The Hidden Gap That Destroys Startups (You Need to Cross It)

So in this series, we want to talk about the books that over the years were our favorites to describe concepts to entrepreneurs. There will be about 10 to 20 books that we have over the time chosen, read over and over and again, and gave speeches and lectures about them. So that the founders understand the concepts and can apply this. So there's going to be a lot of practical examples as much as the core concepts of the book will be presented. One of these books that we talked a lot about is Crossing the Chasm by Geoffrey Moore. Crossing the Chasm is an important book for founders, especially at the early stages, because it gives the founders 5 different segments represent different behaviors in the technology adoption cycle. I'm going to illustrate what those sectors are and how those are going to be very important in the startup's understanding on product development and marketing. So if we need to draw this whole sector of any market, this could be a consumer market, this could be a business market, what Moore has identified is is there is a normal distribution of the total market. So this represents anything that you have in mind. One example, let's say the technology market for education institutions. The narrower you get, the better. So he divides these markets into large segments, so 5 segments, and The first part of any technology market, anybody in buying decision power, you as a consumer or the business person, he divides them and starts from the innovators. The innovators, I'll give you a B2C example, the innovators are the people who have bought tents and have established in a waiting line to get the first iPhone's new version. So you see these people in the news, they get into line, they wait until the doors are opened in an Apple Store so that they can find the— they can get their hands into the first new version of the Apple product. So those are innovators. Then he starts describing the next line, which is early adopters. Early adopters is not like innovators. They like to adopt things early, but they don't take as much risk as innovators. One of the characteristics of innovators is they take risks. They know the product they're buying is not in its best shape. It's a demo product, it's the first version. They are completely aware of the risk they're taking by investing money and time in getting into this new product, whatever that is. Then comes the early adopters. Early adopters follow the technology trends really closely, either as a consumer or a business leader. They like to try new things, but they have different characteristics. Then comes the early majority. And the late majority. These are individuals or companies, leaders in companies, that have been waiting for a new technology to pass certain thresholds, certain thresholds on quality, on durability, on stability, on price. They wait for others, so whenever they give their judgments on the technology or product, they know that a lot of people have used them and these products are working. They don't want to take the risk of a product, uh, if it's not working 100%. Late majority is a bit different. They wait until most of their competitors start using a certain technology until the moment they adapt it, they buy it. And then comes the laggards. Um, I think a good way to describe laggards is people who started, um, with the iPhone 7 or 6, and they have their BlackBerrys for as long as they could before they switch to other versions of the mobile phone. Laggards could be consumers and businesses as well. So each of these segments have unique characteristics, needs, and motivations, and these require different marketing strategies, go-to-market strategies, to effectively reach and convert them. One of these concepts, like the concept of the book The Chasm, is actually a gap between the early adopters, innovators, early adopters, and the late majority. He divides this world into 2 and says whoever is in this category is hardly ever going to be represented in this category. They have very different tastes and they have different needs, so most startups that are building new technologies They can get to early innovators, first 10, 100, 1,000 customers. They can get to early adopters, but usually what they have been using as technology tools or strategies to get into this early adopter market will not help them to cross this chasm and become a mainstream product. So many startups fall into this chasm and they struggle to shift their practices, their go-to-market strategy, and their product So they become more successful. This is where most of the majority of the markets are. So unless a startup moves into this territory, they cannot generate too much revenue. The problem that startups face when they have the original idea, they usually start not being able to fully grasp the product and the technology that's needed for these 2 segments without getting your early innovators, early adopters and innovators You cannot convince the late majority. They have different tastes, they have different requirements, but this is where the big market is. So as a popular example, most of these startups come and say, okay, we're going to build a tool or an application and we're going to start selling to the number one, number two, the market leaders of any market. And they start trying to get to these people, they start trying to get to the leaders of these institutions, and they keep on failing and failing and failing because Their product and their service is not yet ready. They haven't been battle-tested. So instead of trying to get to this late majority or even early majority, startups has to understand how they can start with the innovators and early adopters. This is something usually called starting with a beachhead, beachhead market. And as innovators, as startups start understanding where they can start from, where they can get their product into the hands of other people, they can start actually understanding what's needed in the other markets without getting into the early adopter market, innovator market. A startup will definitely fail, as represented in the book, to come and disclose their technology and sell their technology to the late majority. When startups start understanding this concept, then they can start dividing their go-to-market strategies. If a startup wants to actually be successful, grasp the majority of the market, be revenue generating and profitable, there's no doubt that this is the territory to go. But if they start from this territory, it will be impossible to conquer. One common example also represented in the book is how the Allied forces started from Normandy, the beachhead, and then moved closer to where the occupied France and occupied Europe was held by the Nazis. If they have started trying to capture Berlin without moving and starting from the Normandy beach, they will never be able to get World War II to an end. So this is something you can kind of understand the reasoning behind, because instinctively every founder wants to go to and capture a big market, and they see the time is wasted between innovators and early adopters. They just want to start marketing, doing some push into the late majority market, which usually fails. That's hence the book. So this is it. This is the basic concept of the Crossing the Chasm book. It's very important for understanding what is needed as a mindset, and it's very important for the startups to understand the previous examples like Apple, like Salesforce, like Tesla, so they can adapt their understanding and move into larger markets. Last example is maybe from Tesla. Tesla is now a family car. It's being represented, it's competing with other car manufacturers head-to-head and sometimes overpassing there. They're trying to create the first real EV brand that's been adopted by the late majority. But remember where they started from. They had their first car as the Roadster. And Roadster is this high-end, expensive electric sports car that only focused on a certain amount of people that will pay that amount of money Without actually thinking if this car is going to work, if there's enough EVs. They wanted to be part of a revolution. They wanted to be bragging about how they got their first Roadster before anybody ever heard about the name Tesla. Then it came to early adopters, people who started seeing a couple of crazy guys running around in their Roadsters, which is a beautiful car. And then all of a sudden, Tesla had the momentum. to cross the chasm where they started building different distribution partnerships, different models of cars. They expanded their factory. They started building products that are going to be addressing the early majority and late majority. But if they only started with Roadster and tried to sell it to late majority, to families, it would have never worked. So conclusion is a lot of technology companies have been using this kind of tool. And it's a crucial step for any technology company to understand how they can shift from this piece to the big market and become more successful. So, um, read the book. Don't just stick around and hear what we had to say. Get the book, read the book. There's a lot of content, a lot of more examples in that, um, and apply it so that your chances of launching a product and moving into mainstream will increase, and that's what we try to do with the Brutally Honest Mentor Programs. Thanks so much, and stay tuned for our next book review and suggestions.