Geoffrey Moore on why his business classic 'Crossing The Chasm' still remains relevant 25 years on, and the consumerization of enterprise IT.
WOOL: Thank you for your time, Geoﬀrey. You started your career as a professor of English and then went on to wear multiple hats as a trainer, marketer and salesman. What led you to the concept of the "chasm"? That concept has changed technology marketing forever!
Geoffrey: Almost ten years into the software industry, and in the sales and marketing positions, when I was with a consulting firm called Regis McKenna, I kept noticing a pattern in technology adoption lifecycles. I observed that companies - inevitably - would see a very promising early start, but then, just fall off the radar. It made me deliberate and consider the many possibilities, and led me to identify how the early market is different from the mainstream market. My research and curation indicated that what inspires the early market is negative to the mainstream market, and vice versa. That is how the idea of the 'chasm' came about. Eventually, I wrote the idea down into a book, and 25 years on, it continues to be in print today. While the concept remains the same, the book has undergone three revisions over the years as the examples became obsolete.
WOOL: You have earlier talked about how early adopters in a segment or industry are diﬀerent from the next big "what is in the market". Are you saying there are opposite factors that are at work in these two diﬀerent segments?
Geoffrey: Early adopters make decisions based on their own perception and judgment. They are willing to take risks. But in order to do that, they need project support. The mainstream market is much more at the 'point of view' of work and doesn’t want to take a lot of risk with technology. They want to use it when it’s ready, and tested. The 'chasm' effect is just that hesitation, that goes - "look, this sounds interesting but until I see other people doing it, I am not willing to commit". Crossing the chasm is all about getting the mainstream market to start.
The early adopters take risks, make decisions based on their own perception and judgment.
The mainstream market is much more at the 'point of view’ of work. They don't take risks with technology, and use it only when it's ready and tested.
WOOL: What kind of technologies were trying to cross the chasm in the early 90s? Since then there have been many cycles of evolution in enterprise technology - with the role of IT and business changing signiﬁcantly as well. Is the idea of the chasm still relevant?
Geoffrey: In 1992, client-server computing was just getting started against a backdrop where mainframe computing was established and mini computers from DEC were emerging standards. But client-server computing was a brand-new idea - of a Windows computer talking to a server.
Document management was new. There was no internet and it was all propriety protocol, and there was no consumer market for computers except with the hobbyists. In the enterprise market, computers were seen as a back-office function - not part of the basic fabric of the business. The early adoption of the IBM PC by finance departments, and that of the Macintosh by marketing departments were seen as breakthroughs.
Obviously, we’ve come a long way since, but some challenges remain the same. One would think that the most forward-thinking group in the company when it comes to adopting technology would be IT, but while they are the best informed, they are also the most conflicted when it comes to embracing new generation technology. On one hand they have a commitment to maintain legacy and their budgets are tied up there, on the other, they also need to integrate new technology with legacy. The IT function doesn’t lead change very often but is aligned with the early market sponsors. When you cross the chasm, it needs to be aligned with the business unit’s sponsor.
So, the sponsorship for new technology comes from a department or function in the mainstream market which is under enormous stress. The legacy systems really don’t work for them anymore. For example, the adoption of the Web came from the marketing department, and when mobile computing came along, it was both marketing and customer services that wanted to champion it. Now that machine learning is coming along, it’s often the manufacturing services group asking for IoT, possibly to lower the cost of service. The CRM movement started off the Service function which was facing bottlenecks before it was adopted by the Sales function. Once one department commits to crossing the chasm, cross-department adoption becomes easier.
What has changed, however is the cloud making the incremental cost of extending your computing footprint almost free. It has changed the notion that software can be deployed only where the ROI is very high - so it has taken a lot of risk out at the margin, because it is inexpensive to deploy.
The other big factor is mobility. Employees are used to being productive, anywhere. That has meant that the mobile architecture, especially around systems of engagement has seen rapid adoption. But these are also incompatible with the demands of the systems of record that traditional architecture was built around. The twin demands of security and application performance are very different in the two architectures and we are seeing huge investments in managing the transformation. There’s a huge opportunity in digital transformation and what it is enabling for businesses, particularly in dramatically changing customer experience.
WOOL: Today there’s a whole lot of supply of new products and ideas that are easy to buy and deploy. At the same time, there are giants like Facebook, Amazon, Google who are disrupting the market. It is both a great place to be in and a place where you cannot win against those giants. How do you think they will be the game changers for new technology adoption?
Geoffrey: One of the good things about the new cloud architecture is that it has got the mid-market, the small business market and the consumer into play. As long as there was any technology responsibility put on the end user side of the equation, there was always a gating factor as to how far you could deploy technology. But with cloud, and mobile particularly, that barrier is low. That is why the mid-market for software and service companies has grown faster than the enterprise market.
The amazing value proposition of mid-market is that you can get 80% of what a big corporation gets and yet, not have to go to a data centre. SaaS companies went first in the mid-market segment.
About platforms, that world has been levelled out, made possible by huge, global de-facto standards established by Amazon, Google, Facebook, and Apple. In every era, you need a level playing field to build on. Everything and everybody unconsciously self-organizes around market leaders and makes them the de-facto standard. Once that happens, it is difficult to compete directly against market leaders in that category.
WOOL: Your latest book "Zone to Win" oﬀers a practical framework to help large enterprises add a new line of business to their established portfolio. What kind of dynamics will come into play for companies wanting to balance “keeping the lights on” with bringing new digital innovations to market?
Geoffrey: In any business, there are three natural centres where capital and resources would be allocated. The first one is in the business that makes money. That's the performance problem. We have software systems that help a lot of people arrive at the core of things. The productivity is now all of the cost centre functions that you have to do in any business in order to support the performance. It is your back office functions, like HR, IT, legal, supply chain, customer support-anything that you don't charge the customer directly for but you need to do all your regulatory compliance to serve security and that is in the productivity sum.
Everybody in business understands that they have to fund the productivity sum in order to support the performance sum. Then there is the Incubation zone - the place where you need new and disruptive technology. I find those zones in every company I go to. They are probably spending 45% of their budget in the performance zone, 50% in productivity zone, and 5% or less in the incubation zone. What happens in most corporations is that the governance mechanisms default to funding performance zone first, productivity zone second, and the incubation zone the last. When the incubation zone says it needs funds to become the transformation zone but there’s no budget, it is literally asking the CEOs to step in to create the transformation zone and dramatically re-allocate resources in a way it hasn’t been done before. So, it is a big change.
Today there is enormous amounts of fairly accurate data, which is an actual behavioral log of people’s digital interactions.
Data is without a doubt a much better set of signals for decision making, but there is also a lot of noise around this signal. This is where machine learning is becoming so important.
WOOL: With data playing a critical role in customer acquisition and market segmentation; how can businesses sharpen their chasm strategy with data?
Geoffrey: In the 80s and 90s, there wasn’t a lot of data to use for decision making. It was a lot of intuition and trying, assessing and attempting to solve customer's problem. It was a very human-centric thing, and as you know, it didn't lend itself to scale particularly well. Today you have enormous amounts of fairly accurate data, which is the actual behavioral log of people’s digital interactions. The data is, without a doubt, a much better set of signals, but there is also a lot of noise around the signal. This is where machine learning is becoming so important. If I can filter the noise or capture the signals, then I can actually see segmentations from behaviors. I would really let the computer do the segmentation around the algorithm, rather than me. That I feel is very unnatural as I always try to humanize things with metaphors, and computers don't use metaphors. Computers use SAP theory and do it through a bottom-up granular analysis of data. Metaphors tend to work from a top-down of insight. Earlier, we couldn’t see and only react to it but now we actually have the opportunity to engage with it.
WOOL: With the consumerization of enterprise IT and adoption of Shadow IT, how do you think marketing tactics change?
Geoffrey: Oh, dramatically. This is the whole idea of a marketing tactic called "land and expand". Most enterprises allow a certain amount of shadow IT because it is the safety valve; it allows the group to move ahead of the IT department because IT departments have commitments and need to be somewhat conservative in being mindful of security obligations especially with global data processing regulations or GDPR. As IT departments move more methodically - and possibly slowly - shadow IT and individually configured IT are a good safety valve.
At some point, we will need to normalize what is going on because this approach risks creating the next generation of silos around different – and differing – views of customers. Aggregating various kinds of data streams and ingestion engines, pulling information from the edge will be important. Governance will be critical. The important question is at what point should governance kick in? When shadow IT becomes overpowering, it can repudiate the IT department, which is not healthy and nor a sign of good governance.
WOOL: Which has been the most personally satisfying achievement of your career?
Geoffrey: Periodically in your career, you bring frameworks to your management team and they often use those to work through a problem. Sometimes using your frameworks, you’re able to get to a very different state, and when that happens, it just changes the relationship inside of the team. It changes their effectiveness in the world and also creates friendships.
I would say working with inspiring winners is what keeps me going. I worked with two of Mark Penny’s office CEOs and the Salesforce CEO, and they were extraordinarily inspiring leaders. Being able to help them realize their vision, being in service to that kind of vision; that's probably been the most rewarding thing for me.