Inside the Tornado is a follow up to Geoffrey Moore’s best seller “Crossing the Chasm“. Where Crossing the Chasm described the general layout of market adoption and looked at a few case studies of companies that had successfully gained mainstream acceptance, Inside the Tornado lays out a very specific set of concepts to help a company get there and further describes what generally happens once a market becomes validated.  The advice seems mainly focused at Enterprise level software, but it’s also at least partly applicable to the consumer web.

Innovative Markets

The problem with breakthrough technological innovations that create a new market is that the market doesn’t really exist if you’re the only one in there. Without competitors you’re just a weird little company doing something a little crazy. Then you have the problem of what happens when competitors enter the space and validate that the market actually exists – The market begins to enter a hypergrowth stage and the focus of your business becomes a land grab for market share.

Bowling Alley

Moore describes the initial strategy for creating a market such as this as the “bowling alley”. A company needs to focus on attracting and dominating several specific niches in order to get their technology adopted as the market standard. Once enough of these ‘bowling pins’ are collected, the goal is to fuse these niches together so that suddenly your disjointed little product is a ‘whole product’ solution that can satisfy really big clients.

The Tornado

Once the market has been validated and success stories start to trickle out of the early adopters, you garner the attention of the pragmatist buyer. The thing about pragmatists is that they only want a new solution if everyone else is going to buy it, which leads to a sort of stampede of pragmatist buyers trying to get their hands on this great new technology. This is where the land grab kicks in and companies can spend a significant amount of money trying to get the lion’s share of the market. Once this land grab finishes, the market will stabilize leaving:

• The Gorilla – Market leader. They get to set the bar and the market ‘reference price’.
• The Chimps – Companies that at one point could have been the Gorilla, but lost out.
• The Monkeys – A selection of companies catering to the edge cases that aren’t covered by the market leaders. This can be a specific smaller set of features that the gorilla can’t get a good return on investment on, a lower price point that services a smaller sub-market, or a niche that the gorilla can’t profit from.

These market definitions can change if a new disruptive technology makes it possible to resegment the market, and former gorillas can suddenly become antiquated if they don’t keep an eye on things.

Main street

Main street occurs when the tornado’s land grab dies down. Suddenly the sales funnel is a little emptier and the companies are finding more resistance on price points because simply put, the technology has become a commodity. At this stage, operational excellence drives the ability of a company to profit – process and cost cutting ensure the success.

Summary

Very interesting theories on highly competitive markets, and some interesting inside stories from the pre-dot com days. I enjoyed it.