Early Pragmatists, Head Pins, and the Bowling Alley

To avoid the Chasm, it is critical to quickly make some sales to a few Early Pragmatists that can act as references to others.

A typical Early Pragmatist in the high technology world might be a Chief Information Officer. Early Pragmatists are more concerned with risk avoidance than the Visionaries and Technology Enthusiasts. They want to build a solution for the long run, and so they want to find technologies that adhere to an enacted or de facto standard.

Entering a market at the beginning of the Bowling Alley phase takes a set of skills very different from those which will allow a company to continue to grow after it is established. It is these special skills that distinguishSWIFT from most Product Development and Marketing strategy taught at business schools. Because the majority of business school graduates will spend most of their careers growing products at established companies with existing successful product lines and brand awareness, SWIFTs special focus may not be relevant to them.

However, for the venture capital funded Entrepreneur these differences are critical to success.

D-Day and the importance of Niches

Moore has drawn an apt analogy between entering the market in the Bowling Alley phase and the D-Day invasion of continental Europe.

Military strategy (and military history) demonstrates that the winner of any battle is almost always determined by whether the attacker has an overwhelming numerical force at the location where the battle takes place. This poses a special problem for the military planner who has only a smaller force and must engage a far superior force that is already well entrenched.

Such a situation existed in Northern Europe prior to D-Day in World War II. Germany's huge armed forces had command of all of Continental Europe, while US and British Allied Forces were stuck across the channel.

The Allies did not have sufficient forces to outnumber German continental forces, a seemingly impossible feat. However, because those forces had to defend all of the Western front they were necessarily spread thin. And that is the key to the Allies strategy. Rather than attack all of Europe at once, the Allies could do is is put an overwhelming number of forces in a single location, a beach head called Normandy.

Having successfully invaded Normandy, the Allies could land yet more forces, and then focus these additional on yet other nearby locations where they could outnumber the German forces. Battle by battle the Allies expanded their sphere of control, until they successfully defeated Germany.

The parallel to business is striking. A small start-up can not take on a much larger established and entrenched incumbent in it's main market. But it can win by concentrating all its forces on a small niche where the larger company is spread thin. And having established its dominance in that first niche it attacks other niches nearby.

Moore likens this growth into nearby areas to a set of bowling pins. First you have to knock off the head pin, and that helps you knock over pins 2 and 3, and then those pins in turn knock over pins 4, 5, and 6 and so on. For this reason, Moore calls this Early Pragmatist market, the Bowling Alley.

As you can see, in this model the head pin is critical to successfully crossing the Chasm and building a set of references among the Early Pragmatists that in turn can be used to grow the market.

As a new entrant we will have to do that with out the power of an established brand, an established sales channel, and tried and true operational methods tuned to our specific customers. We may not know who their customers are, or even what our market niche should be, until we achieve "sales traction".

But we can identify which kinds of markets and customers could be won, and having been won, would enable us to win others in the same niche.

The key strategy here is that the target niche must be composed of people who talk with each other. The one thing that would make it easier to sell to an Early Pragmatist is a success story about some other Early Pragamatist just like them. The prospects awareness of the reference customer makes up for their lack of awareness of the new entrant. Credibility is established not through what the new entrant claims the product will do, but what the reference customers have demonstrated it will do.

If the stakeholders in the target niche regularly communicate with each other, word of mouth praise will become the new entrant's strongest weapon. So these are the kinds of market segments we wish to target. Customer 1 tells Customer 2 who tells Customer 3, etc.

Of course, there is one problem with this model, why does Customer 1 buy? They have no pre-existing success story to influence them.

Moore's answer is that Customer 1 must have no other reasonable alternative. Unless they buy, they know for sure that they will not achieve their business objectives. But if they can see a demonstration that proves to them that they have a good chance of achieving their goal by using the new product, they may give it a shot. It is thus critically important that all the company's forces be dedicated to ensuring that first customer success.

Next, by focussing all their energy on other nearby customers in the same niche, they can use that word of mouth advertising to become the gorilla in that small niche.

This niche becomes what Moore calls the "Head Pin" in his bowling alley analogy. The company's reputation in the head pin market is then leveraged to hit other nearby niches as well. Moore shows that there is the possibility to expand from our beach head or head pin in two ways, other products that solve other problems for the same customers (industry focussed expansion) as well as by applying the technology to the same sort of problem as before, but in nearby industries:



Having successfully won our chosen beach head, we can now attack nearby niche's. To be successful at this, we need to take that reputation we have with their first custome(s) and make the new customers aware of this leadership. Our message will be some variant of "the acknowledged leader in the ABC market, now has a solution for the DEF market. We need strategies for generating this marketing awareness and establishing our leadership position. To this end, we will talk about how to use Zoom Marketing Corporation's The Point That Matters model to achieve these goals, and that will be a topic of a future post. For now, let us just identify that the new entrant grows not with a horizontal product, but by winning individual "nearby" niches and then assembling them together into a larger market..

Late Pragmatists and the Tornado

Because Pragmatists are herd animals, once a sizable set in a market begins to settle on one particular vendor or product, others rapidly follow. The leaders product becomes the de facto standard. Late pragmatists, who hung back waiting to see which standard would emerge suddenly, commit themselves. At this point, it is critical to become the market leader, and sales spiral upward at a furious rate. Moore calls this the Tornado market.

Conservatives and the Main Street market

After a product has achieved market success and starts to mature, Conservatives are willing to buy the product. Conservatives can be anywhere in the organization, but are typically managers in end user departments.

While the Pragmatists were buying to solve a problem or take advantage of a new capability, Conservatives are motivated by the need to stay competitive. It is the fact that most of the other competitors already have these products and are getting benefits from them that drives the Conservative to purchase. This is the Main Streetmarket. Price becomes more important, as does added services and extensions that customize the product for a particular customer. But these customizations are radically different from what the Visionary was interested in. The visionary knew what technology they wanted and specified this to the seller. The Conservative on the other hand has no interest in figuring out what technologies are needed and how they should be arrayed.Rather the Conservative wants an off the shelf complete solution, including installation and maintenance services.

Skeptics and the End of Life market

As the market matures further it becomes saturated most everyone who will want the product has one already or the technology starts to be supplanted by new technologies. The remaining purchasers are the Skeptics in this End of Life market phase. These can be end users, or user department managers, or sometimes information technology staff assigned to maintaining legacy systems.

The Skeptics are normally reluctant to make a purchase except to prolong the life of purchases they have already made. For this reason, Skeptics are likely to buy maintenance on existing products they have, converters and interfaces that allow their existing products to work with newer technologies, rather than replacing those products.

Something of every type in all of us

Readers who are not already familiar with this methodology might conclude that any given person is a specificbuyer type: either a technology enthusiast, or a visionary, or a pragmatist, etc. This is not really the case, we all adopt different buyer preferences for different kinds of products. For instance, David might be a technology enthusiast when it comes to home audio-video equipment, and a visionary with respect to telecommunications such as cellular phones or pagers. But when it comes to buying kitchen appliances he may be a pragmatist buying only to meet specific problems and focusing on brands that have name recognition. When it comes to his clothing he is conservative, only discarding unfashionable suits and ties when they have become so old fashioned or worn as to call negative attention to him. And his 12-year-old car is babied along in skeptic fashion, with regular oil changes, car washes, and engine maintenance.

As we saw before, there are typically multiple people involved in any major purchase, and in all likelihood they will be distributed across the buyer types. In our car purchase example, Anita's boy friend, Axel, might have be a Technology Enthusiast, her father, Denton, might be a Pragmatist, her grandmother, Shirley, a Conservative, and her mother, Iona might be a Skeptic, with Jane playing a Visionary.

No one product can be all things to all people, and the car ultimately chosen was not the top preference of every person. But what was critical was that the product

• acceptably met the goals of many of the Influencers,


• was not rejected outright by any of the major decision makers (Mom, Dad and Jane), and


• was a 100% solution to the main buyers problems (Jane).

So now we have the means to further annotate our Stakeholder chart:

No single right market

It is worth stressing again that ultimately there is no single right market for an established company to focus on in the Technology Adoption Life Cycle. While the size of the Conservatives market is larger than the size of the Visionaries market, the price sensitivity is higher there and so margins may be much lower. Companies like Computer Associates dominate the Skeptics markets and make a lot of money in services and maintenance with very little expenses in engineering and new product development. Teknowledge Corporation's primary customers, have included the Defense Advanced Research Projects Agency (DARPA), a classic Technology Enthusiast and Visionary organization. IBM, once the giant amongst the Pragmatists is now showing its clout in the Conservatives market place with sales and services to small companies. Sun Microsystems achieved huge success by establishing its products as open systems standards thus taking the Pragmatists market by storm.

At the same time, for Venture Funded start-ups the growth requirements make the Bowling Alley phase a preferred target.

What the Chasm means for Venture Funded Start-ups and other New Entrants

Why the Chasm exists

Because Visionaries and Technology enthusiasts want to use a product before anyone else, no existing references are needed to sell to them. In fact, references might be counter productive, suggesting that the opportunity to be ahead of their competitors has already passed. Pragmatists on the other hand, according to Moore and Brown, are pack animals and look for safety in numbers. They want to know that there are already other purchasers like them to feel safe.

Pragmatists don't accept references from Visionaries and Technology Enthusiasts, because Pragmatists see Visionaries and Technology Enthusiasts as far more risk tolerant. Pragmatists fear that the earlier adopters' successes may not be repeatable without the substantial effort and customization of the product that Visionaries insist on. A pragmatist doesn't know how they would customize such a product, and they don't want to spend the time or expend the effort to become educated. For Pragmatists the product must be ready to solve their problem as is, or they will wait until there is such a product.

Moore argues that these differences between Early Adopters and Pragmatists cause a "chasm" to develop. Companies that are successful with the Early Adopters are rarely able to successfully ignite sales to the Pragmatists. Today's "mainstream" market leaders and are supplanted by new entrants. I will say more about this when we cover Disruptive Innovation, but suffice it to say for now that in accordance with Moore's model selling to Pragmatists requires different sales skills, and different product attributes than selling to Early Adopters.

A side effect of the Chasm is that if we are successful at pioneering an Early Pragmatist market we may have little to fear from the incumbent market leaders who gained their success selling to Early Adopters. The traits that made them successful to date will inhibit their success in crossing the chasm and competing effectively with our new market entrant.

According to Moore, a company can be successful even if it never moves beyond the Early Adopters, as long as it creates a constant stream of such innovations that it can sell to these customers. And the size and other characteristics of the company have to match what is possible in that market place. Because the percentage of Early Market adopters is smaller than the rest of the life cycle, such companies will be more limited in growth compared to companies on the other side of the chasm.

An alternative destination that we will speak of later is merger or acquisition of a company that is successful in the Bowling Alley.

Why the Bowling Alley Phase is Ideal for Venture Funded Start-ups and other New Entrants

In contrast, the SWIFT method is designed to help Venture Capital funded companies enter the market during the Bowling Alley phase (or to kick it off if it has not already started) and then achieve market dominance during the Tornado phase. These phases are those which are best suited to the ease of entry, leadership potential, growth, and liquidity/exit requirements of Venture Capital.

Here is why:

Because of the Chasm, no entrant in the Bowling Alley has sufficient brand awareness and clout among the Pragmatists to dominate the nascent market. There are no barriers to entry yet which will prevent success for a late comer. (Indeed, keeping in mind the earlier two phases, late comers are the most likely to become new leaders).Who will become the market leader is anyone's guess, and leadership changes are fluid. The market is still small, but growth is rapid. Leadership Fluidity, is important for new entrants, making the Bowling Alley an ideal place to start.

As sufficient numbers of "Early Pragmatists" demonstrate success with the new technologies, their success stories motivate "Late Pragmatists" to join the stampede like herd animals.

Market growth in the Tornado can become exponential, and soon the markets are sizable. This rapid growth is necessary to meet the expectations of Venture Capital investors, who may be seeking returns on their investment of upwards of 40% per annum.

As the markets become large enough, market share and brand awareness come to matter more and more, so that the market leadership become stable, often freezing in a dominant market leader ("the Gorilla"), two or three alternative suppliers with significant share ("the Chimps") and the remainder of the market is limited to many extremely small competitors ("the Monkeys").

While there is still some fluidity in leadership but also some separation among larger and smaller players, a large marketing war chest can be valuable. The emerging Gorilla and Chimp candidates may become excellent candidates for a public stock offering (IPO) to fund their continued growth and to improve their competitive position during this phase.
Also this is the time for merger's and acquisitions. By merging the #2 and #3 market share competitors the previous market leader might be effectively challenged. Acquiring a number of "Monkeys" can also boost any company's market share.

Acquisition is also a common strategy among the former market leaders of the "Rainbow" Phase, who were unable to cross the chasm before, but who now see their market shrinking rapidly. Indeed, this can be an effective and repeatable strategy for a company who achieved great brand awareness and controls a large distribution channel. Effectively, the company lets venture capital pay for the R&D, and lets the market select the winners. They then meet their own growth targets by acquisition of the market approved technology which they can help grow even faster using their own channels. This kind of acquisition strategy has been seen in many of the biggest names in high technology, including Microsoft, Oracle, IBM, Hewlett-Packard, Cisco and AOL, and is now helping generate growth for Google and Yahoo as well.

Both IPOs and acquisitions provides the "exit strategy" wherein the Venture Capital Investors can achieve liquidity and thereby cash out their investment and return the expected substantial returns to their fund.

In the next post we will explore in more depth the characteristics of the remaining market phases and the traits that define the typical stakeholder driving purchasing decisions at that phase.

Innovation and the Technology Adoption LifeCycle

Having identified the archetypal stakeholders, it is time for us to start to describe them in ways that will help us create an innovative product or service that will motivate them to acquire it, purchase it and use it. To do this we need to understand their motivating goals and task they perform, and we also need to know something about their buying preferences and habits. We will come back to goals and tasks in a future post, but in this post I will introduce one of the models of buying preferences and habits that I find helpful.

There are many ways to analyze the buying preferences and habits of a consumer, and there are many books that cover these preferences and habits. The choices are too large to cover here, and even too large to enumerate here, but a serious designer will want to get a broad exposure to this literature throughout their career.

I have found one particular methodology especially helpful, and I’ll briefly cover it here. The methodology in question has been named the “Technology Adoption Life Cycle” by marketing consultant Geoffrey Moore, who first described this model in his books "Crossing the Chasm" and "Inside the Tornado" .

I highly recommend these books, as well as Moore's "Gorilla Game" , "Dealing with Darwin" and “Living on the Fault Line” to interested readers who want to know more. I would also like to thank sales consultant Rick Brown of “Life Cycle Marketing” who has shared with me his further extensions of this model including additional tools for identifying TALC types of stakeholders through various characteristics of those types.

The Technology Adoption LifeCycle (TALC) methodology divides up the stakeholders and corresponding preferred markets into six types:

Buyers	Markets
Technology Enthusiasts	Innovation
Visionaries	Rainbow
	“the Chasm”
Early Pragmatists	The Bowling Alley
Late Pragmatists	The Tornado
Conservatives	Main Street
Skeptics	End of Life

Each type of customer has certain identifying characteristics and purchasing preferences, and it is the predominance of these specific customer types at different stages of the lifecycle that characterize a market phase.

Technology Enthusiasts and the Innovation Market

For instance, TALC calls the first group of people to adopt a new technology: Technology Enthusiasts.

For high technology innovations such as those we focus on, the Technology Enthusiast is typically someone in engineering or information technology. Technology Enthusiasts want to purchase the latest new technology and be a part of determining what it is useful for. Often they have limited purchasing power on their own. They may offer to beta-test a product in order to keep their costs down and they may not have sufficient budget to purchase the product when it reaches final release. With limited purchasing power, these people may be poor candidates for the Customer or Economic buyer, but very frequently play the role of the Evaluator or Technical Buyer, where their vote of confidence is crucial to product acceptance by the organization.

The market that corresponds to the Technology Enthusiasts’ preferences is called the "Innovation market" in TALC.

While we adopt this usage for conformity with Moore's well known model and terminology, it should be noted that Innovations, in the sense that we have defined the term earlier, can be marketed at every stage of the lifecycle. And each stage, these new products do represent a true innovation to the members of that market -- even if they may have been well known to stakeholders in earlier phases. In fact, as we will see in a later post, Disruptive Innovations often achieve that disruptive characteristic by entering the market in the later "Bowling Alley" phase while leaving the former mainstream companies on the other side of the chasm.

AlthoughTechnology Enthusiasts can be enthusiastic adopters of innovative technologies, a problem for companies targeting this market phase is that Technology Enthusiasts have little money to spend. As a result, a common experience of many start-ups in the dot com boom and subsequent bust was that it was easy to gain the interest of wildly enthusiastic Technology Enthusiasts during a free beta test period, but this customer base evaporated when the company tried to “monetize” their customer base by charging for these products. This is a useful lesson for both entrepreneurs and investors trying to gauge the likely adoption of new technologies.

An additional risk for companies who are successful in getting sufficient revenues to prosper during this phase is that this market can be quickly saturated. Once knowledge of a new technology becomes widespread, Technology Enthusiasts no longer gain influence by telling others about it, and so they naturally turn their attention to the "next new thing." Thus a company successful in this Innovation market must ultimately create additional innovations that can be sold to this market, or they must find a specififc competative advantage of their product which allows them to transition to the Visionaries and the Rainbow market.

Visionaries and the Rainbow Market

A Visionary, on the other hand is usually a senior executive, probably a vice president, and his or her interest is to find a sustainable competitive advantage – a solution no one else has to a business problem that all their competitors have. As a senior executive, they often have authority to make large financial commitments and therefore frequently play the role of the Customer or Economic Buyer in purchases, and occasionally play a powerful role as a Sponsor to Technology Enthusiasts who bring them news of innovative technologies that could be used to create such advantages.

The corresponding market is called the "Rainbow market", because Visionaries drive technologies to be customized into a wide spectrum of custom solutions each of which precisely fits that Visionary’s needs. Visionaries don’t want off the shelf solutions; if such products were available off the shelf, competitors could buy them too and just neutralize the strategic advantage the Visionary hopes to get. Visionaries want a wide range of custom solutions so that they can get the solution that most precisely fits their needs.

While there may be more Visionaries than Technology Enthusiasts, the Rainbow market can also be a difficult one for companies to thrive in for long. Because Visionaries can command significant budgets, they may be able to use that leverage to induce a small new company to create a solution so customized that it cannot be fielded as is for any other potential customer.

This fragmentation leads to markets dominated by companies who invest considerable professional services effort into determining customer needs and in creating custom solutions. Because of the high amount of customization by highly specialized and technically skilled staff, margins for such products are often extremely high. And because every solution is customized, the companies successful in this stage rarely create “off the shelf” solutions that are truly usable by the mainstream customer who don’t know what customizations to ask for.

Moreover, as we will see later when exploring Clayton Christensen’s related Disruptive Innovation model, the next class of prospects, Pragmatists, have less stringent requirements than the typical Visionary. Moreover, because their needs are less complex, the margins on sales to these new prospects will pay is typically much lower. As a result, executives at a company successfully selling to the higher end visionary customers will find that there is a strong financial disincentive to investing in products for the lower margin pragmatist market when higher margin products can still be sold to their existing best customers, the Visionaries.

Kit Car Confusion

In part due to the forces, rather than offer a standardized product, at best a “toolkit” product will be offered. The toolkit will be sold with technical training and consulting providing customers with help in creating their own custom solutions (and generating those high margin professional services revenues the manufacturer is used to).

Toolkits often appeals to engineering driven companies populated by engineering teams consisting of many Technology Enthusiasts and Visionaries who like to create their own solutions. To these individuals, a toolkit seems to have a potential reach of a huge “horizontal” market, in which every customer solves their own unique problems with their own custom, vertical, solutions. In comparison, a targeted “no configuration” solution aimed at just one vertical or demographic, seems too narrow – they feel such a solution abandons all the other potential users whose differing needs will now be left unaddressed.

The problem with this view is that the mass market customer doesn’t want to put the effort into creating their own custom solution. In fact mainstream customers rarely want to put any effort into identifying their own needs sufficiently to specify such a solution. Instead, they look for existing solutions that address problems they are already aware that they have. If the proposed new product doesn’t solve all of their problems – at least is solved one!

Toolkits thus don’t address their needs and in fact reduce the size of the relevant market. This is often startling and confusing to technical innovators who are facile with new technology and love to create (and demand) customized solutions.

In SWIFT we often refer to this kind of misunderstanding about the nature of markets as “Kit Car Confusion”. To understand why, consider the following scenario:

InnoCar is a company trying to break into the automotive vehicle market. InnoCar hires a marketing researcher to find out what kind of vehicles people want.

The researcher develops the following two tables. He found that prospects greatest preference for a new vehicle by class was as shown on the left. However, he found that prospects admitted that they would prefer one class vehicle some of the time and another class another part of the time, based upon how many people or how much cargo they needed to carry. The researcher then generated the 2nd chart showing how much of the time people wanted 2 seats, 4 seats, 5 seats or 7 seats.

Model	preference	%	seats
Compact car	4858	27%	4
Economy Car	3884	21%	5
Sports Car	1400	8%	5
Luxury Coupe	100	1%	2
Luxury Roadster	800	4%	2
Compact Coupe	1145	6%	2
Roadster	829	5%	2
Sports Coupe	951	5%	2
wagon	1213	7%	5
hatchback	2980	16%	4
SUV	124	1%	7
Total	18284	100%

seats	% time
2	21%
4	43%
5	36%
7	1%
	100%

The researcher concluded that, assuming all vehicle classes generated the same profit, if InnoCar wass going to produce just one class of vehicle, the compact car would address the largest single market segment of 27% of the total available market.

However, if the car could be reconfigured to into a hatchback when extra storage was needed, the car could address 43% of the available market.

If the car were made even more configurable, allowing it to stretch to 5 seats on occasion, 79% of the market could be addressed.

Engineers at InnoCar propose creating a "kit car" in which body and interior parts of the car could be bolted together in various combinations on a standard engine and chassis to allow the customer to drive a gas conscious compact car for commuting on Monday through Friday, a 2-seater sports car on a Friday night date, a family car for when other members of the family visit on Saturday, and an SUV for bringing home new furniture on Sunday. Cars would be delivered unassembled to the purchasers drive way. Once initially assembled, a car can be reconfigured whenever desired. Reconfiguration can be accomplished by any competent home mechanic, using provided hand or power tools in as little as 4 hours! Since the vehicle is capable of ALL configurations, this should address the maximum market.

Of course the flaw in this theory is that while people might want different vehicles at different times, they aren’t willing to learn to become mechanics or spend 4 hours to reconfigure it. So while InnoCar’s design is far more flexible than LuddiCar’s “one model, any color so long as it is black” family sedan, LuddiCar winds up with the greater share as people drive off the lot in an already running LuddiCar instead of assembling their vehicles at home.

The combination of differing needs (and profit margins) between Visionaries and main market purchasers, plus Kit Car Confusion, often prevent companies who are successful selling to Visionaries from making the leap to selling to the mainstream.

These forces lead to what Geoffrey Moore calls "the Chasm" phase of the Technology Adoption LIfe Cycle. In our next post, we will begin looking further at the Chasm, as well as the phases on the other side of the chasm.