Best practices for crossing the chasm… and beyond

Dan Olsen [00:03:52] Great. Thanks a lot, Daniel. Appreciate it. Yeah, I'm super excited. I'm really excited about this webinar series we put together. We're I get to bring in awesome speakers like Geoffrey Moore today. So thanks to Sendbird for sponsoring this and, creating great content for their product community. So I'm going to share my one slide here to introduce Geoff real quick. So I'm super excited to have Geoffrey Moore here. I posted him a few times at my meetup. He is a delicious author. He's his first big book. And I'm sure everyone here has heard of Crossing the Chasm was a huge hit. A third edition of that is out. He's got a lot of other books he's going to talk today about Inside the Tornado as well. His latest business book is Zone to Win, and he's got some great ideas in there. So I asked him if he could just talk about, you know, share the best ideas from Crossing the Chasm, Inside the Tornado and his latest thinking. And so I'm really excited. You can see basically how to reach him on Twitter. And with that, Geoff, welcome. I'm going to let you take the day and stop sharing here and let you take over. Welcome. Super excited to have you.

Geoffrey Moore [00:04:57] It's great to be here. Let me see if I can get my slides up as easily as you got yours up. So let's see here okay. So looking good.

Dan Olsen [00:05:07] Yep. Looks great.

Geoffrey Moore [00:05:08] Okay, well, look what we want to do. The whole point. Dan and I've been spending a lot of time together over the last several years. And it's all about giving product leaders frameworks for anticipating how the market is going to respond to disruptive innovations. And so that's been my life's work. And the two key books, I think, particularly from a product management point of view, are Crossing the Chasm and Inside the Tornado. What I'm going to do is pull from those two books, a couple of slides on how markets develop. And then we're going to break this up into two chunks. The first is to show how the way the markets develop privilege for different kinds of playbooks. And the number one responsibility for a product leader is to choose the right playbook and get their company on the right playbook. And it's not it's not always obvious. So I think it's worth some time. Dan and I'll discuss this. I hope you guys have questions about it. And you can pepper us both. The second part of the webinar, I'm going to actually double click on Crossing the Chasm, because I think it's still the single most important play to master. And I want to make sure that people feel comfortable that they've got got a good handle on what that entails. So just a couple of slides then on on this market dynamics, this is the technology adoption lifecycle. The key idea here is that when you introduce disruptive innovation in any community, any place in the world, the community will self segregate into five different strategies for engaging with technology disruptions and the kind of go from left to right, meaning the people on the left or the first, the people on the right of the last. So the technology enthusiasts, they're very smart people. They want to engage with the technology directly. They want to understand how it works. They want to demo it. They'll take alpha and beta copies. They're the kind of like, almost like an extended member of your team. But they're very skeptical. They they're testing it. But if you can get past their approval, that can get you access to the visionaries who basically are interested in disruptive technologies for how they can change the game. So visionaries are looking to get a jump ahead of the herd and change the game. And they go they make their own decisions by themselves. They don't consult other people. It's very different from the third group who are really the most of the the success of a tech product is depend on what this third group does. And then we call them the pragmatists. And basically they talk to each other about the opportunity and they ping each other all the time saying, have you adopted it yet? Where are you with this? You know, and they're always checking in with each other. And basically you're going to see in the next slide that creates the unusual dynamics of a high tech market. High tech markets don't grow the way undisruptive markets do. And you'll see why in the next slide. The conservatives are basically trying to hold on to what they have already. They're basically changes, not their friend. And the longer they can get value from their existing systems, the better as far as they're concerned. And then skeptics just believe that this whole thing is not going to get anywhere in the first place, and you should just not even pay any attention to it at all. So those five groups, each one engages differently. When you put them together, though, we get this really interesting market development model, which basically is I've been dining out on for 30 years. So my apologies, but the point about this model is what we're going to see is that there's four inflection points in the development of a disruptive marketplace. And at each inflection point, a different playbook is rewarded. So it's really, really, really important to understand where are you in this cycle? And by you I don't necessarily mean your company. I mean where is the technology itself in relation to the market you're addressing. So if you're in the early market, you're basically at this point the technology enthusiast and the visionaries are leaning in. They want to know what you're doing because they believe what you believe you. It's a very exciting time for an entrepreneur at this point because you're talking to people who get it. They may even get it better than you did, and they certainly come up with ideas for your product that you did you didn't even think of. So that's very exciting. There are very many of them, and everyone's a snowflake. So the idea behind the early market, the playbook is designed to say, look, during this period we want to get one or more marquee accounts. Now a marquee account is like a Fortune 500 famous company because you want the world. The world is not going to pay attention to your company when you're a startup. But they will pay attention to whatever Walmart or JPMorgan or, you know, the San Francisco 49ers or some. If a marquee customer does something exciting with your gear, then that's the story and that's how you'll put your technology on the map. You also get your company name mentioned, but most importantly, you show the world that there is a new way of thinking about things. And so the business model that gets rewarded at this point is a project model. Basically, you'll do whatever it takes to make that marquee customer successful. So that's the project. And if you're a startup, you know your whole company looks to the customer like a consulting team anyway. So it's you kind of swarm the problems and you make the mistakes. You do whatever you can to make them successful. The chasm is caused by the pragmatist people looking now. They've heard about it. They've heard about the marquee customer, but they don't think it's necessarily ready for prime time yet. And when they talk to each other, you say, are you using this yet? No no no no. Okay. Just let's just wait and see. And that's what creates the chasm. So from a technology product leaders point of view, it's incredibly important to cross the chasm and get the first foothold in the pragmatist market. We call it the head bowling pin or the beachhead market segment. And the idea here is who would be the first group of pragmatists who would adopt the new technology, because you don't have the kind of references that they want. And the answer is pragmatists in pain. These are pragmatists who have a use case that they just cannot solve properly with all the conventional solutions, and their understanding of this use case is not only causing their department problems, it's causing their entire enterprise problems. So they're getting pressure from many sides to say, look, you got to do something about this. This is not okay. So that causes them to look across the chasm to see is there a new technology that could help here. And so these customers do not believe what you believe. They're not they're not believers, but they can need what you have. What that means is you've then got to commit to their problem, to their use case. So the whole key, the crossing the chasm playbook in the bowling alley playbook is you pick a target segment, a market segment in a use case, one use case in one segment, and and you just nail it. You. And it's a use case that the conventional solutions can't solve. So once you start to solve it, everybody in that segment goes, whoa, there's a there is a solution. There's a vaccine. Right. We could we could do this. And so as a result, they adapt very rapidly inside this segment because they're all under pressure to fix that use case. So think of that as a solutions business model. Solutions markets can scale to tens of millions. And even with a bowling alley model meaning you could add additional use cases as you go along, or adding either add a additional use case to the same segment leveraging your customer relationships, or add an additional segment to the same use case, leveraging your partner relationships. But either way, this sort of bowling pin model says you can expand segment by segment, and you can grow your company to hundreds of millions of dollars without ever leaving the bowling alley. But at some point, there's a limit. And it's interesting what happens after you win three or 4 or 5 use cases in 2 or 3 segments. The market goes, well, hang on, this isn't just for a few use cases. This is infrastructure. This is cloud computing. This is mobile apps. Everybody's going to need this. And that creates a phenomenon we call the tornado. And the tornado is the mirror opposite of the chasm. So in the chasm it was pragmatist going, you're not doing this. You're not doing this. I'm not doing no. Okay. In the tornado is you are you are. Who am I? I better do it too. So it's sort of like the junior high dance moment, right? You have to get out on the dance floor. So. And in this moment, there are people are not saying we believe what you believe, because that's not what. That's not how they work. They're not really saying, we need what you have. They're saying we want what they have. This is the new thing. We want what they have. We want Wi-Fi in every conference we want. We want with them. And so this is a time when all of a sudden, for the first time, there's budget for your new category. In the early market, there's no budget. The visionary had to create the budget in the bowling alley. There's budget, but it's not for you. It's budget for the stuff that doesn't work. So in the bowling alley you have to redirect budget. And that takes time and selling energy and whatever. So going in the bowling alley, it's not it's not high speed but in a tornado. Now everybody has budget. Everybody has budget to go to the cloud. Everybody has budget, whatever it is. And therefore if they have budget, they're going to spend it budget. And if you don't capture that budget, your competitor will. And whoever captures the most budget is going to be what we call the gorilla. They're going to have an enormous influence on the future of the category for the life of the category, and they're going to take the lion's share of the profits of that category for the life of the category. So it's a very, very big deal to win market share during the tornado. And you do everything you can to do that. Which means if you think about land and expand, this is where you want to land. Lang lang lang lang. You want to capture as many people in your install base as possible. And so even whether it's a product or a service you're selling, it's a transactional thing where you can you can get it, you can sell it, you can, you can get, you know, get access to that budget. And then over the years, you that you're going to expand it. And that's what leads to to the final part of the technology adoption lifecycle, which is Main Street. Now by the way, we say Main Street. This is the end of the technology adoption lifecycle. But it's the big. Getting the category life cycle. The category is going to go on for months, years, maybe decades. But but what's happening now is most people have picked their random list, their first vendor, and now what they're doing is they're doing more of the expanded land and expand. So people on Main Street, you know, particularly conservative people who don't really surf. First of all, conservatives do not believe what you believe. They don't really think that they need what you have. They rather live with what they already have. They don't really want what everybody else has, but they've now realized they've got to capitulate. And they, they they're going to need what everybody else has, because that's just going to be what, what is required. And so in that situation, what this is a perfect time to capture a wallet share through upsell and cross-sell. And by the way, in a downturn, which I think we're all potentially looking at over the next several years. This is where the bulk of your sales are going to come, and a downturn will come from expanding your install base much harder to win a new logo in a downturn and then in an upturn. But but but more easy to actually capture additional value from from your main street. So this is a time for managed services in any kind of, you know, lightweight expansion in the land and expand model. Now, the point of this exercise is those are four very, very different market dynamics. And each one rewards a different playbook. And so it's very and by the way, you could be in in the tornado in North America, but be in the bowling alley in Europe or in the early market in, you know, some other territory. In other words, you it's it's market specific. But for the market you're addressing, it's important for you to know which of these four and what are the key signals is when we show up, do they already have budget for our category? If so, we're either on the Tornado or Main Street. The categories. Now we may be brand new. We may be late to the party. But this isn't about us. This is about the market. So the market if the market has budget, that means either in the tornado or they've had a tornado in their on Main Street. If they don't have budget, it means they can't be in either one of those two things. They're either in the early market, the chasm, or the bowling alley. And choosing which which between those things is choosing between do I need to the project model to get those market accounts? Or can I now transition to this to the bowling alley? So the idea behind this is to catch the next wave to catch anyway if you're going to have to run more than one playbook. So what I'm going to do now is I'm going to walk you through very briefly, just kind of give you a snapshot which of the four playbooks. And then I'll talk a little bit about that. But big your questions as you're going along. And then the back half we'll, we'll double click on the The Crossing the Chasm playbook. But all playbooks in this model are organized around nine chapters, nine sections. And these are the nine. And I would submit to you as a product leader, whenever you're building a go to market plan, use these nine topics and do them in this order. So who's the target customer? What is their compelling reason to buy? What is the whole product that would fulfill that compelling reason to buy for that target customer? What partners and allies do we need to involve in order to get the sale and be able to also fulfill the sale? How do we sell this thing? How do we price it? Who are we competing against and how do we position against that competition? And then if we win this customer, where do we go next? So that's kind of the classic thing. And I'll just show you what that looks like in each of the four, inflection points, because I think you'll see they're very different. So this is the early market playbook, okay. These are the we believe what you believe people will do. We have a project model in the back of our head. We want to win market references at least one. And we'll do whatever it takes. So in that playbook, remember there's no budget. So you have to find a visionary line of business or functional executive who believes that they can gain such a dramatic competitive advantage. They will go create budget for this opportunity. And that's key because because there isn't any budget, they've got to create it. And then the thing that you're going to give them is something very specific to their use case, their vision, their application. And it's custom bespoke meaning it's a project, it's not a product. It's going to take your roadmap in places you didn't expect to go, and the kind of partners and allies to help you this time are the integrators. Anybody that's got great technology expertise and that sells it essentially by the hour, you these are people that come and have a project business model themselves. Not cheap but really, really strong. And you sell this directly face to face. You cannot sell this to partners. It's a very consultative sale. You have to listen to the visionaries vision. You got to align with the visionary. It's all organized around that opportunity to disrupt as the visionary perceives it. And as your technology enables it. The pricing is value based. Nobody knows what the pricing really ought to be. But the good news is that the visionary is focused on a big reward. So, you know, you can you can actually. Up during the early market, and you're going to need to because you're going to put a lot of effort into this, into this first account, the competition. There isn't a competition that looks like you at this point. The competition is the status quo and your positioning is, hey, we are we are the next generation of technology. We are changing the status quo. As a technology leader. And if we if we win this project and we're still got time to cross the chasm, we have completed our entire product roadmap for Crossing the Chasm. You can go get another visionary, but eventually those visionaries will take your company in different directions. And so you do need to cross the chasm. Or frankly, you'll shred your company. And that gets you to the second playbook. This playbook was for create budget. This next playbook is to redirect budget and the redirect budget. Now we're crossing the chasm now, right. So we're no longer we no longer have to go after a visionary to create budget. But we do have to go after a department management chair who's going to champion redirecting our budget, which it's a no small thing. And the reason I'm going to do that is because they have this urgent business problem. And now the whole product is it maps directly to the problem. If the problem needs it, it's in the whole product. If the problem doesn't need it, it's not in the whole product. So you can't say we have a whole product until you say what problem solving. And then the problem defines the whole product. And your partners and allies here are not to help you sell this thing, they're to help you deliver it. And in particular, you're looking for people who really understand the specific use case. They have domain expertise in the customer's world. They're going to help that customer solve that problem with your product. Everybody at the table is focused on that problem and your product. You're still selling it directly, conservatively. You can't have somebody else sell this for you. But now instead of organizing around vision or technology, you're organizing around that target use case in the target market segment. So you only market into the same. You're going after you and everything you sell is saying you qualify the customer on, do you have this use case and are you struggling? And if you're not, I'm in the wrong room. The pricing is value based. Now, however, you have the budgets been set by the old solution. But but the issue you can say is you can charge up by saying, look, what is the consequence of you not solving this problem? And I'm saving you money even if I'm more expensive in your old solution, you're losing money with the old solution. So you can. There's a value based opportunity in that dialog. The competition is the old solution, and your positioning is our technology and art and our domain expertise make us unique. So your old vendor has the domain expertise but not the technology. The technology vendors who have the technology but not the domain expertise. We're the only ones at that intersection. That's our positioning. And if we win this segment, we're going to move on to an adjacent segment. As I said, either a use case in the same segment or a segment with the same use case going forward. Stay close to your power in the bowling alley is the game. That's great. And as I said that you could build hundreds of millions of dollars of revenue around just this playbook at some point. However, if we if the, if the technology transitions to the tornado now, there's kind of a land grab. Now, this is a market share competition. This is the hypergrowth thing. This is what drives high tech stocks through the roof. Right. And this is a time where you want to have a very, packaged offer that you can just land the land. Land with. So who's got that? This is this is the one that the budget is in place. So who do you call on the caller? The person who has the budget, the pragmatist technical buyer. They've got budget. They're going to evaluate products. They're going to buy one of them. You want them to buy yours. And the reason they're buying now is not because of a particular use case. It's like, no, no, this is infrastructure. We're all going to take use of this. And this is why the technical buyer has more power in the tornado. Whereas in the, in the, in the bowling alley, it's more of the application user that has the power. So the focus now is on product in and on standards and on compatibility and on fitting into the infrastructure, the sales. And now you want partners nowadays for coverage. So now you do want sales partners more than service partners, because you want to get every want to get access to every budget you possibly can, not just the ones that your own salespeople can meet. The focus is on landing rather than expanding. Just get in. And if some in the in high volume things, you might even start with a freemium. In B2B you don't start with a freemium normally, but you start with something. It's easy to land and then grow. The pricing is now competition based. Everybody gets that. There's a budget out there and that winning the budget is a big deal. So people will discount significantly in order to get that first deal and then plan to raise prices later. So the way pricing is done in tornado is are you the market share leader? If so, you get to charge a premium. If you're number two, you get to charge a modest premium. Number three and below you got a best price when. So that's the game in a tornado. It's a company versus company time, but it's product versus product company versus company. But but it's a time where they're saying what did you buy it from. You know Salesforce. Did you buy from ServiceNow or did you buy it from HubSpot? Who'd you buy it from? And in The Pragmatist or one to know which company are you guys going to put your budget behind? And then positioning is based on market share for that reason. And now you expand by geographies, by channels, by platforms. You're following where the budget is going in during this period. It's a little bit like those fishermen who land up in a in a school of tuna or whatever. If you're in the middle of one of those and you're just trying to get fish into the boat, and then the final playbook is okay, the fish are in the boat, everybody's got a market share position and everybody has budget. Yeah, but it's now it's ongoing budget. It's more like maintenance budget as a sustaining budget or expansion budget as opposed to that first commit. So basically the customer is now predisposed to buy from you. And now what you want to be able to do is find adjacent light use cases that you can cross selling upsell, where you're essentially giving the customer more and more value for their investment with very little risk that you're a known quantity. These things integrate well with your products. They don't cause a lot of kerfuffle. It's all good. So it's product focus, but it's these differentiated little add ons and they make a big difference to people. And so now you want to be able to do that. And you want to do it as in as friction free way as possible. So you really don't want to have partners and allies at this point. At this point you'd like it to be much more self-serve or customer service situation. The distribution is now is now. It's often, by the way, increasingly becoming the customer success function. Who's doing some of these renewals and now maybe even even some expansion, because the person is connected to the customer is facilitating, a buying motion where the customer is predisposed to buy that they want to spend their budget on good stuff, and you're kind of helping them do that. The pricing that's got to be actually pretty modest at this point is going to be a lot less than the original price. It's a it's competition based is probably not not the right way to put it. You're competing against other uses of the budget inside the company more than external competitors, but it is calibrated by total cost of ownership. If it's like total cost of ownership, that works. The competition is product versus product. I think that's sort of okay. Positioning is better experience for end users, and that's for sure. But probably the competition might be experience versus experience. Off to rewrite this slide sometime. And then one of the ways you expand is you actually go from one department to the next department to the next department going forward. So those are the four playbooks. And I'm going to stop sharing now because I think, Dan, I should have a chance to sort of talk this through a bit. And but please do submit your questions if you'd like to. So Dan.

Dan Olsen [00:28:19] Yeah. Geoff, thanks so much. Appreciate it. So yeah and great framework as always and great explanation. So everyone I know everyone's busy paying attention to Geoff's slides. Now's the time you know to put your questions in. So on zoom here we have the Q&A tab. Feel free to put your questions in there. And then, you know, Geoff and I are just going to discuss some items later this. So good time to get your questions in and then we'll move on from here. So one thing is I think it's great to have it all hangs together like a tape model. Just like in your new book, The Infinite Staircase. Very tight, coherent model, I love it. I could see a company getting good and building the skills to excel in one playbook, perhaps at a time, like. Right. And so now it's like, if they need to do more than one playbook at a time, I could see that being challenging. So I'm just curious, in your experience, any any advice for companies that are trying to learn a new playbook or adapt to a different playbook that that could help them out?

Geoffrey Moore [00:29:15] Yeah, I think I think there's two ways to to think about the the first one is as a startup scales and as a startup scale, I think you actually you actually go through the playbooks in sequence. So you.

Dan Olsen [00:29:28] Do exactly.

Geoffrey Moore [00:29:29] Then you do a solution play, then you do a product. But the interesting thing is let's suppose you've gotten there and now you want to do it the second time. So there was a book you put up called Zone to Win. Yeah yeah that's right. It's a business book. And in Zone to win, it's like now you have to choose from multiple playbooks and you have to organize. Because the metrics for each playbook are so different that you don't want to you don't want to put them all in one pot. And so what the zone model says is, look, the incubation zone is good for the early market. And maybe crossing the chasm. The transformation zone is great from going from the bowling alley to the tornado. The performance zone is great for going from the tornado to Main Street. And the productivity zone is good for actually maybe even send you have a paging product which you either going to frankly milk or sunset or whatever. And that's good for the productivity zone. And so zoning your enterprise as if you're in a bigger company product leader in a bigger company is critical because. Each zone is good at running some playbooks, but not all to your point. And so you need specialized expertise. And if you if you put them all into one pot, what happens is the performance zone does the thing it's most comfortable doing, which is Main Street with tornado, little tornado, and the other stuff is very hard to manage.

Dan Olsen [00:30:43] Right? Yeah, that was my sense is that a startup, if you're lucky to be successful, you work your way left to right and then you get to Main Street. And then at that point, the company's a lot bigger. There's reinforcement patterns and this is what works to sell it. This is how we do it. And then I see many companies kind of like if you have one successful product, you're lucky. If you have two or more, then you're, you know, skilled in you see companies like Apple that do a lot of different products is I've seen even that like when they try to incubate. Right. And do that incubation playbook, the early stage playbook. Again, to your point, the org has built all these mechanisms and culture and DNA. It's almost like it's like, it's like a bacteria. And the origin, it's like, oh, this is foreign. And it kind of like shuts it down. Even so. And that's why I think you see things like, let's create an innovation center. We can't do it in the main ship, the mothership, so let's do it somewhere else. So I'm wondering for companies that are trying to go from their first product being lucky or whatever, to let's do this again in a new product. What specific advice if you have for that specific scenario? I'm curious.

Geoffrey Moore [00:31:46] Well, there's a couple of things that the first thing is you do want to create. Yeah. What happens at scale is you have a set of processes that are designed to support scale, that are not friendly for incubation. You don't need fast failure, agile. All that stuff doesn't work well with with a scale process model. So you say okay, we can we need to isolated. We need to create skunkworks. We have created incubation center. It's going to be whatever it's going to be Y Combinator like place the three people make a mistake there. And established companies is they don't have a good accountability model for that group. And so with the zone a book recommends is that you set up a VC like accountability model, and you're not trying to be a VC and you're not trying to make venture capital financial returns, but you are funding people to milestones, and you're holding their feet to the fire to say, you need to get to this milestone on this amount of money. And the milestones are always external. They're not they're not some project, you know, check point. We've there did you did you the classic did you again create a minimum viable product. Could you get a customer. Could you get a marquee customer. Could you cross the chasm? I mean, you're doing that kind of stuff in that incubation zone. The second thing you got to realize is when you want to take it to scale, you have to ask yourself, can my current performance zone with my legacy products, my establishment, can they absorb this new capability so that primarily to the same kind of customers? In other words, is this is this compatible with our existing book of business? If so, you kind of go from the incubation zone through we call a transition to the performance zone. Or is this a whole new market? Like, you know, Apple went into music and then it went into phones. That's a whole new that cause we call it the transformation zone. And that's a very dramatic thing, because when you add a whole new line of business with a whole new ecosystem, you go through a lot of spending before you. Get positive, you know, ROI and and in a publicly held company. That's a big challenge in the book talks about a lot about that.

Dan Olsen [00:33:52] Oh, great. Yeah. And I think I think that point about external validation of milestones is important. It's the whole outcomes versus outputs. It's like, yeah, we hit our our milestone. But it's like okay, did you did you get some customers to sign up for it or not?

Geoffrey Moore [00:34:07] Exactly. Exactly.

Dan Olsen [00:34:10] Cool. Okay. We had a great question here, which is someone definitely was listening and they said, please tell us more about what happens with the company continues to be run by project. So they're in that project mode and then they they can keep doing it that they I guess the muscles work. They're so good. They're they're good at that. They keep doing that. And instead of attempting to cross the chasm, can you address that scenario?

Geoffrey Moore [00:34:28] Yeah. I mean, eventually if you're being venture funded, you lose your venture funding. I mean.

Dan Olsen [00:34:34] Yes.

Geoffrey Moore [00:34:35] I mean, look, I mean, and what will happen, what will happen is you'll become an what they call an acquire. You'll have great technology. You'll have really smart people. You've obviously done some great stuff, but you're not a scalable business. And so no investor interested in financial returns wants anything more to do with you. But so so but either a vet, but a vendor who is who sees what you've done with your market accounts because okay, the so the good news for the people is you. Well it's good news bad news. If a large company buys you and they have a good incubation zone model, it's actually pretty good news because you're going to get a second lease on life and you're not going to worry about, crossing the chasm, but you're still gonna have to cross the chasm. I mean, because they're they're going to need you to cross the chasm, too.

Dan Olsen [00:35:20] Right? It's almost like you have a ceiling on your revenue until you cross the chasm and can't really.

Geoffrey Moore [00:35:26] And part of it's just because every visionary customer takes your roadmap in a different direction. So you just shred the engineering team? Yes. You know, I can't I can't do all that stuff. So that's what it's. And people worry because they think, yes, but if I cross the chasm in the wrong segment, what's going to happen is, yeah, getting out of the chasm any way you can is better than staying in the.

Dan Olsen [00:35:51] Exactly. Yeah.

Geoffrey Moore [00:35:52] We've got the.

Dan Olsen [00:35:52] Wrong end of the.

Geoffrey Moore [00:35:53] No choice.

Dan Olsen [00:35:55] Yeah, yeah yeah yeah. As long as you're in the bowling alley, even if you start with the wrong pin, you can always get to the right.

Geoffrey Moore [00:36:00] Exactly.

Dan Olsen [00:36:01] Yeah, yeah. And it makes me think, you know, I work with a lot earlier. I work with a lot of early stage startups and a subset of them, I think that fall into the pattern that the person is asking about. They end up not being so much product or platform companies as custom software shops. Like, we built this one off for Visionary Client A, and we built this other thing and they end up with this non maintainable code base. And then, you know they call me and like we want to become a product company. And it's like they're maintaining the tech that is high. So they're basically a custom software shop not a product company. As a result.

Geoffrey Moore [00:36:33] If you if you if you if you're self-funded, you can build a multimillion dollar. It's kind of hard to get it past 10 million, frankly. Right. If you said, look, this is a lot of stuff. I love doing this stuff. And I'm trying to make 2 or 3, 4 or $5 million a year. And I've got a team of, you know, people that I can pay well with that amount of revenue. God bless. But you're not your European project. Yeah.

Dan Olsen [00:36:56] Yeah. You're kind of like a services company more. And the other analogy I like to use is I love what you said. As you said, you know, you're each visionary client is pulling you in a different direction, taking your roadmap and strategy in a different direction. And I'm sympathetic to startups. You're trying to get to break even. So you want to say yes and get the revenue. You want to get the revenue. So but but you're not necessarily strategic in the revenue takes I call it chasing revenue. And then because we both live in the Bay area, I like to bring up the Winchester Mystery House. You just say yes to whatever any prospect says and you build what they want. You end up with this ragtag, random, like a lack of architecture, lack of consistency, like the Winchester Mystery House, where you go into one room and it's made out of wood, and the next one's made out of bricks, and there's a stairway going to the ceiling. It just doesn't make sense as a cohesive product.

Geoffrey Moore [00:37:40] Yeah. And that. Yes, exactly. And so and then I you can see why people at that point say, well, we want to become a product company. Yeah. But maybe a little late.

Dan Olsen [00:37:50] It may be a little late at that point. And then they get aqua acquired, like you said, for the talent and the code and things like that. Yeah. Definitely. Cool. Okay. Let's see here. Another question was can you talk about what happens when you're product me when you're, I guess, your product or your company, your product may be pursuing different market segments simultaneously and being different playbooks at the same time.

Geoffrey Moore [00:38:10] It's a real it's a real challenge. I think ultimately you have to sort of if you have one product team, then I think you have to sort of pick the the which of the phase of the life cycle you're going to optimize for, and then you're going to charter that team and measure that team primarily there. If you say, yeah, but in this other type of thing, geography, it's very common to be in the early market in in a mirror or a pack and be in the bowling alley here or being in the tornado here. It's still in the bowling alley elsewhere. When that happens, you need to empower the geographical team to add more value, add on top of what you're doing. Because you can't really you can't. You've committed to tornado scale. You can't you can't go back. But you can, customize particularly, but through professional services largely. There's still a challenge around, well, who's going to maintain these customized things? It's it's a challenge, but but the main thing is. Don't ask a cop. Don't ask a team in a market to run a playbook that doesn't fit their market. I mean, it's better not to be in the market at all than to do that.

Dan Olsen [00:39:28] And then there's a related question here, which is when dealing with different markets at different stages, i.e. expansion overseas, how do you best reflect this in your website's messaging? Should you have different landing pages, but one core site or completely different website? So I can imagine you've got the schizophrenic across multiple stages. How do you present that to the world, and what's the best way to present that?

Geoffrey Moore [00:39:48] I think, I think that the two key things are going to be the the bowling alley stage is very is is very oriented toward what industries do you serve and what use cases. And the tornado stage is more or around what platforms and what products and what features and capabilities do you have? So I think you can organize your website to have it to what the customer self-select. You can have one website, but but your use case one should be very oriented toward, you know, using the vocabulary of the customer industry, using the challenge you building your narratives around their problems and how you how you help address them. And you spend a lot of time on that part of your website talking about the problem. At the end, you always have a solution, but you want to show it. Really appreciate the challenges. On the product side, it's more that you can talk about. You can you can set up traps for your competitors. You can, you know, set up benchmarks and and figures of merit. You could talk about your Gartner Magic Quadrant and that's for the for the technical buyer who has budget and is trying to figure out which company to go with. So I think you can do both on my website, but but not on the same page.

Dan Olsen [00:40:55] Got it. Okay, good. Okay, good. And it's interesting how you transition. Sounds like you transition how you message. But when you go from phase to phase.

Geoffrey Moore [00:41:02] You do take one more. If you have one more and then we'll maybe we'll move.

Dan Olsen [00:41:04] Yeah, definitely. Yeah. Dub sounds great. So there's a couple of questions from John Kim. Thank you. It's awesome to hear from Geoff directly as we refer to your work often internally at our company. Can you speak to more about the whole product? What does it mean specifically? How does a prospect customer know it's a whole product? For example, if it's a technical product APIs. Yeah.

Geoffrey Moore [00:41:24] Yeah. So again, because you know, when you're making it you want to say, well, I made a whole product. It's like, no you didn't. That's not what you made was a core product. And by the way, without the core product, we need to even discuss the whole product. So the core products are very big deal. And it's it's the thing that your customers buying from you directly. But if you're going to address the compelling reason to buy, which is the purpose of a whole product, is to fulfill the compelling reason to buy for the target customer. So if you change the target customer or change the use case, you have to change the whole product, right? I mean, every every use case, never target customer has their own flavor how they're going to use your product. Now a lot of times you say, well, I don't you leave the rest of the whole product to the customer. We used to do that in the 90s all the time. That's not a great idea because some do it well, but a lot of them get you into trouble and then you have a lot of maintenance, you have a lot of unhappiness, and you install base. So having the engineering team thinking about the whole product and having a whole product manager, so it's a product manager, it's got a little added because you add to it which says what is the bill of materials for this use case besides us? So if you if you forget, if you get us, what else would the customer need either in terms of other products or other services to nail that use case and take responsibility for, not for putting it in your core product, but for orchestrating the availability of that whole product and make sure that you're compatible and that you're it's, you know, you take friction out of assembling the whole product. The more it's preassembled, the better that customer. That's what it goes.

Dan Olsen [00:43:03] Yeah, yeah. I would just add that came up this morning where I'm at today. This company has a great product offering. But their target market, they know they need the product but they don't know how to use it. It's like it's like a Lego set. Here's a bunch of Legos versus show me the instructions how to put. But he said pre-assembled or assembled, you know. And so what we brainstorm is, you know, have you done any how to guides like this is your use case. Here's how another company with the same use case used our tool and configured it. And by the way, here's the template you can just clone. So for me that's there's there's sold the product. But there's a gap of people actually building the Lego set.

Geoffrey Moore [00:43:41] And by the way, if you want to create virality around your product at that stage people will talk about the product, but they will talk about the use case and hey, new use case. So, so so your marketing is should be very customer centric. Use case centric until the category gets to the tornado. Once it's in the tornado, then it's like everybody gets it's for lots of use cases. But at the beginning of okay, I'm going.

Dan Olsen [00:44:04] To go, go okay, let's switch it.

Geoffrey Moore [00:44:07] Okay. I'm going to go to Screen Share here. Hold on. Okay. There we are. And there we go and share and. Here and. Here and. Yeah. Okay. I actually, I'll this is a recap of what we just said. Playbooks are stage specific. Each stage rewards a different approach. We've talked about this thing at nauseum. There is this kind of weird thing about your very horizontal technology. Already in the early market. You get very vertical in the bowling alley. You get back to horizontal on Main Street, and then you kind of get back to vertical on, horizontal of the tornado. You get back to vertical on Main Street. So it's just it's a little bit weirdness for those of us who are paying attention at home. And the point is the kind of leadership style and the skill set that you want for each playbook is different. And so that's that's something you just have to respect. And you personally, what you should think about is where am I the best at? Where's my leadership style working the best. And then potentially where where, where would I, you know, be better to let somebody else or my team lead. Okay, so now I want to talk. I have four slides, and they're just talking about this Crossing the Chasm play. I want to double click on this because this is where I think if you can cross the chasm, everything else is gravy. But if you can't cross the chasm, really all that's all that effort that everybody put in, it's kind of it's it's not lost exactly, but it's not reward. So I'm going to talk about four things that I think are challenging and crossing the chasm and just give you some thoughts about each one. So the first one is what we're across the chasm says we're going to pick one target market with one use case. So how do you pick that. And there's a whole group by the way called the Chasm Institute that do nothing else but help people do solve this problem. So if you if you're in the middle of this one, you might get in touch with them. But criteria for selection. You need to have an urgent, compelling reason to buy because you need the pragmatist to lean in. And this is a pragmatist. It normally would be leaning back because they don't like to get close to the chasm, but because they have a compelling reason to buy, they will, you want to make sure that this, that there's not already a good solution in the market. You want to be the first mover for this target use case, because you want them to all to consolidate on you. If there are 2 or 3 of you competing on exactly the same use case in exactly the same segment, none of you going to win. Even if all of you are excellent, nobody will become dominant. You need to dominate that first segment. It's a little bit like winning a primary in a presidential nomination contest. You want a feasible whole product. It can take work, but it can't take a lot of time. So you can't pick a use case that you'd say, well, I have to do six months more of development to get there. So so it can take work but can't take a lot of time. And you want to make sure that you the economic buyer, there's an accessible economic buyer with access to funding. Meaning there is a person who has budget. And you can you can get to them. You have a sales channel that can they can connect directly with them because you you don't have to talk directly with that person. The market segment size, it's interesting. You know, people think about why I want a big segment. No, here's what you want. You want a big enough to matter so that you could grow an order of magnitude in this one thing. Like if you add 1 million, you won't be able to go to 10 million, you're 5 million. We probably want to be able to go to 50 million, but it's small enough to lead. So it can't be. It can't be more than like twice. If you were in $1 billion market segment, you're a minnow in an ocean. So it's very important. Big enough to matter, small enough to lead and then a good fit with your crown jewels. Meaning this particular segment, the magic that you bring in your technology, disruptive technology really differentiates on this use case for this, for this group of end users. Now, how long should you spend deciding on what target market segment it's like one month or less. The reason why is time doesn't help. If you could do a big research project to pick the right markets in that, you would. But this is a new disruptive innovation. You can't you can't solve the problem with research. So it's a high risk, low data decision. And the clock is ticking. Now having said that, still if you if you're talking to anybody who's been out in the field has been selling, whether they've been winning the sale or losing the sale, they've learned a lot about the compelling reason to buy. They've learned a lot about, you know, what the whole product might or might not look like. So I would definitely bring your field facing folks, both your salespeople and your support people, and anybody who's doing project work in the field into the decision, because they're going to give you a bunch of insight into what might be a attractive market segment. So that's select the market segment. The next thing is we were just talking about is, okay, package the whole product. You know, I pushed this against the criteria for the whole product is everything the target customer needs to fulfill their compelling reason to buy and nothing more. Adding stuff that doesn't help is actually a distraction. It's actually a negative, not a positive. You want to be this as focused and as fit for purpose as you possibly can. It includes the core product. That's you. That's the thing that you do engineering that. That's the thing that's on your roadmap. It also includes any third party products or services needed for the customer to become successful. It's not complete. The solution probably doesn't get the customers got a win. If the customer solves the problem, they're going to tell their friends and you're going to be successful. If the customer, for whatever reason, doesn't get a good outcome, then they're they're not going to tell their friends. And in fact, worse, they might even tell their friends it doesn't work, in which case you're in real trouble. So it's really important that you make sure the whole product holds up under pressure. And if and wherever that is, that there's not a third party or your core product can't do it. You need to put professional services from you to fill in the cracks. You cannot let this customer solution fail because this is the whole key to reference to you. Becoming more powerful is that you're going to win the primary because you are the people with the complete solution. Bringing partners and allies into the equation is great, but they if you're not bringing them first to help you sell the product you're selling, you're bringing them in because they have some special capability. Typically, they really, really understand the customer industry and they really, really understand the customer's use case. So they're actually kind of excited about your product too because it makes them more powerful as well. But you want to make sure that you coordinate with them. So you don't ask the customer to find these people or the customer to pull the thing together. You orchestrated. Now you don't. You don't resell it. You don't have to resell it, but you have to make sure that everybody shows up at the right time on the job site, just like you were like a construction foreman building a building. Okay. The third thing that we got to actually win the sale, we've got target the market segment. We've got sample the whole product. So when you think about pipeline creation, the top of the sales funnel, you know, normally, like in a tornado, you want the biggest funnel you can get. But that's not what you're looking for when you're crossing the chasm. You want to make sure you want. You only want to talk to companies in your target market segment who have been qualified by having the use case. So basically what you're doing with your marketing is you don't talk about your product. They don't care about your brand. They care about is their problem. And so you talk to them a lot about their problem. What what how how you understand the challenges. And then you make clear, by the way, there is a new way to address these problems. And we'd love to talk to you about it. But you don't. In your marketing literature, it's mostly about, hey, if you have these problems, who are you going to call Ghostbusters? And then you put down your phone number, right. For, for for doing this. So yeah. And you follow up directly with the department who owns the the process, who's up for the hot seat. So it's a very different kind of marketing than sort of spraying or, you know, or doing, you know, big advertising on search engines. That's not what you're doing. Much more targeted. The sales channel is, again, this is not a classic enterprise salesperson who's used to having a sales territory coverage model, you know, and taking people through the budget, qualification, sales, qualification. Can you make the decision? All that is tornado, main Street stuff. It's not bowling alley. It's not crossing the cars. What you want now is somebody who comes and talks to the customer initially without computer, without giving a demo, without giving a presentation. Just qualified him, hey let's talk. We've been working with a lot of companies in your area. We understand there's this use case. It's very challenging. We're committing a lot of resources to this use case, as I can understand how the how much how much impact will this use cases in your world and how you are trying to deal with it today. And then eventually you bring this the dialog around to, okay, let me show you what we're doing. But you don't start with what you do. You want them to talk. You want them to to, to to to really tell you as much as you possibly can. And by the way, you want to bring a notebook and you want to write down everything they say, any to show that you're listening. But B, you're going to use their language in the sales proposal. When you go back to them, you're just going to use their own words. Excuse me, I've been pricing hello pricing. The pricing is value based. So it's important for you to understand what is this thing costing the customer today before they before you even talk about the price of your product, what is the economic consequence of not solving the problem. And you're going to position your pricing relative to that, to that consequence. You also have to realize, however, that the customer is going to pay for not just you, but for your partners as well. So make sure that when you set expectations about the total budget required here, it's not just for you, it's for the whole for the whole thing. The good news is, when you're crossing the chasm, you don't have to discount across the chasm people. When people are in pain, when people are in trouble, they're not looking for the cheapest solution. For the best solution. You know, if you have something wrong with your heart, you don't go. And there's a coupon in the paper says Heart Surgery 999 this Saturday only that's not that's not that's not what you're looking for. You're looking for somebody who really, really understands you and your problem. And so same thing, when you're crossing the chasm. And then finally, in terms of the way you position yourself interesting with respect to competitors prior to the tornado, competitors are your friends, not your enemies. I know that seems really weird to people, but competition most of their careers. But the idea is there's no budget yet. So if there's no budget, a competitor at least validates the idea that there should be budget. And so you don't want to destroy your competitors or tell them, tell the world that they're all bad. What you want is you want strong, reputable companies who are spending money in your category. The way you're going to position is you're going to say you're going to praise them for their product innovation because you want people to say, hey, this new technology is really worth investing it, but you're going to exclude them for their lack of domain expertise. So you're going to say, you know, Google and Microsoft and Amazon have this wonderful AI and machine learning, but we specialize in cooling the chillers in data centers or something like that. And in that for that use case, we are the team to beat. Okay. So so you want really strong reference competitors but but not but but then you're going to beat them on expertise. Conversely in terms of the status quo it's the other way around with a legacy people. It's like, okay, these guys have really good expertise, but unfortunately they don't have the necessary technology. So that's why we beat them. So the next gen disruptors have the technology but not the expertise. And the companies have the expertise but not the technology. And we are the ones who actually, meet, make the intersection and solve it. And by the way, we show that not just with our, with our, our decks, but our and our demos, they're very use case specific and they're very pain focused. And so and then when you, you parade your customer wins particularly wins. In the segment that you're targeting. Because as soon as you get 2 or 3 or 4 or 5 companies in the same segment, using the same vendor for the same use case, it's kind of game over because pragmatists do not want to get something. They want whatever everybody else has for what they're doing. And so you wouldn't top five of the top 20 accounts before anyone wants to. It's it's like you you're going to win. You're going to win overwhelmingly. But the dominant share of that segment and that and that share of segment is important because that's your home base. That's what allowed Apple and Apple when desktop publishing and and their marketing and advertising group, that's what that was all they had at one point when the piece and then when they went through their sort of dark, dark times, and then Steve came back and took them into other areas. But but but that but that the core base was, was it was around those original, those original, target market segments. So you focus your PR, your advertising, your market, come on, the target segment, which means, by the way, it's not that expensive to cross the chasm because you're not wasting money spending. You know, the guy that said half my ad budget is wasted. I just don't know which half. You don't do that when you cross the chasm. It's all directed in the place that you're going after. And then you could you can actually even once you get, notoriety and then say you could actually sponsor a conference that just sort of installs you as. Now these are the thought leaders in our in our world. So those are some of the ideas behind Crossing the Chasm playbook. Again, I'm going to stop sharing and open this back up to to to Q&A and into some dialog with with Dale.

Dan Olsen [00:57:43] Awesome, Geoff, thanks so much. That's great, I appreciate it. I like the Ghostbusters reference. Nice. And I like the point about. Yeah, when you're early in the ecosystem, your competitors are basically the way I view it is your other competitors are helping to validate. The category is where I read what you're saying, right?

Geoffrey Moore [00:58:00] I mean, I started in tech in the 80s, and I can remember going to seminars where Oracle and Sybase and Informix, Oracle, Ingress and Informix were on the same day as Paul talking about relational databases. Imperative at that time. Right. It was a couple years later. The tornado starts in the 90s. Came up.

Dan Olsen [00:58:21] Right? Yeah, yeah. It's like, let's get to let's get all get the pie. Let's get the pie against the candy. And then once the pie is big enough, then we'll fight over slice and. Exactly right. Yeah, yeah, yeah. And I like the thing you said to like. Yeah. Well, in that example, the all of the, the top relational database vendors got together and did a conference to like up raise up relational database. And so same thing. Or your other point was, hey, maybe you can do your own conference in that space to kind of do that, which I think is great. It'd be a thought leader thing.

Geoffrey Moore [00:58:53] Exactly how you say great. Or your vendors could do the same thing that big data vendors do the same thing. Yeah. To budget, you know, you want to work together.

Dan Olsen [00:59:05] Yeah. It's not really a product being sold, but I feel like that's kind of what happened. There's a new function within the product, relatively new, called product operation or product ops or prod ops for short. And I feel like that's they've been talking about it, talking about their conferences now, and everyone's talking about that kind of function now. They've done a similar kind of playbook there. Cool. Well, get your query if you have any new questions based on the new content injected in the second section, please get them in. One thing you touched on, which is always like a black box for most people is pricing, right? I mean, you've got to have done all the hard work to understand the market and the engineering work to build it. Just a simple matter of figuring out how we what do we charge for this thing? I feel like that's like this rare skill set that it's hard for companies to do. So I sorry if you have any advice for companies struggling with, you know, how to price effectively what advice you would give them.

Geoffrey Moore [00:59:58] And it is disruptive. If you're going into an established category, then there's there's been norms that have been set for the pricing and the classic pricing research things. And you can talk about, you know, am I going to do, penetration pricing? Am I going to do, you know, value pricing? Am I going to do premium pricing? And all three of those strategies are for mature markets where you say, look, I'm going to if I like you to do a high priced, offer of pads more convenient or has more prestige or whatever, you can do a Walmart low cost, you know, discount offer, same thing. But when you're crossing the chasm early, when you're doing disruptive innovation, there's no there's no there there there's no there's no, market standard. So how do you play the game if particularly when you're crossing the chasm? The thing you can do there is you say, look what you start with, the economic consequence of not solving the use case. So what does it cost a company who's to stay if they stay on their status quo solution and struggle with what. And and that that will take some conversation with with the people. But you're going to be able to there'll be some heuristics because they've had this problem. They've talked to their board about the problem. I mean, their CEO is asking about the problem. So they have they'll have some knowledge of it. And then if you say, look how much of that if I save them X amount of money, how much of that do I get and how much do they get. And at the beginning you could probably start with 5050. That's a lot to for you to get, frankly. But in the beginning, hey, any port in the storm I think pretty quickly it then goes down to, you know, 30, 40, 20, I mean in a tornado will get down to ten. But but but but that's what happens in a tornado is the market gets bigger the the price the price compresses. But I think, I think we consider it's value based pricing, but it's the value of the losses that you're prevented. Whereas in the early market that that really is frankly just magic because the visionary has this vision of I'm going to change the world. Price is no object. And so you have these things like I was talking with the CEO the other day, and he said, well, you know, particularly customer. And he said, well, what's it going to cost? I didn't realize, you know, he said, $15 million. My guy said, okay. I mean, I really, really like that. You really are kind of kind of making it up. But in crossing the chasm, you can get more handle because remember, you've got to consume that budget that already exists and you can maybe get a little extra, you know, could you people get that? They're changing horses, but not a ton extra.

Dan Olsen [01:02:39] He had his Doctor Evil moment. $100 million. All right. Cool, cool.

Geoffrey Moore [01:02:46] Really high class movies. I mean, you know that.

Dan Olsen [01:02:48] Yeah. Yeah, exactly.

Geoffrey Moore [01:02:50] Austin Powers, you know, Ghostbusters. Yeah. We're we're we're.

Dan Olsen [01:02:53] That. We're. I'm give I'm giving a new talk on MVP. And I actually went down a rabbit hole of like, can I work mini me into this somehow? But then I was like, you know, am I going to go? So all right, let's see here. Let's see. Okay. What how I see. How should we factor? One question on pricing. How should we factor the usage cost into the pricing? It seems many clients of B2B who have to plan the budget in advance don't like to get surprised by that. I use it, but I've seen this actually where the pricing plan, it's like a usage based plan and so you don't know. And so people are worried they're going to get. Yeah. And it's a great question because I've seen I've seen people products in the product management space where if you give me a set number, I can budget it, but if it's variable, I don't know.

Geoffrey Moore [01:03:36] Right. So I think initially, initially you may have to take some risk to say, look, none of us know the consumption model yet. Let's put in place a consumption model. But let's cap it for the first year. So for the next year, no matter, even if you go way over it in that year, for that year you're we're going to cap it. But you don't get that price for the following year. In other words, I'll I'll try to take the short term, budget off the problem, off the table. But you I'm not going to I'm not going to reprice my product in order to protect your budget in three years, you can either decide not to do it or whatever. I think, I think, I think just leaving it as an open ended consumption model, particularly when you have a large customer in a bureaucratic purchasing process at their end, you are exposing them to internal, you know, friction. That's just not worth it.

Dan Olsen [01:04:25] I've seen this specifically like in the analytic space. We're going to track by event, and I have no idea how many analytic events I'm going to be sending to your API. And you know, and so I'm just worried about it. So it's funny because like I've also seen that's one concern where you put it all in the client and they've got to decide. And I've seen people literally budgeting their analytic events and saying, you know, we can't afford to instrument that. And then they're using they're not using your product fully because you set up your cost structure. I've been weird way.

Geoffrey Moore [01:04:53] About 3 or 4 years ago, Splunk found themselves in a very similar position where they were charging by the amount of data that was in.

Dan Olsen [01:05:00] Spot. Yes.

Geoffrey Moore [01:05:01] Yeah. It's like, guys, we want them to put more.

Dan Olsen [01:05:03] Data in spot. Yeah. Yeah.

Geoffrey Moore [01:05:06] It is interesting that you have to be thoughtful. This my pricing model? Incent the right dynamics. Right, as well as come up with the right amount of money.

Dan Olsen [01:05:17] Totally agree. And it's funny because then some other company said instead of doing it by event, they said, let's do it by user session. And that just was one level less complex. You could kind of get well, we know how many users we have, we actually know how many, we know how many, etc. it's more estimable for them basically, you know, and then I guess there's a flipside a company can mess up. And I've seen this where it's an all you can plan. There's just, hey, it's ten bucks and and then you see the power users go, great. Is there.

Geoffrey Moore [01:05:42] You know.

Dan Olsen [01:05:43] I think I think.

Geoffrey Moore [01:05:44] I'll give you another issue that's important, which is you have this situation of auditing where they true up. They say, oh, we're going to go to the end. We're going to true up. But in very large companies sometimes, you have these arguments. Well we didn't we don't, we didn't, we didn't use that many things. And, and you know, which how much was open source versus how much was licensable. And and so again, I think the consumption model is not a, it's not like mayonnaise. You can put it on every, every sandwich. Right. It's like, look where it fits. It's great. But you're probably better off using a tiered model initially with, with sort of like, you know, chunks and a cap and you, you'll leave some money on the table. But, but it's better to leave that money on the table than to go through all the headaches of getting every last nickel and then realizing, man, I just I disincentive the relationship. It was just not worth it.

Dan Olsen [01:06:38] Right? Yeah. And I like that point. You start out with one cap and then as you learn, you end up with tears and you end up seeing people like, oh, it's natural. Like, oh, we are so happy you just exceeded your cheers. Sounds like you're ready for our next plant, you know. And by the way, Love Zone.

Geoffrey Moore [01:06:54] Yeah. And by the way, you should probably add more value if each new tier so that you.

Dan Olsen [01:06:58] Exactly.

Geoffrey Moore [01:06:59] Feel like you're just, you know, you know, Rome running the taxi meter.

Dan Olsen [01:07:03] Right. Related to this little. But there's a question of how should we think about the they said percentage of budget. Okay. I'll say it is relative investment in marketing and sales based on the phase that you're in the stage.

Geoffrey Moore [01:07:16] It's interesting. So in the early market, the person who closes the sale off is not the CEO of the startup. I mean, because it's just it's just it's an evangelistic, charismatic thing. And so the sales and marketing, it's thought leadership, it's not expensive when you're crossing the chasm again, because you're going to focus on a target single segment in a single use case. Again, it's not expensive. And you got you want to make sure that the salespeople are people who are good at solving the problem, not just closing sales, where you start wondering about what real coverage of sales coverage and marketing is. The tornado. And I would argue in the tornado, you probably should over rotate to sales and marketing, because it's that there's about the tornadoes last between like. Three. In seven years. Not ten years, but not one year. So somewhere between 1 and 10. And during that period, the market share, structure of the category becomes established. And it's very conservative. Once there's a pecking order, it doesn't normally change. So winning a place in that pecking order is worth a lot. And I would not I would I would make sacrifices, significant sacrifices to find sales and marketing in a tornado. And then you got to dial it back when you're on Main Street, because now you're overpaying on Main Street. You're overpaying. Well, getting a new logo on a tornado is worth a ton. Getting more land and expand money on Main Street. Now we get to be more efficient more and it should be less less money. So each one I think is gonna have its own comp model. And again, if you have products in various places, how do you handle that? I mean, that that's why sales executives should be paid something to figure all that out.

Dan Olsen [01:08:59] All right. Great. Cool. Okay, and then we got one more question from John Kim regarding zone to one specifically, which is great. So how do you keep the right balance between transformation bonus zone versus performance zone at a smaller startup? As people may think either one transformation zone is too risky for my career. I'd rather stay in the main zone or two. Seems like transformation zone is a top priority. Shiny thing versus thing. And Performance Zone is the old thing.

Geoffrey Moore [01:09:26] Right? Well, I bought and I would say I would've just used incubation zone rather than transformation. So one of the things yeah, the way the with the way I'm using the thing transformations are very high risk. And you wouldn't do them very often because you're kind of like bet the company. But incubation zones are there all the time. And there's a are two things. Because you're right in the incubation zone, it's a fast fail model. And that means fail is is definitely on the table. And there's no career path when you fail the incubation zone. Now, the fact that you got recruited means you're probably one of the brighter folks on the team. So I don't think I'm really terrified about you being employable. But the point is, you're going off of a career path when you go into the incubation zone because you're joining a family that you're joining an internal startup. So if you if you're like in sales or in your engineering, you say, no, I, I really do want a career path and you want to stay in the productivity zone of the performance. So because they're both organized around career paths. So that's that would be number one. The other challenge of course is hey, they get to do all the cool stuff. Well yes they do. And and and but here's the deal to one, you got to be good at cool stuff to to play. By the way. There's cool stuff going on in the performance on two we call it nested incubation. You know we're going to do next generation stuff. It's not all going to be done in the incubation zone, incubation zone for stuff that's incompatible with what we're doing in the performance. So the antibodies, you said, you know, how the antibodies would come after the bacterium. Yeah. It's bacterias. It's the bacteria. So maybe that's what we'll call it in the future. So so you got to understand that. But but there is there is a cool factor of being in the incubation zone and that's what attracts people to it. So you got to understand though, but you're you are stepping out of a career path when you do that. And so is that, you know, you have a family and you have a baby. Where are you? What what? You just understand that each zone has its own rewards and its own obligations.

Dan Olsen [01:11:22] Yeah. And I would add a personal anecdote here. So when I was in into it, I worked in the performance zone on our, you know, 80 plus percent market share product learning, learning the space, learning my skills. It was great. So part of it was I wanted something different. I wanted an incubation zone. I wanted to work on a V1 instead of an update. And I and I, it was an internal startup, as you said, and I realized I'm kind of climbing out on a limb here. Like if we do this internal startup and it doesn't work, there may not be a place for me to go back to anymore. But I was fine because at that point, my career, I'm like, you know, I've learned this stuff, now I'm going to apply. I want to take. So I think there's a little bit of a personal journey, you know, and I think I also see the converse is like some people were maybe right out of school, but straight to an incubation thing startup, but they don't have the experience or skills yet. Right. And so I almost think there's a little bit of a why don't you, you know, one successful model fly people go learn your craft where it's relatively stable, less chaotic. Yes. And learn your craft and then go and apply. That's kind of the path that.

Geoffrey Moore [01:12:20] You said is really, really, really good advice. And I think far too many kids go from college to start because they have maybe their friend recruited them, right. And they're super bright. Really great. Right. But you're but you're right that at some point and you've got it, you have to you, you got to learn the, the, the ordinary in order to then position the extraordinary. So anyway, we're probably coming to a.

Dan Olsen [01:12:44] Wonderful quote to end on, I think Geoffrey. That's excellent. So as always. Yeah, as always it's a huge pleasure talking with you. Thank you so much for sharing your time with all of us here. There are more questions we unfortunately didn't get to, but, I know center will be putting the video up. So, Geoff, thanks again. Really appreciate it.

Geoffrey Moore [01:13:04] Well, great to see you. Take care.

Dan Olsen [01:13:07] Yeah. Take care. Everybody gets luck with your products like.