Below is the transcript of a podcast interview we did with Geoffrey Moore, who is a well-known marketing author, speaker, expert and one of the leading voices within the marketing world. This episode is dedicated to Crossing the Chasm, which is a book and framework that has guided an immense number of marketers since it was first published 30 ago.
Crossing the Chasm has been essential in helping marketers introduce new and disruptive tech products to the market. But is this 30-year-old framework as useful and relevant today as it was when it was first released? In this interview, Geoffrey shares his take on this and much more. Indulge in these insights via the freely transcribed podcast transcript below. The full podcast episode is also available to listen to here.
Jakob
Before we dive into a little bit on what's been going on these years, maybe you can just, you know, give us the background on what led you to write the book and become the marketing author, speaker and expert that you have been for the last 30 years?
Geoffrey
Sure. So actually, I started my career in a different profession. I was going to be I was a literature professor. I have a doctorate in Renaissance English literature. I taught for four years, but we wanted to move back to California. And so, in doing so, there were no jobs in the academic sector. So I joined a software firm as a training director, but I got into sales and marketing, and marketing was what I was good at — and then I worked at three different startups.
And at the end of that I went to work for a consultancy called Regis McKenna, which at the time was the premier marketing consulting firm for high tech. Because I was there for five years — and they were working with with many, many tech companies at that time — that was what led me to be able to see the pattern that got captured in Crossing the Chasm. And because I was an English professor, I like to write, so in other words I wanted to write anyway. So then that book just kind of it struck a chord with people like yourself. It allowed me to freelance.
I left Regis and started my own firm the Chasm Group. And we subsequently had two other consulting groups. And that led to a second book called Inside The Tornado which is; “Okay, now you're on the other side of the chasm. What about how do you compete in these hyper growth markets?” Then there was a book about investing in high tech called The Gorilla Game. And then there were a series of books about “How does a legacy firm play this game?” because I was playing always from the startup’s point of view. And so the most recent book in that series, which I think is the best one, is called Zone to Win and it's “How do you cross the chasm if you you still have to pursue your core business?” like in Ericsson or something like that.
So anyway, that's what I've been doing. And currently I'm advising Salesforce. And Zone to Win was with Marc Benioff and his team at Salesforce. And Satya Nadella and his team at Microsoft. So really, really good teams. Gave me a ton of perspective, as you can imagine. And Intel’s working with these frameworks, Cisco's working these frameworks, so big companies — but also companies like f5, which is a two-to-three-billion-dollar company, and then, you know, the startups are still more Crossing the Chasm oriented. So that's what I've been up to.
Jakob
When did you see that you hit a nerve that was really, really appreciated when you broke the Crossing the Chasm?
Geoffrey
It was really kind of funny, because you come out with a book, the publisher said “Well, you know, we don't want to give you a big advance because we don’t think you’re going to sell very many.” And I thought that was fair. I said “Well to cover the advance, how many do we have to sell?” And they said “Well, we'd have to sell, I think, like 7500 books.” I said “Okay, well, if we sold more than that, could we raise the royalty if anything over that?” “Oh, yeah, no problem.” “Okay, no problem.”
So what happened? It was one of those things that went word of mouth, kind of like the whole theory of marketing, right? But for me I think the key moment was when I went to one of these conferences as you often do. And you say, “Hi, I'm Geoffrey Moore” and hear “Oh, you’re the chasm guy.” So that's when I realized that it was beginning to resonate, and it was fun. When you’d give a talk about Crossing the Chasm, we’d watch people elbowing each other because they'd be laughing at each other: “Yep we made that mistake.” So that’s when I thought, “Okay, there's really something here.”
Jakob
If you would rewrite the book today, is there anything you would do differently? Do you see any of the core concepts or ideas you had there that have changed over time?
Geoffrey
In one sense I've written the book twice, because as you said, it's in its third edition. But in both cases, I didn't actually change any of the ideas or frameworks. I just changed the examples because, you know, people had not heard of the companies and we had new examples.
A couple of things we've learned though. One is: this is a B2B framework. It really isn't as good for B2C. So if you're in a B2B business — or most people now are in a B2B2C business, right? — for the B2B part, it really does hold up very, very well.
But the other thing I learned, which was not represented anywhere in the book, came from an experience of being on the board of a company in a venture-backed firm I’m associated with called Enlite. So Enlite makes semiconductor lasers and their original premise was they were going to be an optical network — and the whole optical network thing kind of went into the tank. So they shifted to work with very specialized industrial inscribing like doing the back of an iPhone. Very, very delicate work. And they had kind of a very lumpy business. We thought “We’ve got to find something better than that.” What we ended up saying is “Look, there's an industrial laser business who’s a very strong leader there in IPG, but we could be a number two.” If we just essentially copy them, because we had better technology than them, then we crossed the chasm — basically went to their side of the chasm in a market that they had already established — and we just took the second position there. What that let us do was build a book of business of about $100 million that was basically there to be had for the number two player. And then we were able to take our disruptive technology and now we're being highly disruptive in that industry as well as other industries. But we actually crossed the chasm. Yeah, I never thought about that. You could cross the chasm by essentially — instead of featuring your disruptiveness, you actually feature your compatibility and get into the market that way and then disrupt from within. That had never occurred to me before.
[Instead] of featuring your disruptiveness, you actually feature your compatibility and get into the market that way and then disrupt from within.”
Jakob
That is that is really, really interesting because I think a lot of companies are struggling a little bit, you know, should we be disruptive or should we try to be as the other guys but better? I have actually interviewed a few people around this because I think that's a topic that became quite popular last year. So I think he was one of the pioneers actually defining the product category as a key ingredient in the marketing plan or the positioning. And now we have these category designers, consulting firms. I had Christopher Lochhead few weeks back to the podcast, who is also based in the Valley, who helps a lot of companies and they're so what's your experience, looking back on product category? If it's better to go with — for example, Sangram Vajre of Terminus said “Don't do it, it's very, very hard.” And others who say “Yeah, it’s hard, but it's the only way to compete.” You know, what, what should a marketer today do?
Geoffrey
These are two legitimate paths but they're very, very, very different. Their risk/reward profiles are very different. So for a category to actually come into creation, a whole lot of companies have to essentially circle around it and endorse it and invest in it. At the beginning, if you're just a start up, it's like you're just like one point of light and trying to make this thing happen. Now, if you're truly disruptive — if you’re for example Elon Musk and you're gonna do an electric vehicle that's only electric — that that's the game you're playing. But it's a kind of a “Go big or go home” kind of game. It's very venture capital oriented.
Having said that, however, look what Amazon did with Amazon Web Services. And they did that in a public company, which is just amazing to me. It's certainly the story that creates the maximum wealth creation because when you create a new category, if it's successful, what that means is a huge amount of money in the world, which was being spent someplace else, is now going to get budgeted to spend on this new category. So there's a huge amount and it’s all coming in at the same time, and this is what we call the tornado. Obviously everybody says “We go to the cloud” or “We have to have mobile apps” or something like that. And if you're there, and if you are the leader at that moment, your value goes through the roof. I mean, look, you know, Apple with the iPhone, this goes crazy, right? So that makes great stories, and it makes incredible wealth creation. And there's maybe 10 or so, so it's not it's not very common.
So what the other guy was saying was “Look: a much less risky, but also less rewarding, strategy is go into an existing category but carve out a market where you can disrupt.” So in other words, go to somebody saying “Look, in general, the category leaders that are in place are the leaders, but we can we can take this one piece of the market and specialize there and we can take that away from them” essentially. And that's very much like the Crossing the Chasm strategy of focusing on a niche market. Nail it, you know, nail its issues in a way that even the big guy should say “No, I'm not going to go that far.” You do go that far, and people go “Wow”, and that's probably the single most reliable plan in tech. If you will do that, customers will love you and they will endorse you and you can have a real business.
Jakob
But in that case, you don't innovate a new category, but rather say “We're a European system but we only do funeral agencies” or something like that?
Geoffrey
Exactly. And by the way, but you have to say and funeral agencies have a class of problems that the standard ERP system really doesn't support. And therefore, you know, we've invested in...
I'll give you a tiny example, because it was very early on with Crossing the Chasm.
Lawson Software, at the time, was a $40 million client server ERP system, competing against SAP and PeopleSoft and Oracle who were, like, massively large. But what we decided to do is say “Okay, we're going to go after healthcare specific to the wind grapher, a group called the integrated device, integrated delivery care network ideas”. And they had a problem with inventory. Their problem was that they keep inventory in what they call a par cart. It's a mobile cart inside the facility. They wheel it around operating systems, and they needed to track their inventory. In terms of a par cart, well, nobody's ERP system had par cart in it. So Lawson came out with the healthcare edition and a feature that differentiates par carts. It was in the beginning of every demo, and then we'd say “Now ask SAP about their par carts”. And so we were able to go from 40 million to basically 250 million largely in healthcare because we were... so the point is, you can always do it if you find the nerve and then you really specialize it.
“[You] can always do it if you find the nerve and then you really specialize it.”
Jakob
That's awesome, that example, to find the few feature sets that actually define the core need of that specific segment, the target area and so forth. I think choosing target segments is maybe the most challenging for entrepreneurs and marketing managers. When I've tried to coach companies into, you know, going small going niche, it's really, really hard to get them to intuitively understand that, well, if it goes small, you will become bigger than if you try to be too much to too many people. So what's your key takeaways for companies, you know, on how big or how small should that segment be? And how should they decide which segment is the right one to target? Because it's, you know, should we go all in on that, or should we maybe hedge a little bit and have a few segments here and there? What's your take on that, Geoffrey?
Geoffrey
So I think this is kind of at the core of really Crossing the Chasm and Zone to Win, which is we are taught in business school and from our business experience with large corporations to focus on a set of performance metrics: your bookings, your market share, your contribution margins, your revenue growth, a whole bunch of stuff. It's all in spreadsheets. So I call those performance metrics, and they're incredibly important, everybody gets that.
What they do not pay attention to is what we call power metrics. So power metrics are designed to see when you need to become more powerful. You need to invest and you don't want to be harvesting your power in performance, you want to be building your power. So, for example, you would lose money in a power investment cycle because you're trying to become more powerful. You're going to develop, you know, a tighter relationship with a market segment. So, the the focus idea is you focus to accelerate power growth, which you are subsequently going to harvest as performance as opposed to harvesting it right away.
The problem, when you harvest it right away, is if you don't have very much power in your harvest, you're never going to get anywhere because you're not going to grow in power. And people think, “Well if I get more money, I'll be more powerful.” The answer is no, you won't. You will only be more powerful when you have more customers in a particular segment because then the ecosystem starts to organize around you because you are the gateway to those customers. But if you're not the gateway to any group of customers, nobody organizes around you. They’ll buy your stuff — maybe yes, maybe no — but you will never build power. And so you can't control yourself.
“[If] you're not the gateway to any group of customers, nobody organizes around you. They’ll buy your stuff — maybe yes, maybe no — but you will never build power.”
So then there are two questions to do with segments. The first is how do you know a good segment from bad segment? There are three rules:
1.Big enough to matter, meaning if we got a 30% share of the segment, we would double or triple our size, okay? So it's big enough to matter.
2.Small enough to lead. It can't be so big that if we triple our size, we're only 2% of the segment. Nobody organizes around somebody that has 2% share of anything, right
3.Good fit with our crown jewels. In other words, there's got to be something about the problem and that segment that your technology is just like: yeah, we can nail this one”.
So those are the criteria. Now you're looking at a list of possible sites. So what do we do? And the answer you realize is: pick one. But which one doesn't matter. What you want to make sure is that they have a compelling reason to buy. You want your customer to be in trouble so they'll lean in and listen to you. But other than that, the only thing is hedging the losing bet. So when you're doing this exercise, you know, it's a little bit like — in America we have this election system where we have primaries during the presidential election. We have 50 states and the first primary is New Hampshire. It's a tiny little state. It has like, I don't know, some very small number of delegates, but winning the New Hampshire primary is a big deal because it puts you on the election map. Well, the rule in winning the New Hampshire primary is that votes in Vermont do not count. That’s the state right next to New Hampshire. It’s like, votes in Norway do not help me win the premiership of Sweden. Same idea. So it's really important to nail that focus bit.
Jakob
Ah, that's so interesting. And I know that in Crossing the Chasm you have mapped out this grid system that you should try to find use cases and, you know, segment them based on compelling need and so forth. Is that still a great way to work? Or do you have any experiences from what's the best way to to actually find this if you're a entrepreneur in the scale up today that really wants to nail their strategy — where should they start looking?
Geoffrey
One of the artifacts of the Crossing the Chasm effort — and by the way, there's a place called the Chasm Institute now, run by a guy named Michael Eckhardt, he is the Managing Director who basically teaches the chasm methodology that has been for decades — but we had something we called the nine point checklist and this checklist held up very, very long. Although, I'm now changing the ninth point on it. The book is organized around this.
The nine point checklist:
First point: who's the target customer and what's the compelling reason to buy?
And it isn't just a type of company. It's:
- Who's the job owner
- Who's the budget owner
- Who's going to be the end user
I mean, you really want to figure out what's going on in their world and kind of where's the trapped value in their world that your solution is going to release. And one of the ways you pick a segment is if there's a ton of trapped value. If it's really causing a lot of problems in their success, that's a great: that's a compelling reason to buy. That is the value proposition. That's what we're selling. The outcome we’re selling is we’re gonna solve the compelling reason to buy: a problem for the target customer. And by the way, you're selling an outcome. They don't want to buy your product, they want to buy that outcome.
So then the next two are what we call the whole product, and partners and allies. Okay, if you're going to deliver the outcome, obviously going to ship your product and do what you do. But usually that's not enough. Usually there's other stuff that has to happen in conjunction with you, in order to truly take that problem off the table. And that's where the partners and allies come in.
So you're not looking for partners and allies to increase your sales coverage: you're looking for partners and allies that will help you solve your target customers’ problem. And so building that consortium, and that's the beginning of an ecosystem, because now you're bringing a company into a deal that they would not have gotten except for you. So they're starting to organize around you and you're becoming more powerful.
“[…] you’re not looking for partners and allies to increase your sales coverage: you're looking for partners and allies that will help you solve your target customers’ problem.”
And then the next two were distribution and pricing. Okay, so how are we going to focus our sales resources, how are we gonna play our pricing game? That's pretty straightforward.
And then seven and eight were who's our reference competition and what's our positioning? The key there was “I don't care who's actually your actual competition. I want you to have a reference competitor who the customer respects.” But then you differentiate from them like you say, like for example, IPG. IPG is the global leader in this area, but we specialize in this particular kind of cutting or this particular kind of service ability.
But you differentiate against the best person in your company, not some... you are not trying to trash the competition. You're actually trying to get a certain amount of halo. When Apple and Mac came out, it competed against the IBM PC. It didn't try to compete against Colico and all those other kind of home computers.
And then the last one was next target customer. But I've decided the last one I want to change now, to success metrics. So, how will you know if you've nailed this first one? So in terms of segment share, number of the top 30 companies of your target segment, how many have bought from you in the last year and a half, that kind of stuff. The kind of things that venture capitalists look at, that's what you want for your success metrics.
Jakob
Yeah, it's an important decision. It's a little bit. You can't switch to other times as you said, it's it takes a lot of energy to create that ecosystem and the partnerships and allies and so on. And that is something that has become really important these days, especially for B2B. I mean, if we look at B2B enterprise software, we see their integration partner directories explode. For example HubSpot have, I don't know, 500+ or 1000+ partners. All upcoming SaaS players really trying to integrate to as much as possible... Do you think this is how it will be? Or can a SaaS player, or enterprise software, do it their way and go it alone? Or how should you compete in this ecosystem area where everybody's tying into each other so to say? What's your take on that?
Geoffrey
I do think that one of the differences between the 20th century and the 21st century is that in the 20th century, it was on-premise client servers. Every installation, frankly, was unique because by the time you integrated with the customer software, no two integrations were the same. The 21st century, starting with consumer computing and all the API's and open interfaces, now that’s become standard to B2B as well. So you have to have open API's, you have to be able to do that.
And having said that, you want to look at it from the customer's point of view. If the customer wants to treat you as basically core horizontal infrastructure, then it's incredibly important to integrate with the rest of their stuff. If the customer, on the other hand, says “No, this is a specialty tool, but it's really more designed for our specific applications in our industry,” then it's less important for you to have an integrated plugin. What they’re really gonna care about is have you gone the extra mile for them.
When you go into a target, it's totally different. In a targeted segment, you don't look for RFPs: you actually provoke the customer. You put out marketing literature that says “Do you have this problem? Is this thing driving you crazy?” Because you're betting, of course, that it is. And if it is, you want to look at us as opposed to the broad horizontal ones, which is, you know, if you're thinking of buying Cisco or Intel or whatever, you should look at us too. I mean, it's more in one case as a product category there and you're sort of fighting to get into the RFP battle.
Jakob
That's interesting to hear, because that is exactly where a lot of our clients are, you know, thinking about “which way should we go?”. And that is also bringing me to another question that I think a lot of companies are struggling with. So, you have your marketing framework where you say — it's not so much on the product as I understand it, but rather where the product fits in into the categories: their place in the technology option lifecycle. So, if you launch a new product that belongs to the product category, the tornado phase, you need to do tornado marketing. So, what are your best signs in how to understand where the market where you want to belong is in which phase you know, do you have anything to say for entrepreneurs?
Geoffrey
So just to recap for the audience, there are four stages that we call out what we call the technology adoption lifecycle:
- The early market, which is before the chasm, and that's highly disruptive.
- Then there's the “crossing the chasm” phase where you go after niche markets. We call that the bowling alley; you're knocking over use cases one after another.
- Then the third one's the tornado, when the category just takes off and everybody's buying it.
- And the fourth one is Main Street, which is when it's an established category where more of a renewal, you know, maybe the expanse of land and expand is happening on Main Street.
So when you're looking at that, in terms of weather, remind me the question because I just-
Jakob
Yeah, where what are the signs you should look for? The rights?
Geoffrey
Thank you. The point I wanted to make is, in the first two stages, there's no budget pre-allocated when you show up in the early market, they’ve never even heard of the category. So if they're going to buy in the early market, they're actually going to find money which was either in some sort of slush fund, or was being used for some other purpose and they're going to repurpose it for you, which requires a very charismatic sales motion right?
And when you have to have a visionary customer who's willing to kind of go in some brand new direction, when you're crossing the chasm and going after these niche markets, there's a budget there but it's not for you. They're spending the budget on the old way of trying to solve the problem that's not working. So what you have to do in that sales motion is say “Look, you see how much money you're spending kind of putting band aids on something that's not getting better? Why don't you take that money and spend it with us, and we'll fix it once and for all. And by the way, you'll be able to keep that money, you know, that you can take their spend and use it elsewhere after you buy our stuff.”
But even there, there's no RFPs in either one of those markets, the RFP start in the tornado. And one of the signs of the categories in the tornado is people have budget for it for the first time. And so you see the analysts are writing about the category and the financial people are talking about the category because everybody's spending money in the category.
And then the difference between that and Main Street is on Main Street, the incumbent has a huge advantage. So one of the things you try to do with a tornado is get as much market share as you can, because that means you're the incumbent. And then on Main Street, you can then expand to try to land as much as you can in the tornado so that you can then expand over time on Main Street.
The first budget, the tornado budget, is a budget under spend this year. “I'm going to go all in” is typically a capital expense budget and then in subsequent years it's more like an operating expense budget. So using that. Where's the budget today? I think it's the most reliable sign of where the category is.
Jakob
How should the big company today think about, you know, if they should put a new product on the market? Should they go all the way back to the visionary clients, or should they try to focus on competing in the tornado, or, you know, tornado candidates that're a little bit lower when they deploy their resources?
Geoffrey
There are several ways that a big company can play the game. First of all, the big companies have enough money to incubate new ideas organically. Their problem is not actually getting ideas started: the problem is bringing them to scale. And the reason that's a problem is you lose money when you bring something to scale. You go through what they call the J-curve. This is what venture capital is all about: “Yes, use our money to go through the J-curve because we think you're going to come out the other side being incredibly valuable.” And everybody understands that idea. But publicly held companies, the investors in those companies, do not like that idea. So you get enormous pushback. And so there's a conflict of interest inside the public company between “Should we just do more in the core business or should we take a risk on on the new business?”
And so, what Zone to Win is about, it says; “Look, you need to make this decision very openly, transparently and precisely, because if you're going to do one of these J-curves, it's a big bet, and you really can't afford to lose.” And so you're going to have to go all-in on something and get the entire team rallied behind it. And you're going to make sacrifices in every other part of the company to make it happen. The reward being you'll have a whole new business in your portfolio that will be part of your future - but it's a painful, painful journey.
The other thing you can say is “Well, you know, we're just not that kind of company, our boards, the kind of risk, we just don't have that kind of permission.” Okay, fine. What we want to do instead is say, “Okay, we need to wait for the category to cross the chasm. And the leader will take off and the leader will be so expensive that we couldn't possibly afford to buy them, but maybe the number two or number three or number four company, we can acquire them at a price that still will be more than we ever wanted to pay. But now we're in the category and we're going to actually shepherd it into our into our core business in a way that we can leverage our existing sales force and we can leverage our existing relationships.” If we can do that, you don't get this amazing raised valuation, but you get another decade's worth of relevance to your customers. It's a big deal. So it's less risky. Also rewards-wise, it's a different risk/reward thing. But for many companies, that's a much better answer, because the worst thing you could do is make a big transformational bet, get halfway, and quit. And you see it all the time. It's just it's so destructive. That's the thing you must avoid.
“[...] the worst thing you could do is make a big transformational bet, get halfway, and quit.”
Jakob
Yeah, that's seems to be very, very hard for companies to actually make the whole transition and see through so that's so interesting that theory. So in other words, most companies are not suited to take those J-curves, travels and journeys, but rather should focus on trying to buy companies in the right phase — when they still are affordable so to say.
Geoffrey
Yeah and try to modernize their business, try to catch up fast. And by the way, I'll give you an example; Microsoft has never really led disruption themselves, if you think about it. So it was WordPerfect that had the word processor, and it was Lotus 123 that had the spreadsheet. It was Netscape that had the browser, it was Google that had the search engine. It was AWS that had the cloud computing. What Microsoft was incredibly gifted at — and still is — is: they will they will buy Bing, or buy from from Yahoo, right? Or they'll do their own investment, and then they will catch up and they will catch up fast. That's a very real play.
Jakob
Yeah, they have been extremely successful at that. That's so interesting. From a technology adoption lifecycle perspective, would be interesting if you see any categories that you think is crossing the chasm as of today? Do you have any candidates there you could point out for us and give us an example?
Geoffrey
Yeah, I think so. It's interesting. So one of the things we're seeing a lot...Like right now I'm working with two networking companies: Cisco and f5. Both going through the same thing. These were both iconic hardware companies basically, in the late 20th century and first part of this century, but the world is moving to software first and cloud first. So those are situations where those two companies are going through a J-curve internally to move their operating model and their business model. And so in both cases, what the leader has to do, they say “We have to go through this transformation as quickly as we can, and we have to be totally focused on it.” Because lingering in the middle and being halfway in between... if you look, like, Oracle has gone sideways, Oracle has lost power every year of this decade of this century. And it's not because they don't know what they're doing: it's because they're still hung out between cloud and on-prem and this and that. And at some point, the world goes “Well okay, I mean, you're not going away. We don't want you to go away, but we certainly don't think you're the future.”
And so that's a bad place to get to. And there are a lot of companies that have gotten to that place as well. What you want to be able to do is say, “Where's the next kind of category to get into?” In the case of networking, people's security... I think anybody in the network has figured that in this digitally transformed world, the network has to be a source of security. And so you could play in the security market in a way that, 10 years ago, you would not have thought you could have, and so there's a better place where they're reentering.
I think the other place you can see people doing this a bunch is with machine learning and artificial intelligence. Again, the IBM Watson was sort of an early market thing, but then it was like well, but what do you actually use it for? When you're crossing the chasm right now, I think the machine learning around fraud detection: big deal. Around predictive analytics for advertising: big deal. So you're seeing companies win those battles.
One last one: Gainsight is a company in a category called customer success. That's a good example. So customer success really wasn't a category 10 years ago, we called it customer support or tech support or case management system. And Gainsight was the first one who said, “No, you're not doing this right. You want to manage the adoption cycle inside your customer base and you need to have a group of people that do that and they need to have a set of tools that help them do that.” And so they created that thing. And their first segment was SaaS companies: they were selling to themselves as it were. Because in a SaaS business model, if your customers churn out, you're in deep trouble. So customer success went from being a nice-to-have to a must-have. And so that's what let them cross the chasm. Then once people saw the customer success motion working there, they thought, “Well, wait a minute, why aren’t we doing customer success?” And now you're seeing customer success becoming increasingly more visible as a category.
“Microsoft has never really led disruption themselves if you think about it. WordPerfect had the word processor, Lotus 123 had the spreadsheet, Netscape had the browser, Google that had the search engine, and AWS had the cloud computing.”
Jakob
Yeah, that's so interesting and eat their own dog food I suppose Microsoft would call that.
Geoffrey
Yes exactly. By the way it’s interesting... Gainsight has a very charismatic CEO named Nick Mehta, who's helped evangelize kind of the way Guy Kawasaki helped Jobs evangelize the Macintosh. And of course, you know, Bezos was charismatic about AWS. Andy Jaffe was as well. And then Satya is very charismatic and certainly was with with Azure and going forward.
Jakob
And from a tornado perspective, last year, during the COVID season it has been really interesting from seeing a few categories pretty much explode. I read an article about Microsoft Teams becoming one of the fastest selling products ever in history, how they went from like 8 million users to 50 million in a few months or something like that. So yeah, I think that was a year where we had a lot of examples of exploding tornado categories. Or what do you think?
Geoffrey
You and I are communicating over one, right? Zoom. Zoom has become a verb, the way Google became a verb. The way you know, Xerox became a verb, right? And what Microsoft is doing with Teams is saying... you have to be a little careful with how Microsoft can grow a category. Because if you're a Microsoft customer, you have what they call an enterprise license agreement. If I just transfer your enterprise license agreement, from office to office 365 or from office 365 to Team so I just add teams to your agreement. I can grow from 8 million to 50 million, like overnight, because basically that's their playbook. I mean, I'm not trying to say that this isn't a good idea. I’m just saying you have to be thoughtful about every view. If somebody tried to copy Microsoft, it's like, well, unless you have a huge install base with an enterprise license agreement in place, you probably can't match what Microsoft just did.
Jakob
Yeah, exactly, that's a good comment. It's kind of definition at play there: what's a new client and what's not and so forth. That's great. But I suppose Zoom has, you know, based on one product basically have done a tremendous journey there as well, being in the right place at the right time. And it's not that it wasn’t the only player in that category. But they sure are the elephant, or the gorilla as you would define it in your language, the way I see it. Or what do you say about that?
Geoffrey
Well, it's interesting, because I think Zoom is actually... Zoom went, well, the pandemic just made Zoom incredibly, incredibly important. But Microsoft clearly said “Well, for the enterprise market, we want to take the Zoom option away from the enterprise.” By the way, so does Cisco with WebEx, and so does Google with Hangouts.
But the thing that's happening in this world is, the old gorillas are nowhere near as slow as they used to be. So if you're a disrupter, you got to stay disruptive going forward, because these folks can catch up to you. And they do. And so I think we’re in a situation where Zoom may get bought. I know, it’s an incredible asset. They did such an amazing accomplishment, but it's a little bit of a jewel without a crown. Like maybe that jewel should be in somebody else's crown. I don't know. But it feels a little bit isolated compared to like... well, look what Slack did. Slack was a jewel and now it has put itself in the Salesforce crown. Because, you know, I need to be part of a larger ecosystem for doing stuff.
“[...] the old gorillas are nowhere near as slow as they used to be. So if you're a disrupter, you’ve got to stay disruptive going forward”
Jakob
Yeah. I suppose that's something Oracle have been really successful in over the years, buying a lot of competitors and just putting them there. Microsoft has as well, and others now Salesforce is doing that with Slack and so on.
So do you see a future where the mega companies, you know, can be competed with? Since you say they're so fast nowadays, and they have so many resources, global coverage and so on. So, if you were a CMO at a startup today, you have your series A or some kind of financing, but you need to stay out of the target focus of Microsoft and other big players. So what kind of playbook would you deploy if you had, you know, free reign in order to play the marketing strategy as you would like?
Geoffrey
Well, first of all, the one thing about big players is they can't focus on niche markets. For example, Salesforce bought Velocity which had six vertical markets. Now in theory, Salesforce could have developed all those markets. I mean, it's all built on top of the Salesforce platform. But the fact that they have big numbers to make, and they have global sales forces selling very large deals to very large companies — it's very hard for them to say “We're going to specialize in anything.”
So if you're a CMO of a startup — you know, the first 100 million dollars — as long as you define a market that is big enough to matter but small enough to lead: that's the play. And frankly, the big guys will not compete against you in any interesting way because you're just too granular for them to deal with. About the time you hit 100 million, they're gonna go, “Now wait a minute, maybe that's our 100 million dollars, not yours.” At that point, you have to have a strategy — by the way, the venture capital people are saying, “Yeah, sell yourself to Oracle. Or SAP or Microsoft, Cisco, whatever the hell it is. And by the way, we'll get a great return. And, and we're done.”
And I do think for infrastructure plays where integration matters a lot, that is the exit play. I think the notion that a disruptive infrastructure player would be able to penetrate... Look at the hyperscalers: we’ve got Azure, we've got AWS and Google. There really isn’t a fourth. I mean, there's a bunch of people who want to be number four, but markets go for things that want to be horizontal. You know, there was Windows and then there was a Mac, and then it was sort of Unix and there wasn't a fourth. But there's always, at the other end of things, the problems that aren't getting solved. Because as you solve any layer of problems, it just exposes the next layer of problems. And those I think you say “We can actually build an identity and own that problem and grow with that solution. And we'll fight against the big guys.” As long as we're fighting on our turf, which is our problem expertise.
Jakob
Yeah, interesting, awesome. So go small, go niche, until you become big enough to actually decide where to be acquired and be fine with that… or actually try to carve out something that is so unique that it can be defendable over time, and continue to grow.
Geoffrey
That's the power again. Then we come back here and think about power performance. You're playing for power. Just don't forget you're playing for power, as opposed to getting confused by performance equals power. Power fuels performance, performance funds power, but they're different and you have to realize what you're playing for.
Jakob
And in that sense, you define power as influence in the target category or target markets. Is that how you would say it?
Geoffrey
You have the competitive advantage in your market, so competitive advantage is another phrase for power. And so in that market you’re the safe buy, you're the go to player. When you're the go to solution, you get the benefit of the doubt everywhere. Your partners lean in, the customer wants to prefer you. They say, “Well why didn't we buy them?” as opposed to “Why did we buy them?” For anybody else, it doesn't mean you can't sell: you can, but you're always swimming upstream, you're always going against the flow. So, you know, if you're going to be successful in any medium-to-long-term, you have to be working with the world. The world has to be working with you. You can't always just be trying to row against the current because you'll get tired.
“[...] if you're going to be successful in any medium to long term, the world has to be working with, you have to be working with the world”.
Jakob
Yeah, so I think that's a great, great recommendation for tech companies today. Do you have any final words or parting recommendations for the next year on what to focus on? Where do you see the most important things in the marketing playbooks for the next year?
Geoffrey
Yeah, I do. I wrote a blog recently called The Front to Back Organization which just said… you know, when I entered the industry in the 20th century, ERP was kind of the enterprise backbone, and it was a supply chain oriented deal. So you started with the suppliers, you built the supply chain, you got the product, you put the product in distribution, distribute it to the customer, and there was customer support. But it was oriented from the product to the customer, and you focused on your product and then you marketed it and then you sold it then you moved on. What has happened in this century is that we flipped it. There's so much product at a reasonable price because we brought in China, we brought in India, we brought in the global economy. Product is no longer the scarce ingredient: now it’s the customer. It’s the same supply chain, the same value chain, but we need to organize it from the customer back as opposed to from the product forward. So think of what that does to every function.
But let's start with marketing. Marketing used to be “Take the product and figure out a way to position it to sell it to the customer.” Now it's like “Take the customer and figure out what product we should sell to them and then let's make that product.” So all of a sudden you're trying to organize backwards from the customer as opposed to forwards from the product line. Every function gets changed. Sales has got to become much more consultative, much more customer centric. Customer support has become customer success, right? The whole business model of subscription and consumption says the customer has this power because they can churn out at any time. It used to be, “Well it's all about landing and we've made these huge deals and then frankly, we wouldn't talk to the customer for five years.” But in the new world it's like now you land and expand, which means you continually have to build a relationship of trust. Well, salesmen and trust were not always words used in the same sentence. But now you have to know, it's like no, you need to do that.
So it's the same world but it's just a different world. It's a different flavor of the same world and I think it's easy for people to get caught up in a role like “Well, know your marketing budget, know your pipeline and know what's your marketing qualified.” And there's a bunch of stuff you’ve got to measure and it's really important. But at the margin, you need to think, “Yeah, but I need to think customer-back.” You know, we always said that, but the truth is, we would hear things from the customer that didn't ever really get back to R&D. They never really listened in to any of that stuff. And the answer is well, if today if we don't listen, we're gonna lose customers. So we’ve got to learn.
“[...] it's the same world but it's just a different world. It's a different flavor of the same world”.
Jakob
Yeah. That's a great final advice. Thank you so much, Geoffrey. We can definitely conclude that the theories and the books and all the content you have put out for 30 years is definitely well and alive. In much of need still. So thank you so much for that. Thank you so much for taking your time.
Geoffrey
Take care Jakob, thank you!
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If you would like to learn more about Geoffrey and his insightful books and projects, go check out his website here. You can also listen to the full podcast episode here.
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