Customers Are Still Slow to Adopt Innovative New Tech. Why the Lag?
Back in 1990 my book Crossing the Chasm addressed the marketing challenges faced by entrepreneurs in getting a disruptive innovation adopted by mainstream customers. It struck a chord then. And now 14 years later businesses are still facing a somewhat similar scenario.
Yet the game itself is being played on a whole new field, one shaped by cloud computing, mobile devices and an everything-as-a-service business model. Each of these developments is having a novel impact on chasm-crossing strategies. Here’s how it is playing out:
The lull in the adoption of new technologies comes into being whenever buyers must make a high-risk, low-data purchase decision. The risk comes from technologies that are not proven, solution suites that are not yet built out, partnerships that have yet to coalesce and standards that are still in flux.
In this context, buyers self-segregate into three basic buying groups, as follows:
- Visionaries, who go ahead of the herd to gain competitive advantage or to get a leg up on an emerging problem.
- Pragmatists, who go with the herd, watching their peers to see what is the popular choice and thus the “safe buy.”
- Conservatives, who go after the herd, waiting for the dust to settle, the safe buy to be known and the low-cost choice to be a reliable alternative.
These dynamics play out largely in business-to-business purchase decisions, where often a lot of money is at stake and the productivity of an entire organization is in play. Such decisions are made by groups after thoughtful discussions in which the visionary, pragmatist and conservative positions come to light.
By contrast, adoption dynamics of this sort are much less present in business-to-consumer purchase decisions where often a trial is free, the consequences of failure are incidental and no one except the end user needs to be consulted.
Focusing in then on the business-to-business landscape, three changes have altered chasm dynamics in enterprise information technology. Cloud computing: has dramatically lowered the barriers to entry for startups and one-person consultancies, so much more choice in the market exists than ever before. At the same time, the cloud enables a try-to-buy sales cycle that reduces the risk of the buyer in testing the market. So it is much easier to get started, and thanks to the Amazons and Rackspaces of this world, straightforward to scale.There are still concerns about reliability security, and these do create chasm effects in some cases.
The same can largely be said for the software-as-a-service business model. In the prior era, once customers had purchased the offering, they were on the hook to make their use of it successful. In effect, they had to undertake “adoption risk,” and this was a big part of what created hesitation among pragmatists and skepticism among conservatives.
In the service-oriented model, the pressure is on the vendor to secure widespread adoption; that is how the firm makes money at scale, via a “land and expand” business model. This makes it easier for customers to buy in to next-generation offers, provided they are not widely disruptive to the rest of the business.
This has worked to the benefit of software as a service applications like SuccessFactors (bought by SAP), ExactTarget (bought by Salesforce), as well as independent companies like Workday, NetSuite and Intacct.
Still, to make a big impact in a short time, companies find it worthwhile to focus their market development efforts on a beachhead market, where they can gain dominant share around a specific use case within a target segment.This way their products can become the safe buy for those customers, their de facto standard if you will. This in turn creates an open and vibrant market for the partners in their ecosystem. Lithium took this approach to community-enabled tech support, with a particular focus on wireless telecommunications, a tactic that established the company firmly on the other side of the chasm, from which they are now expanding into other use cases.
The third and final big change in enterprise IT in the past decade is the arrival of mobile devices and the bring-your-own-device movement.This is reshaping the landscape of enterprise IT, pushing aside established players like Microsoft and Intel at the edge and resetting the bar for application vendors like Oracle and SAP at the core. When everything is in flux, it is hard for IT decision makers to commit to next-generation infrastructure, even when everyone in their company is encouraging them to do so.
Here a stairway to heaven approach works well, where the first use case is relatively low risk, the next one addresses an urgent re-engineering problem, and the ones that follow are more general purpose. Box is a company that's following this path, and the first step customers usually take is just to deploy consumer-style document sharing with an enterprise security wrapper around it and then dig into deeper challenges like sharing medical records, board documents or confidential intellectual property.
In all cases, what the market is looking for is a new product with advanced features, surrounded by a reliable whole product -- the complete set of products and services needed to deliver on the value proposition promised by the core product. Whole products require ecosystems to be self-organized to fill a market need. The key lesson that Crossing the Chasm teaches entrepreneurs is to target a market segment for the new offer that is big enough to matter, small enough to lead and a good fit with their crown jewels.