There are companies that make fortunes, but also those that vanish from existence, despite excellent products!

Master thesis project overview - Remco de Kramer

"There is a tide in the affairs of menWhich taken at the flood, leads on to

fortune; Omitted, all the voyage of their life Is bound in shallows and in miseries.”

William Shakespeare, Julius Caesar, Act IV, Scene 3: Within the tent of Brutus

Some companies succeed by getting their innovation adopted on a large

scale and “Cross the Chasm”. However most do not!

So what happens in the Chasm?

But first: what is the origin of this phenomena?

Discontinuous / disruptive product innovation in the high-technology sector

(where innovation requires the adopter to change behavior)

And in which context is this phenomenon most applicable?

Adapted from G.A. Moore (2005) from the book “DEALING WITH DARWIN”

Innovators

Techies

Early Majority

PragmatistsLate Majority

Conservatives

Laggards

Skeptics

Early Adopters

Visionaries

It is in the Technology Adoption Life Cycle!

time

Rel

ativ

e %

of c

usto

mer

s

•Look to adopt innovation to achieve revolutionary improvement

•Attracted by high-risk / high-reward projects•Envision great gains from adopting innovation

•Look for evolutionary changes to gain productivity enhancements•Averse to disruptive change; want proven applications, reliable service•Want to reduce risk in the adoption of the innovation

In order to be successful, we need to move from the early market to the mainstream

Because that’s where the vast majority of customers are!

To cross the “Chasm”, a lot of internal …… needs to happenWhich is influenced by the environment in which the company operates

How are we going to measure this change?

The internal factors are described through business model changes

The external factors are the forces that influence a chasm crossing which are

outside or within limited company control

But first, let’s explore theoretical concepts to increase our understanding

of the “chasm” phenomena

Notice the infliction points!

Technology Adoption Life Cycle (TALC) Main authors: Moore (1991) Rogers (1962)

Theory: The TALC is a means for classifying the market and its reaction to a high-tech product. Moore re-defined Rogers’ (1962) innovation diffusion

theory, by introducing gaps between user adoption categories the major gap being "the Chasm". The theory analyses the TALC from a marketing

perspective.

Title: Sales Take-off Main Authors: Shermesh & Tellis (2002) Agarwal (2002)

Theory: New products do not grow into maturity at a steady rate. The sales pattern is marked by a long introduction period when sales linger at low levels,

followed by a period of rapid growth. The theory analyses the TALC from various external perspectives; influence of competition, price, innovative

opportunity.

Title: Disruptive InnovationMain author: Christensen (1997)

Theory: A disruptive innovation is an innovation that eventually overturns the existing dominant technology paradigm in the market. Success depends on the

ability to “reach” the mainstream market and become the dominant design. The theory provides insight into how and where the technology in the TALC

develops before it reaches the mainstream market.

Title: Dominant Design (DD)Main author: Utterback (1996)

Theory: Describes the occurrence of a DD as the key technological design that becomes a de-facto standard in the market place. Before the occurrence of a DD product innovation is the emphasis, after that process innovation is, since

reductions in cost become the main concern. The theory analyses the TALC from a research and development perspective.

Title: Technology- to Customer Centered Approach Main Author: Norman (1998)

Theory: Integration of Moore's and Christensen's theories. Defines "the chasm" as a transition point where a technology satisfies basic needs and becomes a

consumer commodity instead of high-technology. The theory analyses the TALC from a human-centred product development approach by focusing on the

needs of the consumer.

Title: Disruptive Technology S-Curve Main Author: Christensen (1997)

Theory: A disruptive technology gets its commercial start in emerging value networks before invading established networks. The technology can invade if it professes to a point where it can satisfy the level of performance demanded in

an other value network. The theory analyses the TALC from a technical performance perspective related to conventional technologies.

Now we understand more……But what changes?

Distilled from the work of G.A. Moore who describes changes in “the chasm” and the strategy to cross it…

Before generating a conceptual model it is critical to determine the location on the TALC for which the model had explanatory power…

Based on:• Sales levels / sales saddle (Moore, 2002, Goldengerg, et. al. ,2002, Modis 1998)• Cumulative adoption (Meade and Rabello, 2003)• Customer profile (Moore, 2002)• Expert insights (Wieffels, 2002, p 98+)

pre- post-

To structure the mapping process internal factors have been categorized through the perspective of the business model framework

VALUEPROPOSITION

COSTSTRUCTURE

CUSTOMERRELATIONSHIPS

CUSTOMERSEGMENTS

ACTIVITYCONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

REVENUESTREAMS

INFRASTRUCTURE CUSTOMEROFFER

Business Model components - Adapted from A. Osterwalder, Business Model Ontology, proposition in design science approach (2008)A business model describes the value an organization offers to various customers and portrays capabilities & partners required for

creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams

COMM & DISTRI-BUTION CHANNELS

The key resources we need to make our

business model function

The partners and suppliers we work with

The most important activities that have to be

performed to run ourbusiness model

The costs we incur to run our business model

A bundle of products and services that satisfies a specific

customer segment’s needs

The types of relationships you entertain with each

customer segment

The channels through which we communicate

with our customersand through which we

offer our value propositions

Our groups of customers with distinct

characteristics

The streams through which we earn our revenues from our

customers for value creating and customer facing activities

FINANCIALPERFORMANCE

VALUE PROPOSITION

MARKET DOMINATION STRATEGY

ORGANIZATIONAL BUILDING BLOCKS

SUCCES IN CROSSING THE

CHASM

Aggregated Conceptual Model – Internal and External Factors

EXTERNALFACTORS

VALUEPROPOSITION

COSTSTRUCTURE

CUSTOMERRELATIONSHIPS

CUSTOMERSEGMENTS

ACTIVITYCONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

REVENUESTREAMS

ORGANIZATIONALBUILDING BLOCKS

MARKET DOMINATIONSTRATEGY

VALUE PROPOSITION

Pre-Chasm Business Model

COMM & DISTRI-BUTION CHANNELS

1. Technology-centric R&D

2. Product-centric R&D3. Technology expertise in

Human Resources4. Cultural archetype:

Pioneers

1. Strategic to validate technology in market

2. Tactical to speed product development

1. Emergent strategic planning process

2. Leadership role from research & development

1. Enabling competitive advantage

2. Product-oriented3. Prepare for technology

acceptance no focus4. Price skimming

strategy

1. Focus on technical community

2. Appealing to visionary values

1. Product-centric sales strategy

2. Word-of-Mouth3. Distribution ?

1. Strategy: ad hoc segmentation

SUCCESSMETRICS

1. Maximizing design wins2. Reaching technological

maturity3. Control cash-burn-rate

SUCCES IN THE EARLY MARKET

VALUEPROPOSITION

COSTSTRUCTURE

CUSTOMERRELATIONSHIPS

CUSTOMERSEGMENTS

ACTIVITYCONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

REVENUESTREAMS

ORGANIZATIONALBUILDING BLOCKS

MARKET DOMINATIONSTRATEGY

VALUE PROPOSITION

Post-Chasm Business Model

COMM & DISTRI-BUTION CHANNELS

1. User & application centric R&D

2. Process-centric R&D3. Business expertise in

Human Resources4. Cultural archetype:

Settlers

1. Strategic to facilitate creation of ecosystem

2. Tactical for whole product infrastructure and niche market domination

1. Deliberate strategic planning process

2. Leadership role of marketing

1. Whole product2. Solution-oriented3. Optimize for

technology acceptance4. Price penetration

strategy

1. Focus on end-user enlist support economic buyer

2. Appealing to pragmatist values

1. Market-centric sales strategy

2. Industry lines & prof. organizations

3. Distribution ?

1. Strategy: niche segmentation

SUCCESSMETRICS

1. Time-to-segment dominance

2. Category market share3. Quick & small revenues

SUCCES IN CROS-SING THE CHASM

External Forces Influencing the chasm crossing

SUCCES IN CROSSING THE

CHASM

COMPETITION

DOMINAND DESIGN

CRITICALMASS

MARKET CIRCUMSTANCESe.g. TECHNOLOGY WAVES

Theoretical validation of the model by relating scholarly articles & management books to the factors

Empirical validation of the model by multiple case study research

Adjust the model if necessary to generate the definitive version

NOTE: Generation and validation of the model is a cyclical iterative process!

Operationalize changes in the business model & forces:Through scoring change progression by:expert evaluation of the company and the industry through:answering question sets resulting in:Business model building block ratings on 5 point likert-scales

Application for practitioners: Analysis tool

Application for academics: Contribute to validation of the Chasm theory

.ing Remco de KramerGraduate Student Innovation ManagementRSM Erasmus University

+31611276263rdekramer@gmail.com

www.linkedin.com/in/remcodekramer