For the first two hours and 70 PowerPoint slides, Geoffrey A. Moore, founder and managing director of the much-in-demand Silicon Valley strategy consultancy The Chasm Group, looked relaxed, leaning back in his chair, listening as executives from software vendor Lawson Software described a new market thrust, the competitive landscape, and their strategic options. A large, amiable man of 53, Mr. Moore fit right in with the team, laughing at their jokes, adding a little cornball humor of his own, and tinkering with slides on a laptop computer. Hardly the stuff of which $15,000 day rates are made.
But now he was on his feet, shirtsleeves rolled up, assaulting a white board with a flurry of multicolored markers and asserting the strategic course the company must take to survive in the new market. "You have to make this guy the enemy. Rally the market: 'You guys are toast if you let them in and I'm threatened too, which is why I'm at your door.' Do you have an anchor client? Do you have somebody who will say 'I'm not sure what I'm going to do, but I want to do it with Lawson'? Who is the gorilla? Where is your bowling alley?" The metaphors fly thick and fast.
Wait, time out, time out, as Mr. Moore says about 50 times a session. Gorillas? Bowling alleys? Chasm? What is he talking about? Within Silicon Valley or any of the other venture capital-funded enclaves of high-tech entrepreneurialism around the globe, Mr. Moore's words and phrases have anchored a place in the executive vocabulary. In the broader business world, however, his metaphors—and his melding of marketing, strategy, and corporate culture—have yet to take hold. But that may be about to change.
Geoffrey Moore seemed to come out of nowhere with the 1991 publication of a marketing strategy book for high-tech companies called Crossing the Chasm (HarperBusiness, 1991). And for all practical purposes, he did. He had spent four years with Regis McKenna Inc., a Silicon Valley public relations and marketing consulting firm, and had held sales management positions at a few undistinguished software companies. Prior to that, Mr. Moore had been an English professor at a small Midwestern college. He had a PhD in medieval and Renaissance literature.
But there was something about his flair for communicating business ideas with clarity, metaphors, and humor that seized the imagination of high-tech executives, and rapidly insinuated itself in their thought processes. Indeed, Mr. Moore did not have to impose his views on the world; the world gobbled them up.
Crossing the Chasm was forecast to sell fewer than 5,000 copies, and it commanded just a $10,000 advance. It has actually sold over 250,000 copies, and has been translated into Chinese, Japanese, Korean, French, German, and Portuguese. His employer at the time, Regis McKenna, wrote the foreword to the book, but its success enabled Mr. Moore to form his own consulting firm in 1992.
His next book, Inside the Tornado (HarperBusiness, 1995), had similar success. Today, the two are standard texts at the business schools at Stanford, Harvard, MIT, Northwestern, and other universities. They are also required reading for newcomers at leading venture-capital firms and high-technology companies. A third book, The Gorilla Game (HarperBusiness, 1998), took the ideas from the first two and repositioned them for investors.
With his fourth book, Living on the Faultline (HarperBusiness, June 2000), for the first time Mr. Moore's target audience is primarily the Fortune 500. The Internet, says Mr. Moore in this new book, exposes all companies to the market dynamics faced by technology companies and startups—and they had better learn how to play by the same rules. Management need only look at what happens to their share price when a dot-com competitor arrives.
In Crossing the Chasm, Mr. Moore described what he calls the "Technology Adoption Life Cycle," a model for understanding the acceptance of new products. The book grew out of his work at Regis McKenna, and the notion of "the chasm" stemmed from his observations of a common pattern: A new technology would appear, be backed by millions of dollars in venture capital, and receive endless media attention, only to fail in the market. The most notable example of the past decade was pen-based computing; remember Go, Eo, Momenta, or Apple Computer's Newton? Even Microsoft's Pen Windows fell into the chasm.
One of the book's theses is that people respond differently to a new product when they must change their behavior to take advantage of it. Mr. Moore calls products that require behavioral change "discontinuous innovations." For example, if the General Motors Corporation promises a new car with better mileage, people won't necessarily need to change their driving routine. But they will if the car requires electricity instead of gasoline, like the now-discontinued EV-1, another product that did not cross the chasm.
Perhaps more relevant to the high-tech executive are products, like enterprise resource management (ERP) software, that purport to automate business processes. Most companies are reluctant to experiment with such programs unless the perceived benefit is extremely high or the inefficiencies in their existing systems are costing them an unacceptable amount of management time and energy.
Mr. Moore's Technology Adoption model defines distinct customer segments that correspond to distinct psychological and social profiles. It gauges how each segment responds to discontinuous innovations, and how markets change depending on which group dominates. Products thus spread from technology enthusiasts, to visionaries or early adopters, to pragmatists, and finally to conservatives. Not surprisingly, marketing, selling, and servicing each of these groups requires different sets of values, skills, and strategies.
These are not necessarily new ideas. Indeed, some of them draw upon Everett M. Rogers's Diffusion of Innovations, based on Mr. Rogers's childhood observation of farmers' adoption of hybrid corn seed, and a work that was required business-school reading for decades. Other ideas in Mr. Moore's book would be familiar to any reader of The Regis Touch, by Regis McKenna.
What was new was the notion of "the chasm," a deadly gap between an early market dominated by a few visionary customers and a mainstream market dominated by a large number of pragmatists, a gap into which new technologies and whole companies fell, never to be heard from again. Beyond describing this phenomenon, which in itself went a long way toward explaining the failures of otherwise promising products, Mr. Moore prescribed a set of actions to help high-tech companies "cross the chasm."
At their simplest, these actions were: first, identify a vertical market where a broken mission-critical business process was causing management enough pain that it would gamble on an unproven technology; and second, provide that market not just a product, but a whole solution. Only after attaining dominance in one niche, no matter how small, should a business target another market; only after achieving some level of critical mass in three or more vertical markets should it attempt to expand horizontally.
Silicon Valley executives say the beauty of Crossing the Chasm was that it took marketing success out of the realms of magic and mystique and into a series of actionable items that anyone could understand.
"I valued Chasm less because it had any dazzlingly original insights into how markets worked than because it came up with a common workable language that we could all use to talk about these issues," said Arthur Reidel, president and chief executive officer of the Pharsight Corp., a software developer for pharmaceuticals companies. "It became something you would hand to people new to the space and say 'read this.' You could meet somebody new and talk about one of these marketing problems and you would immediately understand what he was talking about," he said. "That wasn't true before."
Just when technology executives everywhere had mastered the skill of telling investors they were crossing the chasm, Mr. Moore published Inside the Tornado, which explored strategies for survival and success on the other side of the gap.
If getting across the chasm required choosing a niche and dominating it, what followed was a succession of adjoining niches, each of which could leverage the technology of the last. Even more importantly, because these niches were related, the reference customers gained from a successful push in one niche would be familiar to and thus credible to the target customers in the next.
Apple Computer Inc.'s Macintosh computer found its initial success this way. It was sold first to in-house graphics departments to do desktop publishing, then to marketing executives for business presentations. Later, the product's capability was extended to take on the professional pre-press and publishing market. Apple also leveraged its traditional strength in the education market to gain a strong franchise in the consumer market.
Mr. Moore calls such a group of related markets "the bowling alley," for the notion that each vertical market is a pin to be knocked down. Companies should stick with this serial vertical market strategy while they gain momentum and their technology matures enough to tackle the horizontal market.
Technologies that successfully roll through the bowling alley can enter a period of hypergrowth, which Mr. Moore calls "the tornado"—and which anyone who has followed the fortunes of Microsoft, Intel, or Cisco Systems can recognize. As Apple CEO Steve Jobs put it in a cover blurb for Inside the Tornado, "The Chasm is where many high-tech fortunes have been lost. The Tornado is where many have been made."
The tornado is driven by the pragmatist buyers described in the first book because they are where the real numbers are. Pragmatists buy because everybody else is buying, and they buy in droves. When a product moves to the conservatives, Mr. Moore says it has reached "Main Street," where it can potentially spend many profitable, if slower-growth, years before reaching the "end of life."
Early sales focus on the product, but in the bowling alley, sales are made to end-users, and the focus must move to solving their problems. Thus, early Macintosh customers were buying a computer you could control with a mouse, but the real growth market was customers buying a computer to use for professional-looking newsletters and presentations.
In the tornado, market demand always exceeds supply, so Mr. Moore actually advocates ignoring the customer, simplifying the product, and developing lower-cost sales channels. One example is 35-millimeter SLR cameras, which moved from a hobbyist and professional product sold through camera stores to an automated product sold through mass merchandisers.
On Main Street, when your aging product becomes prey to new discontinuous innovations, customers again reign, and must be coddled with what Mr. Moore calls "+1" offerings. These are relatively simple differentiations that once again play to niches and help distinguish the product. Apple rejuvenated the Macintosh, for example, by adding more attractive designs and easy Internet access, which set it apart from generic PCs.
Lawson Software is based in St. Paul, Minn., a long way from Silicon Valley, but it is in many ways a poster child for putting Mr. Moore's ideas into action. A family-owned company, Lawson produces software for basic business processes, like general ledger processes, the sort now known as ERP, or back-office applications. Although its products were well regarded, by the mid-1990s sales had stalled in the $40 million range even as competitors like SAP AG and PeopleSoft Inc. saw revenues soar. It was then that management read Crossing the Chasm, and brought in Mr. Moore for a strategy session.
"Lawson had always been sort of the quiet company," Mr. Moore said. "I started working with them about seven years ago because I think it was hoping to become the loud company. That was never going to work, given the culture, so I set out to make them the gorilla in a niche," he said.
In Moore-speak, a gorilla is the dominant player in a market, owning more than a 50 percent share (typically 70 percent); chimps struggle to claim 10 to 20 percent shares; and monkeys scrabble about in the single digits. A gorilla wins sales simply because it is the gorilla, and thus the safe choice, while chimps and monkeys must fight for every deal, usually using price as an incentive and thus never enjoying the lower sales costs and higher profit margins of the gorilla.
Lawson had failed to cross the chasm because it marketed its software as generically applicable. "It's too expensive to win every deal on your own," Mr. Moore said. "You need to be in markets where people bring you deals voluntarily, and the only way that happens is when you own the market. We had to make them the number-one supplier someplace, and picked health care," he said.
Health care made a good bowling pin for several reasons. Major hospitals' back-office systems were in dire need of a discontinuous innovation, but the politics and long sales cycles typical of the market had led the ERP gorilla, SAP, to concentrate elsewhere. Mr. Moore believed Lawson could acquire the expertise it needed to address this market's particular needs and emerge a hero. One or two big wins at major medical centers would provide references to gain more sales throughout the health-care system.
Lawson now has about $300 million in revenues, with over $100 million coming from health care, and it commands more than 50 percent of the back-office market for large hospitals. The company has made successful, if smaller, forays into other vertical markets, primarily retail and professional services, and is expanding the health-care offerings to include front-office applications, like procurement and customer service.
But at the outset, Mr. Moore's prescription was not an easy one for the company to follow. "You can imagine a fairly large sales force around the country saying, 'what? I've got to limit myself to one market?'" said chairman William Lawson, Sr. "Geoff came in and facilitated some sessions. He takes things down a level from that high-level yakity-yak: to fulfill on that strategy, here are the tactics you need; here are some functional initiatives. He works with our executives and builds enthusiasm in the company. He's one of the family, so to speak," Mr. Lawson said.
Actually, Mr. Moore, now on Lawson's board, is positioning the company for an initial public offering, and moving it away from the family orientation. "The family is a metaphor for how to act in the world, but if you want to become a public company, it's not an acceptable metaphor. As you get bigger, that metaphor runs out of gas," he said.
Metaphors count for a lot with Mr. Moore. In a typical strategy session, they come spilling out of him in a giddy rush. Some of this is spontaneous; it's just his way of verbally grappling with the issues. Some is orchestrated, and even anticipated by clients who know the lingo and expect to be told where they fit in his verbal framework.
"Metaphors are us," Mr. Moore said. "If I find a metaphor that fits a situation I milk the hell out of it. Because all of my work is in subjective insights, and these markets are moving so fast, data is not worthless, but it almost is. Everything is based on pattern recognition. Metaphors are organizing principles that explain a pattern," he said. "Metaphors also present a set of relationships that you can test against reality. When you find great metaphors they explain the universe. It's not in any sense trivial. It is playful."
Mr. Moore writes his books while flying from one engagement to another. His work is his research: He meets with 70 to 100 companies a year as a consultant. He particularly likes working with startups, and last year joined Mohr, Davidow Ventures, a leading venture capital firm, as a venture partner. Between consulting contracts and the business plans he reviews, his head is always teeming with ideas he can't wait to write down.
"It's a little like being a parent; I have a bunch of companies I think about all the time," Mr. Moore said, using the family metaphor himself. "And the more companies I know, the more connections I make and the better it gets," he said.
While he is not a cheerleader for excellence, like Tom Peters, or a proselytizer for a packaged solution, like Michael Hammer and James Champy, Mr. Moore is passionate about his ideas, and he loves communicating them. He loves teaching, and, in fact, loved being an English professor. He quit that career, he said, only because it was tight raising three children on his salary, and because his family encountered prejudice in the Midwest—his wife, Marie, is Filipino. Moving to Palo Alto, Calif.—where Geoff had gone to college and Marie had grown up—required a career change.
He took a job at a software company as a training director and soon moved into sales, where, by his own account, he was only a so-so performer. He talked his way into Regis McKenna just as the firm was adding marketing to its public relations practice, and instantly knew he had found his metier.
"I realized this was what I should have been doing all along," Mr. Moore said. "I'm a natural consultant." Of course, not every client buys into his subjective views and prescriptions wholesale, but the language provides a kind of shorthand that lets Mr. Moore deliver value in his preferred mode of engagement, the one- or two-day strategy workshop.
"That is probably the most fun thing I do," Mr. Moore said. "They call and say, 'we've read the books, we know the ideas, we don't need a class, but we're right in the middle of something heavy. Help us out.' That means they're in the middle of something where the models apply," he said. "It also means the management team is not all on the same page. If I think we're in the tornado, and you think we're in the bowling alley, you're going to think I'm an idiot."
Mr. Moore likes to say he facilitates strategy rather than dictating it, and that it is up to the group to find its course. "The deliverable at the end of the day is a strategy statement we all agree to, which I then write up for the client. In the process we fairly quickly find where the tension is. I use a kind of gentle humor to get the egos out of the way."
His approach is surprisingly adaptable to companies of very different sizes and fortunes, from stalled mid-sized companies like Lawson, to raw startups, to long-established gorillas facing a new market challenge. Mr. Moore is a frequent advisor to various teams at the Microsoft Corporation, and he helped Hewlett-Packard successfully enter the consumer market with its ink-jet printers.
Although he has become known as a marketing guru or a strategy guru, those are not terms Mr. Moore likes. "It's a group strategy, not a guru game. It's not 'let's have Geoff give us the right answer,' it's 'let's pull it out of the group,'" he said. "With more than half the clients I work with, that's it. As I like to say, I don't do any real work. As soon as implementation starts, I'm out of there. It's an exercise in getting direction, not execution. But I think what's true is that a large number of execution problems are really direction problems."
Body language plays a part as well. "In strategy groups I'm sitting down, I'm not at the head of the table, because in some groups there's a tendency for people to report to you [if you sit there] and that's not a good dynamic. That's a guru dynamic," Mr. Moore said. "There's no way to build off it. They wind up saying, 'what would Geoff say?'"
But there are times he comes up with a battle plan, such as at Lawson. "We call that creating a straw man," Mr. Moore said. "It's something I always eventually do, if it's clear they haven't gotten to the right place. Strategy is first description, then prescription," he said. "The idea is to break through paralysis. [The battle plan] is not sacred text, this is probably not even what we are going to do," he said.
Pharsight asked Mr. Moore to come in because it was struggling with whether to position its offering as a product or a service. But large companies struggle too, with new market opportunities or new challenges to their existing market. The Oracle Corporation hired Mr. Moore when Microsoft's corporate operating system, Windows NT, took off without the Oracle database. Early NT adopters were opting instead for Microsoft's own SQL Server for database management, or Sybase Inc.'s similar offering.
"The goal was really clear: to make sure we went from a zero market share to being the dominant player, and the goal was met, within 18 months," said Shari Simon, then vice president of Oracle's NT solutions group, now senior vice president for e-business. "I wanted a thinker and a sounding board; we already had a strategy. What really stands out about Geoff is his ability to adapt. He didn't come in with any prescribed approach. He asked the right probing questions. He's fun and he's bright," she said.
"Fun" is a word often used in describing working with Mr. Moore, and it pops up just as often in the mouths of critics as of fans. An outgoing man who clearly enjoys what he's doing, Mr. Moore is compulsively likable. He has been happily married to his wife for 30 years, as he will freely tell you, and his three adult children have settled into rewarding vocations of their own. He considers himself blessed, and says so.
Thus, those who take issue with his views or his work tend to want to remain anonymous, because they like him personally. But the standard complaint, such as it is, is that while an engagement with Mr. Moore may be fun, not a lot comes out of it.
That may not be Mr. Moore's fault, however. As Jeffrey Tarter, editor of Soft-letter and one of the leading influences cited by Mr. Moore in Inside the Tornado, puts it, people tend to read into Mr. Moore what they wish, while ignoring some of the more challenging solutions he suggests.
"He's become almost a religious figure where people impose their own beliefs on him," Mr. Tarter said. "The irony is the chasm stuff is quoted by all kinds of people who interpret it in different ways, like Holy Scripture. People recognize the risks of discontinuity, but don't recognize that he's pretty tough about what you need to do in that case, which is to basically fire all the people in marketing and start over. The problem is that the people who got the company in trouble are still there and they sit around for the next six months discussing the issue. It's like a religious conversion and then they lapse," he said.
Mr. Moore and his work are referred to in religious terms often enough that he has developed a stock reply that such references are a sad comment on the state of theology. But on a more serious note, he is well aware that a certain kind of management is not going to appreciate what he does, even within the high-tech community.
"I'm a synthesizer, so I like to look at a lot of situations. It's a matter of anecdotes versus facts, poetry versus essays," Mr. Moore said. "The people who like me enjoy that. The people who are uncomfortable say, 'have you checked your facts?' The answer is always 'no,' because there are no facts." Within the high-tech community, Mr. Moore pulls off this high-wire act in large part because he knows everybody, and can with rapid recall describe in depth what every relevant company is doing.
Still, some companies, particularly those with what Mr. Moore calls a "control culture," are not going to have a good time with him or the other five partners at The Chasm Group. "We are strategic psychiatrists," he said. "As soon as they realize their masks are coming down, there's a certain kind of client that says 'no.' They have us [come] in to 'position' them, which means 'help me impose my view on the world.' But that is 180 degrees away from us," he said.
The success of the first two books in the technology community prompted Mr. Moore's agent to propose a book for investors. The result was The Gorilla Game, which Mr. Moore co-wrote with Paul Johnson, a securities analyst with Robertson Stephens & Company, and Tom Kippola, a successful private investor, who is now a managing partner of The Chasm Group.
The book basically suggests that investors buy shares in gorillas, companies that have a proprietary technology that dominates a market inside a tornado, and not chimps or monkeys. As the book's critics suggest, that may not be so remarkable an insight, but as the earlier books did for management, The Gorilla Game gives investors a common language.
For Mr. Moore, the primary revelation was that market cap is everything. The market gives gorillas big valuations because of the size and duration of their competitive advantage. Big market caps tend to be self-perpetuating because they give the company a currency—its high share values—with which to acquire the technologies that might threaten the duration of its dominance. Cisco Systems Inc., for example, has played this strategy to the hilt. "At the end of the day, the stock price is the lever that allows you to move the world," Mr. Moore said.
In Mr. Moore's new book, Living on the Faultline, the central lesson is that the Internet puts every company on the Technology Adoption Life Cycle, because it introduces a discontinuous innovation that threatens their competitive advantage. Look at the stock performance of Barnes & Noble Inc. following the creation of Amazon.com Inc., or of Merrill Lynch & Company compared to Charles Schwab & Company's performance after the latter's rapid adoption of online trading.
"Anybody who's getting dot-commed is inheriting the Life Cycle for the first time," Mr. Moore said. "The Internet is reconstituting the dynamics of their market. These are companies who for the past 20 years have been on Main Street. They had a market cap based on earnings. And all of a sudden, their market cap has been driven down in spite of the fact they're still delivering very good earnings. What we're doing is helping people come to grips with this new reality," he said.
Mr. Moore's prescription for Main Street companies that have seen their market caps dot-commed into the ground: It's time to recross the chasm. This will be painful, because the very corporate values and cultures that have served the company well will work against it now.
He advises companies to outsource everything that does not contribute to their market cap. In place of vertical integration, in which a company produces every component of a product, he prescribes "virtual integration," in which a company finds where it adds the most value, and forms partnerships and alliances for everything else. The terms he uses here are "core" and "context." In the New Economy, the scarce resources are time, talent, and management attention, all of which should be reserved for what he calls the core. Plentiful resources are money, computing, and service providers, which should be applied to "context," that is, all those tasks that are necessary for companies to do, but that add nothing to market cap and are probably better done by someone else.
In addressing the Fortune 500, Mr. Moore knows he is no longer preaching to the choir. He has no great following in large, established non-technology companies. And his style, which endears him to the T-shirt and shorts-clad leaders of Silicon Valley, may not play so well in buttoned-down boardrooms.
"There's a level of personalization in what I do and, frankly, a level of presumption. If you buy into it, it's great," Mr. Moore said. "But on another level, someone more policy-oriented might find it a bit too casual, and shot from the hip," he said. "These customers think I'm Peter Pan."
His proposed solution for this situation is not unlike what he tells the companies to do. He plans to form alliances with large consulting firms and let them do the heavy lifting once his ideas take root. He is counting on the book and subsequent speaking engagements to provide him entry, and history suggests they will.
Given his success, Mr. Moore no longer needs to work. Yet his typical workweek still includes three days of traveling to meet with companies, and two days at home in Silicon Valley working with the startups in Mohr, Davidow's portfolio.
"What's compelling me is I'm an evangelist for ideas," Mr. Moore said. "This is not about economics so much as a person possessed." And having a very good time, too.
Reprint No. 00206
Lawrence M. Fisher, [email protected], covered technology for the New York Times for 15 years and has written for dozens of other publications. Mr. Fisher, who is based in San Francisco, is a recipient of the Hearst Award for investigative journalism.