Crossing the international chasm

 In Business Model Management, Entering Foreign Markets, Featured

The issues software companies are facing when planning the international roll out are very similar to the issues described by Geoffrey A. Moore in his 1991 best seller, “Crossing the Chasm”. If you haven’t yet read the book: Rush to your online bookstore and order it – NOW!! Although it was published for the first time in 1991 it is still worth while reading.  The latest revision published in 2002 covers some of the changes in the market place since the beginning of the 90’ies. Moore is addressing the issues associated with getting new (and disruptive) technology to the market. The question he attempts to answer is why some technology companies break through and become embraced by the market, while others – with seemingly equal attractive technologies – fail.   The model and structures he developed in “Crossing the Chasm” can also be used to explain (and navigate around) some of the reasons why many software companies fail to grow from a local presence to become true global players.

The Technology Adoption Life Cycle
Moore defines what he calls the Technology Adoption Life Cycle. He divides the market into 5 segments:

  • Technology Enthusiast or Innovators
  • Visionaries or Early adaptors
  • Pragmatists or Early Majority
  • Conservatives or Late Majority
  • Skeptics or Laggard

Technology Enthusiast or Innovators (early innovators) are gadget freaks. They will try out any new technology within their field just for the fun of it.

Visionaries or Early adaptors are business people who are constantly on the outlook for new technologies which can help get their companies a competitive advantage.

Pragmatists or Early Majority are customers looking for new yet proven technology, with established support structures and an emerging market leader.

Conservatives or Late Majority are customers looking for commodity technologies that have been around for a while, where the price/performance ratio is low and a purchase decision represent no risk whatsoever.

Skeptics or Laggards are customers who will only purchase technology when their current solutions get obsolete and they have no other choice.

Moore points out that new disruptive technology are purchased by early adaptors and early innovators only, which again only represents some 10 % of total market volume. The remaining 90% cannot be penetrated, as they only purchase proven technology and preferably from a market leader.   The challenge for new technology providers is to jump from early adaptors and early innovators to the early majority and thus the main stream markets.

Strategies for crossing.
A major issue in B2B markets is references. Early innovators and adaptors are not concerned with references. However, pragmatists’ purchase decisions are very dependent on adequate references. A pragmatist only considers references within his own industry as an adequate reference. This is exactly your challenge. It is almost impossible to jump from an early adaptor in one industry to a pragmatic one in another industry.

The strategies which Moore recommends are all centered around fine tuning the value proposition and focusing all energy on a very narrow segment in the market, where you can become the de facto standard and thus market leader. Using this approach you can make the jump from early innovators and adaptors to early majority. From this position you can then broaden your market coverage in a later stage.

The international “chasm”
Making the move to international markets resembles in all details the technology “chasm” challenge.   Being successful in a new geographical setting requires winning early majority customers. However the early majority is not available to you!

Me-too solutions
Let us consider the situation where your technology or value proposition is not new and unique. Your offering is equivalent to what is already available and adopted by early majority customers. In this case you clearly cannot be the market leader in the new geographical setting and you will be considerably disadvantaged, as the market will prefer to purchase from the current or emerging market leader.

Me-only solutions
Let us consider the situation where your technology is new and/or your value proposition differs substantially from what is already available in the new geographical setting. Early majority customers are not available to you as they don’t adopt new technology before it has become mainstream. You need to focus on early innovators and adaptors.

Strategies for jumping the double chasm
We consider entering a new market with a me-too value proposition as extremely difficult.   Early innovators and adopters will find you uninteresting as you are not offering anything new. Early majority will find you uninteresting as you are not the market leader.   We see very slim chances of making it across borders with a me- too solutions unless you’re an extremely well positioned player already and you can take advantage of your current position.  You can enter through acquisitions

This leaves only one option: You must cross the borders with new technology or at least with a new and competitive value proposition. You must find early innovators and adopters (or make yourself visible, so they can find you) and apply the strategies for crossing the chasm, which Moore lays out in his book.   Thus, making it to the international markets represents a double chasm challenge.   First you need to find or be found by early innovators and adopters and win them as customers. This can be seen as a chasm on its’ own. Then you will need to find ways to jump to the early majority = chasm number 2.

The Bridgehead
TBK recommends following a bridgehead strategy for crossing borders. This approach allows you to leverage from a position of strength in one geographical setting in the effort of creating a bridgehead of first reference customers in a new territory.  We still see the bridgehead strategy as the most appropriate for crossing the first (international) chasm.

Reference Geoffrey A. Moore, Crossing the chasm – Marketing and selling disruptive products to mainstream customers. HarperBusiness 1991. The most recent edition (2002) has been revised with the changes which occurred from the first edition in 1990.

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