Crossing the Chasm Between Markets and Meaning with Geoffrey Moore (Part Two)

Forbes Books presents the Startup Science Podcast with Gregory Shepard, brought to you by startupscience.io. Greg is an entrepreneur who has built and sold 12 businesses. He's a recipient of 4 private equity awards and is a featured TEDx speaker and Forbes author. Here's Gregory Shepard.

Welcome back to my talk with Geoffrey Moore, the author of my all-time favorite book, Crossing the Chasm. Now, Jeff, in part 1, you walked us through the concept of the chasm and crossing the chasm. But now I want to talk to you a little bit about storytelling. I've read a lot about storytelling in your content. And when it comes to crossing the chasm, perhaps you could enlighten everybody and the listeners here on the concepts of storytelling.

Well, you know, so I don't, I don't know if you know, Gregory, but I was originally an English professor.

I didn't know that. I was going to ask you, I'm so curious, like where you, what your background is because you're so, you have like an instinct for this. And I'm like, how did this happen?

I don't think you get to have the only claim to neurodivergence. I think I can be neurodivergent too. You just hooked on stories. But the point is, I think so, I think stories is kind of a universal problem-solving laboratory where basically you can experiment with a strategy by essentially putting it into a story and telling a story. But in fact, I would argue that every entrepreneurial pitch to a venture capitalist is a story. There's no, you don't have, I mean, you might have a prototype product or a demo, but you don't have much else.

So the—

What the venture capitalist is listening to is, Well, tell me, tell me, tell me, they don't say this, but tell me a story about how this would change the world or why this would change the world. And venture capitalists turn out to be very good literary critics because they're listening to the story very skeptically. They're trying to say, what, you know, what, how would this, is this a, you know, is this a real good, whatever. But the point about narratives is, first of all, they allow you to experiment with possible futures. Science fiction's wonderful at doing this, of course, as well. But then secondly, they inspire people. So in other words, you tell a story that says, you know, like Steve Jobs when he was John Sculley, he said, do you want to make sugar water for the rest of your life or do you want to change the world? You know, and so there's a story there. And Steve was an incredibly, if you ever listened to his graduation speech to the Palo Alto High School, I mean, it's just super inspiring. And the stories that they tell. And so between the ability to use storytelling to explore alternative futures and, you know, when you're— now at business schools, they will call storytelling scenario planning. So what they'll say to you is, look, you should try several scenarios. Okay? To me, those are just stories, right? By the way, if you're the salesperson, when you're essentially engaging with a customer, there's 2 stories you want to know. What you want to tell your story, but you really should listen and get the customer to tell as much of their story first as you can so that your story connects with their story. And we all have this, you know, I have a story about my career, you know, or I have a story about my job, or I have a story about my company, or I have a story about my customer's problems. And so all of those stories, are ways that we carry around. But what do you do for a living? And if you ever have a kid who wants to figure out, like, I mean, my kids were figuring out, I thought I was just unemployed for most of my life. What does he do? But eventually, eventually I was able to craft a story that made sense to them. But it was like, well, but Dad, Dad, you don't have a job. Anyway, so I— Not anymore.

Nowadays everybody's like, right?

Yeah. At some point, at some point, the story caught up with it.

Yeah.

Yeah. It was good.

So I'm going to move backwards to go forward because I'm dying, because you brought it up and I'm just really dying to know, how did you get to the point from where you were an English professor to the point where you're writing one of the most impactful books in the whole startup industry. How did that happen?

All right. So, I was an English professor. I was teaching at a small college in Michigan, but Marie and I, I'm from Oregon and I went to Stanford. Marie's from Palo Alto. Living in Michigan wasn't the right fit for us and our family. So, we just picked up stakes and we said, okay, we're going to move back to the Bay Area. And when we did that, there was no chance I was going to be able to stay in academics. The jobs in academics were very, very, very scarce. But I thought, well, you know, I can do something. So anyway, I ended up joining a software firm as a training director. And, you know, I said, I don't know anything about software, but I think I know something about training. And the guy that hired me, I think, just wanted to mentor somebody who was young and bright and, you know, enthusiastic or whatever. So he said, well, you'll learn. And I'm going, I don't know about that. No, no, you'll learn. You'll learn. And so anyway, so I joined a software company. After I'd been there for a few years in kind of a staff role, I'm thinking, I don't know if I could be a staff guy all my life. I think in tech, you either have to make it or you have to sell it. And I didn't think I was going to be able to make it. So I thought, okay, I'll sell it. Well, it turns out I had a— so I just wangled my way to the sales force and I got a couple of sales positions at other companies going forward. But it turns out with selling, I was really good at opening, but I was not very good at closing. That's not a good quality in a salesperson. So basically, Basically, halfway through, somebody kind of said, well, what about marketing? No marketing.

Yeah.

What's that? Just storytelling, right? So anyway, I go, well, this is fun. And I end up joining a company called Regis McKenna. So Regis McKenna was the guy who kind of invented high-tech PR. Prior to Regis, people thought marketing just was Procter Gamble and was just, you know, brand marketing and And, you know, catchy logos and jingles and whatever. And Regis was the first guy who said, no, for technology companies, marketing is education. It's ecosystem development, infrastructure development, the whole thing. So that was, and I went there and I was like, wow, this is really cool. Well, that was where, and it's all, the keyword was positioning. So you went to Regis McKenna to help you position your company, which was a really, really good idea. Well, positioning is storytelling. I became kind of the storyteller. I mean, I didn't actually run a group. I just kind of went from project to project to project. Well, if you see enough projects, after a while it's like, hey, wait a minute, something's going on here. And what was going on was we would have these great repositioning programs. The company would come out of the gates, they'd be on Businessweek, they'd be in the Wall Street Journal, they'd be in the New York Times, they'd be, It's like, whoa. And then a couple years later, you're going, well, whatever happened to them? What happened? And they just kept on going off the radar, which is— so that's where the chasm idea kind of experienced it.

Oh, cool.

And that's why I wrote the book.

You are— this is like, you know, I'm like talking to a hero of mine and I'm like sitting here getting all this backstory. It's like, you know, you have those people who say, if you can meet one person and spend time with them, what would you say? and I'm having one of these conversations. I know I'm fangirling a little bit, but I don't care. So another question, going back on the rails here. Sorry about that.

Yep.

I'm just having a great time talking to you, to be honest with you. So when you look at how the digital transformation landscape has changed since you wrote Crossing the Chasm, what do you see that's different now Than what you saw when you wrote that book?

Oh, it's hugely different. When I wrote the book, if you were going to take a startup software company, you probably had to raise about a million bucks. You had to, because you got, you had to get computing and you had to get, you know, the databases and you had to get offices and you had to do all this stuff. And today, because of cloud computing and because of the whole remote infrastructure, because of the You know, the kind of video conferencing stuff that you and I are on right now and Zoom and Teams and, you know, Webex, all these incredible things. You can get into this game much, much quicker. And so that I think is a— and there's so much technology out there now that you can make, you can actually be, you can have an impact a lot sooner. So I think the technology adoption lifecycle For many things has become, the chasm has either become shorter or in some cases nonexistent. You actually could just start your company on the other side of the chasm because there isn't that much risk in trying a new thing. There's some, there's always some because particularly if you're a new company, you know, customer, business customers very worry about that. But that's why I said consumer is a little bit different. If you're just a consumer and you want, hey, you download it and try it. If you don't like it, don't do it. Don't do it. So that, I think that was never possible. When we were starting, it was all business. First of all, there was no consumer computing at all.

Yeah.

And then for a decade, it was really business computing brought home. So it was like the IBM PC in your home. And it wasn't really until the beginning of this century where Facebook and the, well, Facebook, Netscape Navigator, Facebook, you know, Google, Yahoo, eBay, A handful of these companies and all of a sudden it was like, whoa. And then we had a decade where as a consumer, you had a better IT experience than you did at work. It's like, you remember? You know, they got down and you go, hey, how come at work it sucks?

And they were using mainframes and stuff. Oh, so terrible.

Wait a minute. And so consumer computing kind of took over. Now I think we've actually, that wave is now receding. And I actually think now business-to-business is getting its resurgence. We've released a ton of trapped value in the consumer world, but boy, if you look at education, if you look at healthcare, if you look at law enforcement, if you look at, you know, trying to onshore our manufacturing again, call centers, I mean, there's a ton of trapped value to be released in the coming decade.

Yeah, I love it. I always think when you say trapped value, I think about This is a terrible analogy, but I think about like gas trapped in rock.

No, that's exactly, that's where it comes from. That's the oil industry, right? No way, really? Yeah, yeah, it's exactly where it came from. Oh, I thought it was a terrible analogy. No, it's great. You get like a gusher and then, yeah, no, it's exactly it. So if there's no oil, you have what they call a dry well. And by the way, part of being an entrepreneur is understanding when you've dug a dry well and move on.

And get out. Yeah.

Yeah. By the way, you might take the same technology but take it to a different place, or you might try a different technology, or you might do both.

So let's do— if you don't mind, I'm going to come off script a little bit. I want to do a little test with you, a little— I want to, I want to tell you what, what I've been up to and then give you the opportunity to criticize it. Okay.

Yep.

So I spent 5 years studying why, when, and how founders fail. And then in that process, I found that the founders were failing for, for the reasons that they thought they were failing for weren't the real reasons. As usually, you have to ask the 5 whys and you dig down and you find out what the real reasons were. So then I built a platform that takes everything that's in the founder ecosystem into one place, right? So it allows them to take classes and then it gives them tools like you could do your market sizing, find investors, do grants, all that kind of stuff. Because the concept that I had was the trapped value was that founders were failing because everything was fragmented all over the place and there was no consistent way of talking about things. There was no consistent lifecycle. Everybody was thinking that a lifecycle was a round, which is just something that happens in a lifecycle. If you look at that model, the, the, when I think about it, the trapped value for me was the fact that founders are failing at 90% for like the last 20 years, and that just seems outrageous. Uh, so is that a— can you criticize that and talk about it a little?

It's a— by the way, if I go back to your oil industry, because it's so fragmented, it's like fracking. It's like, like shale oil. Totally. Exactly. There's oil everywhere, but how the heck do you get it out? So, and, you know, earlier on, I think one of the earlier successes or, uh, green shoots for this problem was the Y Combinator.

Yes.

Yeah. But what you're saying is, look, there are too many people in too many directions. We need to create a community. It's not unlike a religion really. I mean, we need to come together in a congregation or whatever you want to call it.

Yeah. And say, this is how this works. Does everybody agree?

Yeah. And by the way, we can even have disagreements, but the point is we're having We're all focused on the same stuff and we're all wanting to help each other.

Right.

I think that helping each other piece is really important too because nobody makes it by themselves.

Yeah.

Yeah.

I mean, my whole concept is, and recently we're working with Fulbright on this, which is this concept of trying to use marginalized people, people that have been otherwise brushed off to this, people like me, right? Who were just brushed off to the side, race, religion, income, all of that sort of wealth, and then use them to solve the problems that they experience because they are the subject matter experts that only experience that. So is this like, does this work in your—

Well, I'll tell you this one wonderful example. So one of my clients that's been a client, a relationship I've now had for over a decade is with Salesforce. And it's been Marc Benioff and his team, you know, like his team's turned over a bunch of times, quite a lot over the last 10 years. But Marc's always been at the center of things. And one of the things that they invented very early on, about 10 years ago, was something called Trailhead.

Yeah.

Trailhead was where you could learn how to do and where you could learn to be a Salesforce administrator. Well, talk about a marginalized community. So Salesforce, a lot of the Salesforce administrators, had been administrative assistants or they'd been, you know, delivery, whatever they'd been doing, it wasn't a white-collar, you know, job.

Right.

And, but the Trailblazer thing let them come in and of course now, first of all, they're having a lot of success, but there's a Salesforce economy. I mean, it's like a huge worldwide economy. Yeah.

They've created their entire own world.

Exactly.

Amazing.

Yeah. Salesforce doesn't have any magic. Salesforce just has will and intention and values. But there's no reason why anybody can't do that. And so I think that notion of coming together, and I think there's, to me, there's a key component. I call it being in service to. If you come together with the idea that we all want to get rich, the problem is, God bless you, but I don't care if you're rich. But if you say we're coming together to help so-and-so or to achieve something or other, either I might say, well, I don't care about that either, but there are a bunch of people who say, really? You want to make the climate— you want to attack climate change? You want to help? I want to help. And so all of a sudden you can pull people together. And so that in-service-to thing is important as well.

So when you think about this whole idea of innovation, crossing the chasm and moving forward, Then it sounds like almost there's a component of bringing a, uh, something that's bigger than you and something that requires a community to participate to overcome whatever this fundamental problem is that's stuck in the chasm, this unreleased value.

Yeah. And by the, the, I just was reading the, the press today, the, the Nobel Prize, it was a Nobel Prize given yesterday, I think, in medicine. For the people who invented the messenger RNA technique that allows the vaccines to be created so rapidly. So the people at Pfizer and at Moderna, they're both relying on this technology. Well, that's a technology that basically was in the chasm. I mean, first of all, it was incredibly hard to get the messenger RNA not destroyed by the cells. The big discovery these people did was, how do you get through that? But then, how do you do all the engineering to make, you know, carry the vaccine? And then, somebody had to create— another company had to create a kind of a container of like a fat cell. It's like a little bubble, a fat bubble to put the thing inside so it could get inside the cell. I mean, all this stuff is going on, but the point was they were in service to—

To, right.

Yeah. And it started actually with HIV. They were trying to solve that. But then when the COVID thing, then when the flu guys saw it, they thought, well, you know, we got, we got, we always have to start a flu vaccine over and over and over again. It takes 4 or 5 years to get it going. Gotta be a better way. And so there, there was a real use case and now it's, it's changed medicine. I mean, a messenger RNA.

Fundamentally.

Yeah, it's, it's very exciting.

So when you think about the, the chasm, what are the most common trips that founders make when they're trying to get across? Like, where do they fumble and fall?

Founders tend to be envisioning global domination, huge horizontal infrastructural change, right? Because they're so excited, because they look at it and they go, let's think of the possibilities. Yeah. And secondly, they're also looking for So between the fact that they're looking everywhere and they want, they'll take kind of almost any deal they can get. They end up taking deals all over the place. It's kind of like chickenpox. And the problem with that is you never build a reputation with a community. You have a deal here, you have a deal there, you have a product here, you have a product. There's no ecosystem. There's nothing. The number one failure point is not picking a single target And then the second thing is not staying on target until you get— until you essentially, we call it knock over the first bowling pin. Once you knock over the first bowling pin, the second, third, fourth, they'll come. But if you don't knock over the first one, you're going to be in the chasm until you run out of money.

So they basically do a spray and pray and fragment their own and destroy their own ability to get to go drill into something and create that community.

Exactly. And if you get— in fact, I'd never used the phrase create community until just— you just used it right now. And I think it's— I think that actually is— I've said ecosystem, which is great. Ecosystem's part of it, but I think community is a better word because the customer's at the center of that community. The customer's need is the thing that pulls that community together. And then if you're in service to that need and genuinely in service to that need, meaning I'm not leaving until this problem's fixed. And then you will succeed. I mean, the world will pull you in.

I'm curious now, as we close out the podcast, I don't want to take too much of your time because I could just hang out with you. I mean, you are so cool and I'm just like in awe. I mean, you have to realize that as a, you know, I've done 12 startups and 12 exits and When I started, you know, your book, when I came across your book, it was one of the books that I was like, that changed my life, right? It was one of the books that changed how I thought about these things and how I worked through them. And I, all of my portfolio companies, I always tell 'em, you have to read this book. It's just a real honor. And if anybody's listening that hasn't read Crossing the Chasm, I mean, this thing is like, this is like a must-read if you're a founder. I'm telling you, it's incredible. And nothing has been written quite like it since then. So, if you're looking forward, right, you yourself, what are you doing now? I mean, you know, you went out there and you laid this foundation and it's just changed people's lives like mine. What are you doing now? Like, what are you up to these days?

Well, it's so interesting. So, for most of the— so, the book, I had to, by the way, rewrite the book a couple of times. I didn't change the any of the models, but I had to change the examples because it's—

Yeah.

So I've done that twice. But I would say, given that the book came out in 1991, and I would say for most of the '90s, all the way up till maybe when the tech bubble popped in like 2001, I was focused on the startup. I was focused on the community that you serve. What happened when the bubble popped was I ended up shifting my focus to established enterprises, A, because they could, they could employ me.

Yeah.

The startups are kind of in trouble if I write that. But what I realized when I started working with the established enterprises is they have to cross the chasm too.

Yeah.

They have a different problem. If you're a startup and you have to cross the chasm and you get some money, you only have one place you're going to put it. I mean, you're going to put it right where you need it now. But if you're Kodak or you're Businessweek or you're General Motors, you have a lot of places to put that dollar. You can put it in your established business and try to eke out a little bit more money from it, even though you know you're being disrupted. It's just, and by the way, you have shareholders who are expecting a profit every quarter. And I gotta tell you, at the beginning of these new life cycles, there's no profit. It's loss, not profit. The venture capitalists understand that, but the public markets don't. They understand it, but they don't like it. Yeah. So I've been spending the last 10 years in particular, like I mentioned, I was with Salesforce. It actually started with Salesforce and Microsoft. So the last book, the only, I've written 7 business books, but the first and the last are the only ones that really, really matter. The last one's called Zone to Win. And Zone to Win says, if you're gonna be in an established enterprise, you have to be able to zone off your core business, your core, you know, back office stuff, all your all the stuff that makes you big today from your next generation stuff, what we call the incubation zone and the transformation zone. And you have to run those zones very, very differently and you have to honor the zone. In other words, you can't say one zone's better than the other. They're not better, they're just different. But what you can't do is have one size fits all, which is kind of what people were doing. So I've spent the last 10 years helping companies who are, you know, established enterprises, put that framework in place so that, in fact, I'm gonna give a talk to some banking people this month. And the subtitle was Crossing the Chasm Inside the Belly of a Whale, which is kind of the problem statement, right? Like, you're trying to do that and you're giving the whale indigestion.

I mean, it's funny 'cause when I sold one of the companies that I sold to eBay Enterprise Marketing Solutions, and they told me they wanted the minnow to swallow the whale. They wanted, My little company to swallow the whale. I was just, I remember sitting there going, I'm sorry, what?

Yeah. Well, what happened? So, and they do, big companies do acquire companies like your company. And then the question is, do they kill it? Can they assimilate it or can they allow it to do change? And so those are, and then the track record, as you know, is not happy. It's not good. And so a lot of folks on this podcast, if your company gets acquired by a big company, you need to, you need to get the Zone to Win book.

Just, yeah, for sure.

It's just a playbook for how would you play this game inside the bell label web.

Yeah, it's, it's absolutely true. I mean, I read it and it helped me with my scenario, you know, because I was dealing with, you know, you walk in with your few hundred employees and they have Thousands and thousands, and you're sitting there going, how do I work with this monstrous beast of moving parts?

And well, and the thing that's so important is most of that beast is what we call the productivity zone. So it's finance, it's HR, it's IT, it's cybersecurity, it's marketing, it's customer support, it's facilities, it's all those things. Legal. Yeah. And God bless them.

Yeah.

They are there to make the existing business work more efficiently and effectively. And then, and they're good at it. But what they think they're also supposed to do is bring you into their fold. And the answer is no, not—

That's what kills it.

That's what— Yeah, exactly. The productivity zone and the incubation zone, you know, they're both, both are populated with very nice people, but they just should not, they should not interact with each other.

Yeah, I found it was like, I felt like I was a boat with a really sharp tip just cruising through the water. And then they turned me into a tanker, you know, and now I got a bunch of headwind and a bunch of weight and I'm moving really slow. And, you know—

One of the things that makes the entrepreneur different from the more traditional person in that group is how you value time. So the large, more bureaucratic organizational things say, look, you need to take your time. You need to think more slowly, analytically. You need to study problems. You need to, you know, socialize them. And then, because you don't want to make big mistakes. And by the way, that's true. Big, you don't want to make big mistakes, but an entrepreneur doesn't make big mistakes. An entrepreneur specializes in making little mistakes. But you make lots of very, very fast. Yeah. And very fast. And you learn. And those 2 zones, just, they can't even, they barely can understand each other.

Man, I really, really appreciate your time and being able to talk to you and meet you in person. I hope that we get to talk again. I know that I've been fangirling so much, but you have to realize the impact that you made on my life at such an early age, you know, when I was just getting started. And I was like, oh, and I was carrying the book around with me all the time, you know. And it was just like a— it's, it's a real treat to have you on here. And I'm very, very appreciative. Thank you so much for your time.

Well, Greg, thank you for having me on the show. I really appreciate it as well.

And that's it for another episode of the Startup Science Podcast. Founders, as a thank you for leading the changes in our world, I'm offering free access to the Startup Science platform Visionaries by Gregory Shepard. A one-stop shop for founders. It has everything from a startup academy and free classes to investor match, grant finders, finding pitch events, everything you need all in one place. Go to GregoryShepard.com, click on Visionaries to access, use code FOUNDERS, all capitals, for free access to the platform and check it out for yourself. Until I see you next time, namaste, my friends.

The Startup Science Podcast with Gregory Shepard is brought to you by startupscience.io. Founders can log on to startupscience.io and use code Forbes to get free access. To connect and find out more about Greg, go to gregoryshepard.com. The Startup Science Podcast is a production of Forbes Books.