While early-market buyers can serve as a start-up’s lifeblood for the first several months, longer-term revenue objectives (a much larger piece of the revenue pie chart) cannot be realized within this segment, which makes up only a small percentage of the overall market.
Companies remain in the early-market stage for offerings within vertical markets until they establish a beachhead consisting of a critical mass of customers who can provide credible references. These are invaluable in emboldening the initial mainstream-market buyers—the “early majority”—to evaluate and consider making a buying decision. Eventually, if all goes well, these buyers are followed by other groups of mainstream-market buyers: the “late majority” and—very late in the cycle—the “laggards.”
Even in the case of horizontal offerings—that is, products that are applicable universally, rather than to a particular vertical segment—mainstream-market buyers respond best when selling organizations appear focused on their particular vertical segment. An example of a horizontal offering would be e-commerce software that applies to a wide range of businesses. If you are selling this product to a mainstream- market catalog retailer of clothing, for example, they are likely to be most comfortable with you if your company has already sold to other customers in their market segment. The fact that you’ve sold successfully to, say, a tire manufacturer isn’t likely to carry much weight with them—even if the product is equally as applicable to selling tires as to selling clothes.
After the initial missionary sales effort—often accomplished through heavy involvement by the founders and intensive product redevelopment—the following months can be heady ones. Sales come more easily, and momentum is established. Customers are providing validation with their checkbooks, and this feels good. The sales team now begins a round of recruiting, to handle what they perceive to be increasing demand.
The company is now approaching the chasm between the early and mainstream markets. To get across this chasm, the company needs to be sure that at least two fundamentals are in place: (1) the new offering has been proven functional and reliable, and (2) there have been quantifiable results. With these two criteria met, and with a sales force that is up to the new challenge—a subject to which we’ll return below—the company is ready to attempt to penetrate the mainstream market, which usually represents something like 80 percent of the market potential.
An example of the chasm can be seen in the artificial intelligence (AI) industry of the early 1980s. This industry comprised disruptive technologies that could be used in all sorts of ways. The early market (think tanks, universities, and so on) saw this potential and bought the products. Purchases were not usually based on near-term business applications; rather, they were made to allow organizations to explore. Many traditional salespeople who represented companies with a competitive product killed their quotas and cashed huge commission checks.
This wave of buying and euphoria lasted about 18 months. Then, suddenly the superstars couldn’t achieve 50 percent of their numbers. While there certainly were other factors at work, one underlying problem was that the artificial intelligence companies failed to cross the chasm. They never showed the mainstream market why the offerings were needed, and how they could be used to achieve improved business results. Artificial intelligence has been recovering from this debacle ever since. Decades later, AI has made a modest reentry into the marketplace.
Unfortunately, getting across the chasm is not an optional exercise, nor can it be done at a casual pace. Failure to execute this phase of the larger business plan will adversely affect revenue. Delays may afford competitors an opportunity to catch up, and may fritter away whatever first-mover advantage the company may have had.