By Michael Eckhardt
B2B tech firms that want to move from a customer base of Early Market “visionaries” to broader mainstream markets face several big challenges. Whether they’re involved in software, mobile, AI / Machine Learning, IoT, Big Data or related tech solutions, growth companies need to get to mainstream customers with their disruptive or breakthrough offerings, otherwise:
This need to move to the next stage in customer adoption is called, as many of you know -- “crossing the chasm”, based on the book title of my firm’s chairman, Geoffrey Moore.
Despite the best intentions and a skilled management team, both new ventures and established companies sometimes pursue the wrong paths. They might err in targeting the right market segment, whole product, pricing, and other errors that prevent them from making this trajectory across the chasm.
Here are seven best practices (and a few cautionary warnings) for executives and venture teams that want to accelerate a “chasm crossing”, in order to take their business to a scalable and more profitable future. These are based on our Chasm 3.0 work with more than 500 companies in Silicon Valley and worldwide.
Intelligently Develop Your Target Market
Early market companies strive for fast growth that will allow them to move past their current market. However, in planning for scalability they often talk to current customers to determine wants and needs, instead of looking at the broader possible market opportunities that sit to the right of the chasm. The key is to gain insights from “mainstream customers” who are NOT YET adopters of your technology. In the next year or two they will need to be your target, so you should proactively understand their pain points and problems now.
Validate Your Product's “Compelling Reason to Buy”
Driving adoption by a mainstream customer base requires you to develop a compelling business case for why pragmatists should switch to your solution. This needs to be an "outside-in" view from the market’s perspective - not your internally-driven myopia.
"Perfect" Is The Enemy of "MVWP"
Are you possibly waiting for your R&D, engineering, and marketing teams to configure the "completely perfect product" before you launch into the marketplace?
Perfection does not exist in tech. You need to focus instead on configuring MVWP (Minimum Viable Whole Product) -- the well-defined set of benefits / features / capabilities that give pragmatic customers in the main market an answer to their major business pain or workflow problem. Don’t adopt a “kitchen sink” mentality, but instead look for features to SUBTRACT out, in order to help simplify the usage, installation, integration, and purchase of the solution.
Follow Smart Pricing
Businesses that want to attract the broader customer base and immediately impact sales are often tempted to cut prices by 10 to 15%. However, price elasticity is rare in the transition from Early Market to Mainstream Customers. We have 500 real-world examples to prove this point. Your pricing needs to be reasonable, but cutting the price further is not likely to provide the unit sales boost that you might be dreaming about. Stay with your pricing to protect margins and instead look at strategies to accelerate adoption by pragmatists in the main market. For example, you could offer a performance guarantee, a migration service, or financing options that reduce customer risk in order to attract their attention and commitment.
Focus Your Sales Training on a “Tiger Team”
Both you and your product managers are excited about a soon-to-be-launched product that you deem a true industry disruptor. There might be the temptation to conduct sales training for this new innovation with EVERY member of the sales organization. Don't follow this path.
A small percentage of the team will likely account for a significant majority of first-year sales -- usually 85% or more of the sales of a breakthrough product are generated by 10-15% of the sales organization. The more powerful approach is therefore to identify this “Tiger Team” of sales pros who have top consultative skills and energy, and then provide them with intensive training and tools, as well as attractive incentives for selling this new product.
Develop Strong Messaging
A high-impact B2B message should be articulated in 75 words or less. If you cannot state it in 75 words, then you'll need to sharpen your understanding of the customer problem you are seeking to solve, and how your solution will deliver resolution. Tech firms often rely too much on buzzwords like "flexibility", “manageability, “agility” or “productivity” when describing their products, instead of specifying why it is tangibly superior versus the competition. Strong and clear messaging should make a case for why your solution stands out from the crowd, and why they should buy NOW instead of sometime in the future.
Establish a Vision for Today and Tomorrow
For success in B2B tech markets, you need a long-term vision that defines where the company and the market is headed in the next 12 to 36 months. You need to develop this vision, but not at the expense of actions taken today. Identify customer pain points and address them quickly so you can achieve the 30-40% growth rates in key market segments that allow you to confidently reach your longer-term vision, goals, and milestones.
None of these seven practices described above are easy. But what's the cost of not following these tips? Likely frustration, missed forecasts, and possible failure.
So we're on the side (just like you are) of seeing your future filled with momentum, market traction, and a profitable path to scale. And we hope these seven nuggets of wisdom can help you achieve those lofty goals.
Michael Eckhardt is a Managing Director and Senior Workshop Leader at Chasm Institute in Silicon Valley.