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Crossing the Chasm in Software as a Service

Most software executives are familiar with the concepts of using the “bowling alley” strategy to usher a new product through early adoption to market acceptance as presented by Geoffrey Moore in his book Crossing the Chasm. However, they may not be aware that this strategy has unique pitfalls when it comes to launching an on demand Web application. When you introduce a new product, the initial design often needs minor (or major) adjustments to gain general market acceptance. In addition, target customers may have requirements that are unique to their segment or that conflict between segments. In order to resolve these issues, a vendor will enter a number of iterative cycles of trial, feedback and revision of the offering with representative customers. Moreover, in order to “cross the chasm” it becomes critical to capture reference customers to begin the process of dominating each “bowling pin” segment.

In these early stages, the company must engage in strategies and behaviors that are the exact opposite of the ideals required to achieve the highly efficient, low cost, high volume, commodity-oriented execution required to deliver a successful on demand application. Salespeople may have to invest large amounts of time and effort in securing initial strategic reference accounts. Engineering may have to modify the product to satisfy the requirements of early adopters. And, the company runs the risk of being derailed by enticing short term revenue opportunities from customization and consulting services that are ultimately low margin and non-strategic.

It is also critical in the early stages to reinforce the longer term strategy and vision in order to highlight the fact that these actions are merely a means to an end, and not the end in itself. New feature requirements should be carefully weighed against overall market needs and only those that will prove useful to large groups of customers should be accepted in order to maintain a standardized product offering. Sales and marketing should carefully monitor the penetration of each target market segment, so that a conscious, smooth transition can be made from high touch, strategic account selling to high volume, transactional selling as soon as the initial critical mass of reference accounts and demand generation is achieved to knock down the “bowling pin.” And, managers must realize that achieving this smooth transition requires more than simply establishing a plan. It can become very difficult to walk away from a deal, a customer or a product idea once it has lost its strategic value, because people have established behaviors and made personal investments of time and energy.

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