Chasm

By Michael Eckhardt

Cloud-based companies – whether in Silicon Valley, Boston, Berlin, or Bangalore – often seek “best practices” to accelerate growth for their key products or services. And that’s clearly a good thing.

But today I’d like to draw your attention to a different perspective – seven worst practices or pitfalls that cause seemingly great cloud-based products or services to fail in the marketplace. Resulting in share price plunges, worthless stock options, customer dissatisfaction, and damaged brands. And, of course, frustrated shareholders and executives. At Chasm Institute, we call these pitfalls for tech companies the “7 Deadly Sins.”

Quick Intro

For 15 years, in 500+ client engagements, our Chasm Institute team has assisted tech-based companies through workshops / tools / training, to win in tough, highly-competitive markets. One major specialty has been helping these tech-based companies move from Early Market visionary customers to the larger and more profitable Mainstream Market.

Geoffrey Moore, chairman of our firm and best selling author of “Crossing The Chasm”, amplifies a key success driver in this movement from Early to Mainstream markets when he states “companies must focus and win with a specific segment of customers in “pain,” before a disruptive new solution can successfully cross the chasm – i.e. commercialize – with mainstream buyers”.  Such breakout successes as Workday, Google, Box, Lithium, and Salesforce have all applied this “focused strategy method” to drive impressive growth.

But that’s not the only success driver. In addition, winning cloud-based companies must also avoid these seven key pitfalls and errors:

 

The “7 Deadly Sins” to Avoid

 

  1. Target Customer Mix-up: if you’re in the Early Market and ready to move beyond it – don’t just ask your current customers what they want or need. Instead, gain insight from Mainstream customers who have not yet adopted – since they are your target in the coming 12 to 24 months and beyond. We’ve seen companies suffer $1 billion losses due to this avoidable mistake.
  2. Compelling Reason Confusion: the catalyst for driving adoption by mainstream customers is to understand the target customer’s “Compelling Reason to Buy.” Do not confuse that with “Compelling Reason to Sell.” The latter is your problem, and the customer doesn’t care about that.
  3. Whole Product Perfectionism: if you’re waiting until you have the perfect product before you launch into the main marketplace – surrender now. To successfully cross the chasm, we advise clients to focus on initially delivering MVP (Minimum Viable Whole Product). That’s the least complex solution that fulfills the target customers’ compelling reason to buy. Stop thinking about “what else to add in,” and consider subtracting features to simplify the buy / install / use process.
  4. Overdoing Sales Training: just because you are excited about your new product or service doesn’t mean everyone must be trained on it. If you truly have a new breakthrough product (i.e. a disruptive innovation), then experience tells us that less than 15% of your sales team will account for 80% or more of first-year sales – so don’t train everyone right away. Instead, double-down on training and incentives for a small “Tiger Team” of sales pros who have the right mix of consultative skills, motivation, and energy – and limit the rest to “awareness training” in that first year after launch. Avoids wasted training time and money.
  5. Pricing Misstep: the road is littered with businesses that thought cutting price by 15% to 20% would help them cross the chasm. Sadly, price elasticity is muted at this stage of the market. Yes, you need a reasonable price, but reducing it further will likely not cause unit sales growth – it will just damage margins. Instead consider reducing adoption risk for these pragmatist buyers by offering a performance guarantee or an attractive low-risk financing package.
  6. Weak Messaging: for a B2B message to be effective, it needs to be well articulated in 75 words or less. Preferably way less. And be cautious of thinking in terms of “unique selling propositions.” Unique could imply weird or different. Instead, communicate a superior selling proposition. Software companies in particular struggle with this, as many use a plethora of terms that end in “ility” and “ivity” (agility, manageability, productivity, connectivity) – yet miss the mark in communicating how their solution is truly superior to that of competitors.
  7. Lastly, the Vision Thing: it’s great, yes even essential, to have a longer-term vision for your business. But don’t confuse that vision with today’s imperative – to identify and deploy a compelling solution for specific customer pain points. And aim for revenue growth rates of 30-40% in those customer segments. That’s the fuel that will propel you forward onto a scalable and profitable path in the years ahead.

How many of these seven sins have you observed in the past 3 years?

7 Deadly Sins: How to Successfully “Cross The Chasm” with Cloud-based Solutions — By Avoiding These Mistakes

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