KEN CHENEY

Contributor

Is the book “Crossing the Chasm” relevant for scaling a SaaS or software-driven businesses today?


Crossing the Chasm in the Era of User-Driven Sales

What is the relevance of the book "Crossing the Chasm" and how should one apply learnings from it to scale a SaaS or software-driven business today? The book mapped the path for technology adoption in an era of top-down

In the era of top-down decision making, an account used to be easy to categorize as an early adopter or a slow-moving pragmatic laggard. User-driven sales now means every account is likely to have multiple categories of users willing to adopt new technologies, creating new challenges for achieving mass-market appeal.

decision-making and adoption. In that era, an entire organization was easily bucketed as a visionary early adopter or one of the more pragmatic later-stage adopters. With today's empowerment of users to try and buy new technologies, the proliferation of open-source software, and vendors carrying most of the costs of early adoption, users drive the early- to mid-stage technology adoption life cycle. Vendors must have a strategy to create a groundswell in accounts with the understanding they may need to cross-the-chasm multiple times within an account to recoup the accrued customer acquisition costs and reach peak long-term-value (LTV).


Why is Geoffrey Moore's book "Crossing the Chasm" still relevant?

 

"Crossing the Chasm: The Next Step" was written by Geoffrey A. Moore in 1991 and has since become one of the most popular and highly reviewed business books ever published for entrepreneurs. In it, he presents a new model as a guide for making your technology company successful. The book separates the market into a market category for early adopters or visionaries who understand technology and are willing to take risks on new technologies and other categories for the late majority of users who continue to rely on older technologies and are change-averse. Account-level top-down decision-making drove technology adoption when Moore wrote the book. Today, empowered users are responsible for most technology adoption decisions on a need-based basis, a significant difference that has created the need for user-driven sales. Still, the book remains relevant because the insights and tools on successfully shifting from early adopters to mass-market appeal for a product or service still work.

 

What risks exist for startups and products that do not cross the chasm and enter the mainstream market?

 

The risk is that the company will not be able to reach a large enough market share and, as a result, have no choice but to shut down or consolidate operations. Having seen success and having failed, I'll state that the journey to success is much easier to look back on than the hard lessons endured on the path to failure.

 

What does it mean to cross the chasm for marketing and sales teams?

 

Crossing the chasm has become a term for when a product or service becomes mainstream and has mass-market appeal. The "chasm" in this case is the gap between early adopters and the mainstream.

 

Marketing and sales teams should be prepared to make a significant shift in their approach to marketing as they move from the early adopter's phase, focusing on the visionary innovation of a product or service into mass-market appeal.

 

The term "mass-market appeal" is often used in marketing and sales to describe the stage of a product or service when it has become popular enough to be widely adopted.


What is the era of user-driven sales?

 

The era of user-driven sales occurred when software users could purchase goods and services on their own. The internet allowed quick transactions and easy access to information on various brands, products, and services. The internet provided the building blocks for cloud computing and a variety of -as-a-service offerings, including software-as-a-service (SaaS), that removed the need for capital-intensive investment to trial, adopt, and procure new technology. These new offerings shifted vendors to subscription-based and usage-based business models, significantly lowering costs for users to experiment with new solutions. Finally, the widespread adoption of open-source software removed a barrier of entry for many vendors and allowed for further low-cost experimentation by users.


Why should a company embrace user-driven sales?

 

The idea of user-driven sales is not just for smaller companies but also for large corporations looking to create an interactive and engaging marketing and sales strategy. User-driven sales have been taking the world by storm. If your company is not best-in-class at user-driven sales, you are open to competitive disruption.


User-driven sales can be seen across many industries but is best exemplified by the technology industry, specifically cloud computing, open-source software, and SaaS vendors. Often referred to as "the power behind the throne," users are seen as the driving force behind purchasing decisions. In other words, it is a belief that end-users and their needs should drive sales discussions. Whether you're a B2B or B2C company, you're simply focusing on what your customers want (and explicitly asking them) over and over again. You are also lowering the barriers for users to adopt and purchase your product or service, often for free or with a credit card to start.

 

What are some examples of innovative software businesses that have crossed the chasm powered by user-driven sales?

 

Some examples of innovative software businesses that have crossed the chasm include Uber, Airbnb, and Instagram for B2C. For B2B, examples include Salesforce, New Relic, Docker, and Splunk for software and AWS, Digital Ocean, and Microsoft Azure for cloud computing. These companies demonstrated the value of user-based business models with a focus on the success of the customer. To gain mass-market appeal, these companies relied heavily on data-driven marketing strategies for awareness, demand generation, user acquisition and adoption, customer acquisition, and customer success to drive expansion.


Is your company ready to cross the chasm?

 

Crossing the chasm means going from one market to another. The "chasm" in this case is the chasm between the two markets. This is a gap that has proven to be a death zone for many businesses. Companies typically cross the chasm when they are confident in their product, termed "product-market-fit" with a clear understanding of their target market, and are willing to invest in building a repeatable and scalable go-to-market. If your company is not ready to cross the chasm, it should not attempt to go from early to late-stage growth. If this is the case, you should focus on product-market-fit and avoid the pressure to rapidly scale a go-to-market as it may be perilous and unachievable to reach a repeatable business with high-growth rates.


How do you cross the chasm today?

 

To cross the chasm today, you must have a strong product, which you are passionate about and want to share with others. You must also have a solid customer base and a community of followers actively promoting the value your company delivers. Getting across the chasm requires building your community from the ground up while constantly developing your product, attaining users, and converting those users to customers that rapidly expand to reach peak long-term value (LTV). Those customers who are at or heading towards peak LTV will provide the references and case studies proving to others that you are ready for mass-market appeal.

 

What is critical to understand and plan for is that you may need to sell to early adopters and pragmatic laggards simultaneously within every account. User-driven sales split across early and late adopters within the same account requires a well-thought-through groundswell strategy that focuses on acquiring users, user adoption, and customer acquisition followed by rapid expansion. A promising sign of success is when you can repeatably acquire early adopters as actual paid customers and use them to sell your value to others in the account, especially the pragmatic laggards. Creating a groundswell movement can be expensive, but best-in-class vendors are adept at converting users to paying customers and driving expansion within an account for the timely recuperation of customer acquisition costs and achieving peak lifetime value (LTV). 

 

Another strategy often used by startups is to side-step crossing the chasm with paying customers and focus on accumulating enough non-paying users to justify a partnership with or acquisition by a larger company capable of converting those users to paying customers. These types of partnerships or acquisitions signal a willingness to invest in innovation for many more prominent vendors. They have the existing go-to-market engine in place to add your product or service to their portfolio and rapidly monetize the user base.


How do you accelerate reaching peak lifetime value (LTV) within an account?

 

The proven path to accelerating an account to peak LTV is by focusing on creating a groundswell within the account. By providing a high-quality customer experience, consistently delivering on key product milestones, offering a compelling vision to the market (see post on the importance of a Point of View), having a community of supporters within the account, and executing on sales and revenue growth, aggressive growth goals can be met. 

 

Looking across all accounts, a crucial factor in accelerating overall LTV is increasing the peak lifetime value of every account. Growing overall LTV means finding additional reasons for your existing customers to buy. New reasons to buy may include:

  • New or add-on products.
  • Other services.
  • Entering into multi-year deals or deals with special terms.
  • Adjusting pricing upwards as you become better able to sell based on value.

 

What are the five items to get right when crossing the chasm?

 

To cross the chasm, you need to get these five items right: strategy, plan, people, process, and product.

 

What industry best practices exist to help businesses across the chasm?

 

Best practices exist to help businesses across the chasm, including best practices for understanding your products or services' strengths and weaknesses, how to go about building a successful strategy, and the science behind increasing customer adoption in this era of user-driven sales. In future posts, we will dive into examples of best practices.


What are other good resources for crossing the chasm?

 

There is no perfect resource that can help you cross the chasm. You have to do your research and put in the work.

That said, finding a mentor is a great place to start when contemplating crossing the chasm. Look for someone who has successfully dealt with tough challenges, such as working with board members pushing for repeatable growth too early. Often they may have dealt with early adopters with use cases and demands not in line with the use cases used by their target market. It is essential to find someone with experience achieving product-market-fit and then success at mass-market appeal.

 

In addition, finding resources in these areas will help you across the chasm:

  • The Lean Startup methodology
  • Customer Development
  • User Experience Design
  • And, of course, the book "Crossing the Chasm"
Crossing the Chasm in the Era of User-Driven Sales
Point-of-View Marketing: How SaaS and Other Software-Centric Businesses Breakout and Win
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