chasm n dissonance
TRANSCRIPT
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Crossing The Chasm and BeyondGeoffrey A. Moore
Karen GaskillEmily GarnerEli El-Zoghbi
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Intro to Discontinuous Innovations
What is meant by discontinuous Innovations?New products or services
Require users and marketplace to change past behaviorsPromise new benefits
Different people react differently to discontinuousInnovationsTechnology Adoption Life Cycle is a model about howcommunities respond to discontinuous innovations
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Technology Adoption Life Cycle
Model grew out of social research in the 1950sModel predicts that when faced with discontinuousinnovations, Customers self-segregate along an axis of riskaversionFive communities are created:
Innovators (risk-immune)Early AdoptersEarly MajorityLate MajorityLaggards (Risk Allergic)
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Change
Technology Adoption Life Cycle
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Terminology was relabeled for High-Tech Industry:
Innovators : Technology EnthusiastsEarly Adopters : VisionariesEarly Majority : PragmatistsLate Majority : Conservatives
Laggards : skeptics
Technology Adoption Life CycleIn High-Tech Industry
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Market Development As Predicted By Model
Product TechnologyEnthusiasts
Visionaries Pragmatists
Once SatisfiedGood ReferenceTo Pragmatists
Conservatives
Bulk of Revenue Company Becomes Market Leader Product becomes more reliable Product becomes cheaper
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Introducing The Chasm
Model appears attractive in theoryDid not work very often in practice
Truth is that Visionaries
and
Pragmatists
are verydifferent
Communication between the two groups is almostimpossible
Therefore, Visionaries cannot make a good reference topragmatistsMarket development stalls past the visionary stageSuch a hiccup throws high-tech companies into the CHASM
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The Chasm
The Early Market
T e c
h n o
l o g y
E n
t h u s
i a s t s
V i s i o n a r
i e s
The Mainstream Market
P r a g m a t
i s t s
C o n s e r v a t
i v e s
S k e p
t i c s
Innovative High-Tech Product
TheCHASM
?
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Crossing The Chasm
Pragmatists want a 100% solution to their problem:They want the whole product
Thewhole Product
is defined as follows:The minimum set of products and services necessary to
ensure that the target customer will achieve his or hercompelling reason to buy
High-Tech companies unable or unwilling to takeproducts to this level of completionTherefore, High-Tech companies were prolongingtheir stay in the chasm
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Crossing The Chasm
The only safe way to cross the chasm is to put allyour eggs in one basketIdentify a single pragmatist cutomer
Accelerate the formation of 100% of their wholeproduct
Goal is to win a niche foothold in the mainstream asquickly as possible
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Example: Documentum
Documentum is in the document management softwarebusiness
Virtually unknown until 1994Spent early part of the 1990s in the chasmIn 1994, became dominant supplier of systems to thepharmaceutical industry
How?Began with specific niche of Computer Aided New Drug Approval(CANDA)Targeted specific pragmatists based on five criteria
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Documentum s Five Criteria
1. Is the target customer well funded and are theyreadily accessible to our sales force?
2. Do they have a compelling reason to buy?3. Can we today, with the help of partners, deliver awhole product to fulfill that reason to buy?
4. Is there no entrenched competition that could
prevent us from getting a fair shot at this business?5. If we win this segment, can we leverage it to enter
additional segments?
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Documentum End Result
1994: Documentum garnered 30 of their top 40 targetcustomers
Unquestioned market leader in this segmentFrom pharmaceutical industry perspective,Documentum cannot be allowed to go out of business
Such is the power of crossing the chasm
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Beyond The Chasm
TheCHASM
TheTornado
End of Life
The Early Market
M ain Street
The BowlingAlley
Business Strategy must changedramatically as marketplacesmove through these six stages
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Beyond the Chasm
1. The Early Market: Customers are technology enthusiastsand visionaries
2. The Chasm: Mainstream market still not comfortablewith the immaturity of the solutions available3. The Bowling Alley: A period of niche-based adoption in
advance of the general marketplace
4. The Tornado: A period of mass market adoption5. Main Street: A period of aftermarket development6. End of Life: Which can come too soon in high-tech
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STRATEGIC DISSONANCE
by Robert A. Bugelman and Andrew S. Grove
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DISSONANCE
Inconsistency between the beliefs one holdsor between one's actions and one's beliefs
Merriam-Webster Medical Dictionary, 2002 Merriam-Webster, Inc.
A harsh, disagreeable combination of sounds;discord. Lack of agreement, consistency, orharmony; conflict
The American Heritage Dictionary of the English Language, Fourth Edition.Copyright 2000 by Houghton Mifflin Company.
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QUESTION:How can top management inextremely dynamic environmentsdecide on the right strategic intent?
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KEY CONCEPTS
Strategic DissonanceStrategic Inflection PointStrategic RecognitionConceptual Framework
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STRATEGIC DISSONANCE
Differences between competence and thebasis of competition or strategy and action
Conflict is strategic when it signals impendingindustry or corporate transformationKey to moving the company out of strategicdissonance is top management s capacity touse the conflicting information generated byit to create new strategic intent
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STRATEGIC RECOGNITION
Top management s major tool fordealing with strategic dissonance and
an SIPPicks out the elements that can formthe basis for new, viable strategic goals
Enabled by the ability of internalselection environment
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CONCEPTUAL FRAMEWORK
Describes the evolving linkagesbetween company s core competencies
and the basis of competition in theindustry and its official corporatestrategy and strategic action
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FRAMEWORK from Exhibit 2, page 481
Basis of competitiveadvantage in the industry
Internal selectionenvironment
Distinctive competenceof the firm
Officialcorporatestrategy
Strategicaction
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SOURCES OF STRATEGIC DISSONANCE
Divergence of the basis of competitionand distinctive competence
Divergence between stated strategyand strategic action
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INTERNAL SELECTION ENVIRONMENT
Regulates the allocation of thecompany s scarce resources to strategic
action while the official strategy is influxCash, competencies, capabilities and sr.management attention
Time cushion for bringing corp strategyback in line with strategic action andkeeping company alive during SIP
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MANAGING STRATEGIC DISSONANCE
NewStrategicAction
NewDistinctive
Competence
NewBasis of
Competition
NewStrategic
Intent
Strategic Recognition
Old/NewStrategicAction
Old/NewDistinctive
Competence
Old/NewStrategic
Intent
Old/NewBasis of
Competition
StrategicDissonance
StrategicInflection Point
OldStrategicAction
OldDistinctive
Competence
OldStrategic
Intent
OldBasis of
Competition
*Exhibit 3: The Transformation Process (Page 484)
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MANAGING STRATEGIC DISSONANCE
Taking advantage of strategicdissonance and surviving an SIP depend
on the internal selection environmentand top management behaviorsInternal selection environment must
reflect external realityTop management must allow dissent
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NEW STRATEGIC INTENT
Formulate based on strategic recognitionDevelop a mental image of what the industry
will look like based on information generatedby strategic dissonanceChanging with the environment and theorganization (led by reality)Requires reinventing or rediscovering thecompany s identity
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STRATEGIC INTENTTO STRATEGIC ACTION
Reassigning resourcesMining of middle managers insights
Too little intellectual debate--vision is notclearly developed and march is not clearToo much paralyzes the company and
delays SARole of sr. management: encouragedebate, bring it to conclusion
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CULTURE IS THE KEY
Strong bottom-up and top-downforces
Two attributes:1) Tolerates-even encourages-debate2) Capable of making-and accepting-clear
decisions; with entire organizationcapable of supporting the decision
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IN CLOSING
Comprehensiveness, depth, and rigorof intellectual debate among middle and
top managers is the cultural featuremost telling of a company s long-termability to manage through SIPs.