtime (some of these ideas are discussed in this interview).

One key problem – multitasking.  His blunt conclusion: It’s pretty clear to scientists you cannot do more than one thing at a time.

Here is the key excerpt from the interview:

GROSS:
Well, that’s very ironic because we think when we’re multi-tasking that we’re really doing great, we’re getting two things done for the price of one or three things done in the amount of time it should take to do one thing. But what are scientists learning about how efficiently we’re doing any of those two or three things when we do them at the same time?

Mr. RICHTEL:
Yeah, this is another place where I don’t have to equivocate. It’s pretty clear to scientists you cannot do more than one thing at a time (emphasis added). This research goes back years, and it is having like its new day in the sun, its new applicability.

Your brain effectively processes one stream of information at a time. I’ve heard this very basic test from a Stanford scientist that has stuck with me. It’s a kind of cocktail party test that researchers have known about for years, where if you sit at a cocktail party and you’re listening to the person in front of you, you can’t really listen to the person behind you.

In fact, you may pick up very basic things like your name being said, if someone says it behind you, but beyond that, you’re not processing both those streams of information.

So apply that to the person sitting at a desk, fiddling with a device or trying to read an IM while surfing a website or talking on the phone to a boss or colleague or subordinate. What you are basically doing is switching rapidly among those tasks, not doing them at the same time.

And all the research says when you switch among those tasks, you cut your effectiveness at each one of them by a significant degree.

Listen to the full interview here.  It is worth your full, undivided, undistracted attention.

Nathan Myhrvold on “The Big Idea: Funding Eureka!”

Nathan Myhrvold

Here is an excerpt from an article written by Nathan Myhrvold that appeared in the Harvard Business Review (March 2010). You can purchase a copy of the complete nine-page article and/or subscribe to HBR. You can also listen to an interview of Myhrvold. To watch the interview (at no cost), purchase a copy of the complete nine-page article and/or subscribe to HBR, click here. To watch a four-minute film clip from Charlie Rose’s interview of Myhrvold earlier this year, click here.

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My company, Intellectual Ventures, is misunderstood. We have been reviled as a patent troll—a renegade outfit that buys up patents and then uses them to hold up innocent companies. What we’re really trying to do is create a capital market for inventions akin to the venture capital market that supports start-ups and the private equity market that revitalizes inefficient companies. Our goal is to make applied research a profitable activity that attracts vastly more private investment than it does today so that the number of inventions generated soars.

“That’s preposterous,” some might say. “Inventing can’t be a business in its own right. It’s too risky, and inventions are too intangible to generate sufficient profits by themselves. Inventing and inventions can’t be separated from the companies that turn the ideas into actual products. And the notion of creating a liquid market for inventions is absurd.”

I couldn’t disagree more. In the 1970s, people said the same thing about another type of intangible intellectual property: software. Back then, everyone in the computer industry believed that software was valuable only because it helped to sell mainframes or minicomputers and that you could never sell software by itself. As a result, software engineers worked for computer manufacturers or for companies that used computers. Very few independent software vendors existed, and those that did were barely profitable. As a business, software was hopeless. Everyone said so.

Everyone was wrong, of course. Over the next three decades, software became one of the most profitable businesses in history. I know because, as a manager and ultimately the chief technology officer at Microsoft, I had a ringside seat to this amazing success story.
Software owes its ascent largely to two crucial developments. First, software vendors gradually persuaded software users—through both education and lawsuits—to respect intellectual property rights and pay for something that they might otherwise simply copy. Then vendors liberated software from hardware by overcoming system incompatibilities and developing solutions that could work on many different brands of computer. When the PC revolution hit, software became an industry in its own right.

I believe that invention is set to become the next software: a high-value asset that will serve as the foundation for new business models, liquid markets, and investment strategies. The surprising success Intellectual Ventures has had over the past 10 years convinces me that, like software, the business of invention would function better if it were separated from manufacturing and developed on its own by a strong capital market that funded and monetized inventions.

The lessons we have learned so far suggest that a full-fledged invention capital system could solve many of the problems that have long plagued both inventors and the consumers of inventions: inadequate funding for applied research, an inefficient market for connecting companies with the inventions they need and for monetizing inventions, a balkanization of the inventors and inventions required to tackle big problems, and an enforcement and arbitration system that simultaneously permits too much infringement and relies too heavily on lawsuits to determine price.

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Nathan Myhrvold is the CEO and a cofounder of Intellectual Ventures, a company that makes a business out of invention. He is a former chief technology officer at Microsoft.

The Key to Business Success, in One Sentence, from Herb Kelleher (via Tom Peters)

(from a brief video by Tom Peters – and a thank you to Larry James for posting this, where I first saw it).

Question posed to Herb Kelleher, Southwest Airlines:
What is your secret to success?

Answer, by Kelleher:
You have to treat your employees like customers.

Discussion over!

——

Here’s the video (about 2 1/2 minutes — worth a look):

The Yale Book of Quotations : A Book Review by Bob Morris

The Yale Book of Quotations
Fred R. Shapiro, Editor
Yale University Press (2006)

During the past 25-30 years, I have purchased and then made frequent use of dozens of anthologies of quotations (including revised and updated editions of Bartlett and Oxford) and consider The Yale Book of Quotations the most entertaining and enlightening of them all. As editor Fred R. Shapiro duly acknowledges, he had the substantial benefit of state-of-the-art research methods and resources that were not available to his earlier counterparts and thus was able to trace more thoroughly the origins of quotations he selected. Correct attribution is especially important to those who are, as Joseph Epstein characterizes them in the Foreword, “highly quotatious.”

Here several such corrections. “We are like dwarfs standing on the shoulders of giants”(Bernard Chartres, not Isaac Newton); “War is hell!” (Napoleon, not William Tecumseh Sherman), and “Murphy’s Law” (George Orwell, not Edward A. Murphy, Jr.) Shapiro also includes a number quotations not found in previous anthologies. For example, “Whatever does not kill me makes me stronger”(Friedrich Nietzsche) and “Live fast, die young, and leave a good looking corpse” (William Motley). The 12,000 quotations are arranged in alphabetical order by author, with source and date of origin cited.

I especially appreciate Shapiro’s provision of 200 memorable “Film Lines” (Pages 258-269) that include some of my personal favorites. For example:

Adam Cook (Oscar Levant) in An American in Paris (1951):”[My face is not] a pretty face, I grant you, but underneath its flabby exterior is an enormous lack of character.”

General Buck Turgidson (George C. Scott) in Dr. Strangelove (1964): “Mr. President, I’m not saying we wouldn’t get our hair mussed. But I do say no more than ten to twenty million people killed, tops, depending on the breaks.”

Captain (Strother Martin) in Cool Hand Luke (1967): “What we’ve got here is failure to communicate.”

Dr. Moreau (Charles Laughton) in Island of Lost Souls (1933): “[The natives] are restless tonight.”

Howard Beale (Peter Finch) in Network (1976): “I want you to get up now. I want all of you to get out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell `I’m mad as hell, and I’m not going to take this anymore!’”

Harry Lime (Orson Welles) in The Third Man (1949): “In Italy for thirty years under the Borgias they had warfare, terror, murder, bloodshed – they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love, five hundred years of democracy, and peace and what did that produce? The cuckoo clock.”

This is an anthology to be kept near at hand, perhaps on a coffee table, and will encourage and generously reward occasional browsing. Here are a few that recently caught my eye:

“There may be said to be two classes of people in the world; those who constantly divide the people of the world into two classes, and those who do not.” Robert Benchley (1921)

A U.S. sailor saluting a new flag hoisted on his ship: “I name thee Old Glory.” William Driver (1821)

“The most important aspect of our [Israel's] policy must be our ever-present, manifest desire to institute complete equality for the Arab citizens living in our midst…. The attitude we adopt toward the Arab minority will provide the real test of our moral standards as a people.” Albert Einstein (1955)

“You know the world is going crazy when the best rapper is a white guy, the best golfer is a black guy, the tallest guy in the NBA is Chinese, the Swiss hold the America’s Cup, France is accusing the U.S. of arrogance, and Germany doesn’t want to go to war.” Chris Rock (quoted in Calgary Sun in 2003)

“Nowadays people know the price of everything and the value of nothing.” Oscar Wilde, The Picture of Dorian Gray (1891)

Using meticulous research to trace quotations to their original sources, Fred R. Shapiro was able to determine the validity of a claim such as Yogi Berra’s, “I really didn’t say everything I said.” He probably didn’t make all the statements attributed to him but he did make that claim, Shapiro confirms, during an interview by Sports Illustrated in 1986. Shapiro will gratefully welcome corrections of information provided in this volume as well as suggestions of new quotations for future editions. Submit them to fred.shapiro@yale.edu or www.quotationdictionary.com.

Tony Hsieh (Zappos) in “The Corner Office”

Tony Hsieh

Adam Bryant conducts interviews of senior-level executives that appear in his “Corner Office” column each week in the SundayBusiness section of The New York Times. Here are a few insights provided during an interview of Tony Hsieh [pronounced "SHAY"], CEO of Zappos. Hsieh is also the author of Delivering Happiness: A Path to Profits, Passion, and Purpose, published by Business Plus (2010). To read Bryant’s complete interview and his  interviews of other executives, please click here.

“After college, Hsieh and a roommate started a company called LinkExchange in 1996, and it grew to about 100 or so people, and then they ended up selling the company to Microsoft in 1998.” From the outside, it looked like it was a great acquisition, $265 million, Hsieh recalls, “but most people don’t know the real reason why we ended up selling the company. I just dreaded getting out of bed in the morning and was hitting that snooze button over and over again.”

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Bryant: Why?

Hsieh: I just didn’t look forward to going to the office. The passion and excitement were no longer there. That’s kind of a weird feeling for me because this was a company I co-founded, and if I was feeling that way, how must the other employees feel? That’s actually why we ended up selling the company.

Financially, it meant I didn’t have to work again if I didn’t want to. So that was the lens through which I was looking at things. It’s basically asking the question, what would you want to do if you won the lottery? For me, I didn’t want to be part of a company where I dreaded going into the office.

So when I joined Zappos about a year later, I wanted to make sure that I didn’t make the same mistake that I had made at LinkExchange, in terms of the company culture going downhill. So for us, at Zappos, we really view culture as our No. 1 priority. We decided that if we get the culture right, most of the stuff, like building a brand around delivering the very best customer service, will just take care of itself.

Bryant: So how do you do that?

Hsieh: About five years ago, we formalized the definition of our culture into 10 core values. We wanted to come up with committable core values, meaning that we would actually be willing to hire and fire people based on those values, regardless of their individual job performance. Given that criteria, it’s actually pretty tough to come up with core values.

Bryant: Tell me what happened.

Hsieh: We spent a year doing that. I basically sent an e-mail out to the entire company, asking them what our values should be, and got a whole bunch of different responses. The initial list was actually 37 long, and then we ended up condensing and combining them and went back and forth and came up with our list of 10.

Today, we actually do two separate sets of interviews. The hiring manager and his or her team will interview for the standard fit within the team, relevant experience, technical ability and so on. But then our H.R. department does a separate set of interviews purely for culture fit. They actually have questions for each and every one of the core values.

Bryant: Can you give me an example of the value and the question?

Hsieh: Well, some of them are behavioral questions. One of our values is, “Create fun and a little weirdness.” So one of our interview questions is, literally, on a scale of 1 to 10, how weird are you? If you’re a 1, you’re probably a little bit too strait-laced for us. If you’re a 10, you might be too psychotic for us.

It’s not so much the number; it’s more seeing how candidates react to a question. Because our whole belief is that everyone is a little weird somehow, so it’s really more just a fun way of saying that we really recognize and celebrate each person’s individuality, and we want their true personalities to shine in the workplace environment, whether it’s with co-workers or when talking with customers.

I think of myself less as a leader, and more of being almost an architect of an environment that enables employees to come up with their own ideas, and where employees can grow the culture and evolve it over time, so it’s not me having a vision of “This is our culture.”

Maybe an analogy is, if you think of the employees and culture as plants growing, I’m not trying to be the biggest plant for them to aspire to. I’m more trying to architect the greenhouse where they can all flourish and grow.

Bryant: Did the process of developing those core values go smoothly?

Hsieh: Honestly, there was a lot of resistance to the core values rolling out, including from me. I was very hesitant, because it just felt like one of those big-company things to do. But within a couple of months, it just made such a huge difference. It gave everyone a common language, and just created a lot more alignment in terms of how everyone in the company was thinking. If I could do it all over again, I would roll out our core values from Day 1.

Bryant: What other things did you do at Zappos to sort of reinforce and build the culture?

Hsieh: Probably the most important thing I did was try to encourage employees to come up with their own ideas for building the culture. The actual ideas that I’ve personally come up with are few and far between.

Bryant: But what were those?

Hsieh: For example, for our offices in Las Vegas, it’s a big building. We’ve probably got 700 employees in Vegas. The previous tenants had multiple doors where you can exit, and the parking lot is in the back. We made the decision to actually lock all the doors so everyone has to go through the front-entrance reception area, even though that means you might have to walk all the way around the building. The reason for that is to create this kind of central hub that everyone has to pass through to help build community and culture.

And the free lunch we provide for employees is really meant less as a benefit in terms of a free lunch, and more to get employees to interact with each other. But most of the stuff that happens in our office is really about some employee coming up with an idea and, whether it’s me or other managers, saying, “If you’re passionate about it, just run with it.”

At some point, it kind of just snowballs, because once employees see other employees just doing stuff, then that lets them feel like they have more permission to run with their ideas.

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Bryant: If you could ask only one or two questions to get a sense of a person, what would they be?

Hsieh: “If you had to name something, what would you say is the biggest misperception that people have of you?” Then the follow-up question I usually ask is, “What’s the difference between misperception and perception?” After all, perception is perception.

Bryant: What are you trying to discover with those questions?

Hsieh: I think it’s a combination of how self-aware people are and how honest they are. I think if someone is self-aware, then they can always continue to grow. If they’re not self-aware, I think it’s harder for them to evolve or adapt beyond who they already are.

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To read several of Bryant’s more recent interviews of other executives, please click here.