Inside the Tornado

A review of the book Inside the Tornado by Geoffrey Moorewith additional material from books in the bibliography.

Richard Chambers

MM572 - New Product Introduction

A Model of The Dynamics of Innovation

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Fluid Phase TransitionalPhase

SpecificPhase

From Mastering the Dynamics of Innovation - James Utterback

Product From high variety, to dominant design, to incremental innovation onstandardized products.

Process Manufacturing progresses from heavy reliance on skilled labor and general-purpose equipment to specialized equipment tended by low-skilled labor.

Organization From entrepreneurial organic firm to hierarchical mechanistic firm withdefined tasks and procedures and few rewards for radical innovation.

Market From fragmented and unstable with diverse products and rapid feedback tocommodity-like with largely undifferentiated products.

Competition From many small firms with unique products to an oligopoly of firms withsimilar products.

Product From high variety, to dominant design, to incremental innovation onstandardized products.

Process Manufacturing progresses from heavy reliance on skilled labor and general-purpose equipment to specialized equipment tended by low-skilled labor.

Organization From entrepreneurial organic firm to hierarchical mechanistic firm withdefined tasks and procedures and few rewards for radical innovation.

Market From fragmented and unstable with diverse products and rapid feedback tocommodity-like with largely undifferentiated products.

Competition From many small firms with unique products to an oligopoly of firms withsimilar products.

Product Innovation

Process Innovation

The Diffusion of Innovations

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Rate of diffusion of innovations depends on the adoption of the innovation by individuals.

Relative advantage the degree to which an innovation is perceived as better than the thing it is replacing.

Compatibility the degree to which an innovation is perceived as being consistent with the existingvalues, past experiences, and needs of potential adopters.

Complexity the degree to which an innovation is perceived as difficult to understand or to use.

Trialability the degree to which an innovation can be experimented with on a limited basis and ifnecessary discarded without undue costs.

Observability the degree to which an innovation’s results are visible and measurable.

Rate of diffusion of innovations depends on the adoption of the innovation by individuals.

Relative advantage the degree to which an innovation is perceived as better than the thing it is replacing.

Compatibility the degree to which an innovation is perceived as being consistent with the existingvalues, past experiences, and needs of potential adopters.

Complexity the degree to which an innovation is perceived as difficult to understand or to use.

Trialability the degree to which an innovation can be experimented with on a limited basis and ifnecessary discarded without undue costs.

Observability the degree to which an innovation’s results are visible and measurable.

From Diffusion of Innovations - Everett Rogers

The Technology Adoption Life Cycle

InnovatorsEarly Adopters

Early Majority

Late Majority

Laggards

Innovators = Technology enthusiasts

Early Adopters = Visionaries

Early Majority = Pragmatists

Late Majority = Conservatives

Laggards = Skeptics

Innovators = Technology enthusiasts

Early Adopters = Visionaries

Early Majority = Pragmatists

Late Majority = Conservatives

Laggards = Skeptics

The Six Zones

• The Early Market, a time of great excitement when customers are technologyenthusiasts and visionaries looking to be first to get on board with the newparadigm.

• The Chasm, a time of great despair, when the early-market’s interest wanes butthe mainstream market is still not comfortable with the immaturity of thesolutions available.

• The Bowling Alley, a period of niche-based adoption in advance of the generalmarketplace, driven by compelling customer needs and the willingness ofvendors to craft niche-specific whole products.

• The Tornado, a period of mass-market adoption, when the general marketplaceswitches over to the new infrastructure paradigm.

• The Main Street, a period of aftermarket development, when the baseinfrastructure has been deployed and the goal now is to flesh out its potential.

• End of life, which can come all too soon in high tech because of thesemiconductor engine driving price/performance to unheard of levels, enablingwholly new paradigms to come to market and supplant the leaders whothemselves had only just arrived.

• The Early Market, a time of great excitement when customers are technologyenthusiasts and visionaries looking to be first to get on board with the newparadigm.

• The Chasm, a time of great despair, when the early-market’s interest wanes butthe mainstream market is still not comfortable with the immaturity of thesolutions available.

• The Bowling Alley, a period of niche-based adoption in advance of the generalmarketplace, driven by compelling customer needs and the willingness ofvendors to craft niche-specific whole products.

• The Tornado, a period of mass-market adoption, when the general marketplaceswitches over to the new infrastructure paradigm.

• The Main Street, a period of aftermarket development, when the baseinfrastructure has been deployed and the goal now is to flesh out its potential.

• End of life, which can come all too soon in high tech because of thesemiconductor engine driving price/performance to unheard of levels, enablingwholly new paradigms to come to market and supplant the leaders whothemselves had only just arrived.

From: Inside the Tornado; Geoffrey Moore

The Bowling Alley

PharmaceuticalRegulatory Submissions

PharmaceuticalRegulatory Submissions

Medical Equip.Regulatory Submissions

Medical Equip.Regulatory Submissions

Food ProcessingRegulatory Submissions

Food ProcessingRegulatory Submissions

PharmaceuticalManufacturing

PharmaceuticalManufacturing

Medical Equip.Manufacturing

Medical Equip.Manufacturing

PharmaceuticalR&D

PharmaceuticalR&D

Niche-based strategy, highly customer-centric• Goal is to make your product defacto-standard in as many

niches as possible building market mass.• Focus on the end-user community and target the pragmatic,

economic buyer.

Niche-based strategy, highly customer-centric• Goal is to make your product defacto-standard in as many

niches as possible building market mass.• Focus on the end-user community and target the pragmatic,

economic buyer.

Bowling alley for a documentmanagement software company.Bowling alley for a documentmanagement software company.

From: Inside the Tornado; Geoffrey Moore

The Tornado

From: Inside the Tornado; Geoffrey Moore

The essential principles of Tornado Marketing1. Attack the competition ruthlessly. The tornado is a zero sum

game. The goal is to dominate the market and be the de factostandard.

2. Expand your distribution channel as fast as possible. Shelf spaceand mind share are the key to market domination.

3. Ignore the customer. The product is becoming a commodity andthe goal is to ship a standard product to everyone as fast aspossible.

The essential principles of Tornado Marketing1. Attack the competition ruthlessly. The tornado is a zero sum

game. The goal is to dominate the market and be the de factostandard.

2. Expand your distribution channel as fast as possible. Shelf spaceand mind share are the key to market domination.

3. Ignore the customer. The product is becoming a commodity andthe goal is to ship a standard product to everyone as fast aspossible.

Main Street

From: Inside the Tornado; Geoffrey Moore

The essential principles of Main Street marketing1. Cultivate existing customers emphasizing processes for customer

loyalty. New customers tend to have an existing infrastructure basedon competitor products. If a competitor’s customer is willing to buyyour product, they will be just as willing to buy someone else’s later.

2. Listen to the end-user customer incorporating low cost additions tothe product. Sell differentiation within the commodity market.

3. Canabilize your own products before the competion does it for you.

The essential principles of Main Street marketing1. Cultivate existing customers emphasizing processes for customer

loyalty. New customers tend to have an existing infrastructure basedon competitor products. If a competitor’s customer is willing to buyyour product, they will be just as willing to buy someone else’s later.

2. Listen to the end-user customer incorporating low cost additions tothe product. Sell differentiation within the commodity market.

3. Canabilize your own products before the competion does it for you.

Comparison of the Zones

From: Inside the Tornado; Geoffrey Moore

Bowling AlleyFocus on the economic buyer and theend user; approach the infrastructurebuyer late in the sales cycle.

TornadoIgnore the economic buyer andthe end user; focus exclusively onthe infrastructure buyer.

MainstreetSell to the end user

Emphasize return on investment as thecompelling reason to buy.

Ignore return on investment.Focus on timely deployment ofreliable infrastructure.

Focus on the end user’sexperience of the product, seekingto gratify their individual needs.

Differentiate your whole product for asingle application, position it withinvertical markets.

Commoditize your whole productfor general-purpose use, positionit horizontally as globalinfrastructure.

Differentiate the commoditizedwhole product with +1 campaignstargeted at specific niches,position by end-user preferences.

Partner with a value-added distributionchannel to ensure customized solutiondelivery.

Distribute through low-cost, high-volume channels to ensuremaximum market exposure.Advertise heavily.

Continue to distribute through thesame channels, but now focus onmerchandising to communicate+1 marketing messages.

Use value-based pricing to maximizeprofit margins.

Use competition-based pricing tomaximize market share. Driveprice points ever lower.

Celebrate +1 value proposition togain margins above the low costclone.

Discontinuity and the Life Cycle

From: Inside the Tornado; Geoffrey Moore

Pure Science

End of Life

Prototypes

Early Market

Tornado

Main Street

TechnologyEnthusiasts

Conservatives Pragmatists

Visionaries

Low High

Low

High

ApplicationBreakthrough

ParadigmShock

Bibliography

• Moore, Geoffrey; Inside the Tornado; copyright 1995 by GeoffreyMoore; published by HarperBusiness

• Rogers, Everett; Diffusion of Innovations (fourth edition); copyright1995 by Everett Rogers; published by Free Press

• Utterback, James; Mastering the Dynamics of Innovation; copyright1994 by the President and Fellows of Harvard University; published byHarvard Business School Press