Sometimes there’s a single book (or movie, podcast or Broadway show) that seems to define a particular time in your life. In my professional life, Geoffrey Moore’s Crossing the Chasm has always been that book. When I started my career as VP Marketing in the 1990s, this was the absolute bible for early-stage B2B startups launching new products. Fast forward to today, and people still refer to it as a touchstone. Even as go-to-market motions have evolved and become more agile and data-driven, the need to identify a beachhead market entry point and solve early-adopter pain points fully before expanding to the mainstream market has remained relevant and true. I still use the positioning framework for every new product and company.
Graphic from “Crossing the Chasm” showing the gap between early adopters and early majority. Image source: Patel, Neeral & Patlas, Michael & Mafeld, Sebastian. (2020).
Recently while hosting the Causely team at their beautiful new offices for our quarterly meetup, our investors at 645 Ventures gave everyone a copy of the latest edition of Crossing the Chasm. It was an opportunity for me to review the basic concepts. Re-reading it brought back years of memories of startups past and made me think about the book in a new context: how have Moore’s fundamental arguments withstood the decades of technology trends I’ve experienced personally? Specifically, what does “crossing the chasm” actually mean when new product adoption can be so different from one technology shift to another?
A Quick Refresher
One of Moore’s key insights is that innovators and early adopters are willing to try to a new product and work with a new company because it meets some specific needs – innovators love being first to try cool things, and early adopters see new technology as a way to solve problems not currently being met by existing providers. These innovators/early adopters then share their experiences with others in their organizations and industries, who trust and respect their knowledge. This allows the company to reach a broader market over time, cross the chasm and begin adoption by the early majority. Many years can go by during this process, much venture funding will be spent, and still the company may only have penetrated a small percent of the market. Only years later (and with many twists and turns) will the company reach the late majority and finally the laggards.
Photo by David Lusvardi on Unsplash
The Chasm Looks Different Over Time
Netezza and Data Warehousing
I started to think about this in terms of technology shifts that I’ve lived through. Earlier in my career I had the good fortune to be part of a company that crossed the chasm: Netezza. We built a data warehousing system that was 100x the performance of existing solutions from IBM and Oracle, at half the cost. While this was clearly a breakthrough product, the data warehousing industry had not changed in any meaningful way for over a decade and the database admins who ran the existing solutions were in no rush to try something new or different, for all the usual reasons. Within 10 years we created a new category, the “data warehouse appliance.” We gained traction first with some true innovators and then with early adopters who brought the product into their data centers, proved the value and then used it more widely as a platform. However, “crossing the chasm” took many more years – we had a couple of hundred customers at the time of IPO – and only once the company was acquired by IBM did more mainstream adopters become ready to buy (since no one ever gets fired for buying IBM, etc). The product was so good that it remained in the market for over 20 years until the cloud revolution changed things, but it’s hard to argue that it ever gained broad market adoption compared with more traditional data warehouses.
Datadog and Cloud Observability
A second example, which is closer to the market my current company operates in, is Datadog in the observability space. Fueled by the cloud computing revolution (which itself was in the process of crossing the chasm when Datadog was founded in 2010), Datadog rode the new technology wave and solved old problems of IT operations management for new cloud-based applications. While this is not necessarily creating a new category, the company moved very quickly from early cloud innovators and adopters to mainstream customers, rocketing to around $1B in revenues in 10 years. What’s more impressive is that Datadog has become the de facto standard for cloud application observability; today the company has almost 30,000 customers and is still growing quickly in the “early majority” part of the observability market. Depending on which market size numbers you use, Datadog has already crossed the chasm or is well underway, with plenty of room to expand with “late majority” customers.
OpenAI and GenAI
Finally, think about the market adoption in the current GenAI revolution. 100 million users adopted ChatGPT within two months of its initial release in late 2022 and OpenAI claims that over 80% of F500 companies are already using it. No need for me to add more statistics here (e.g., comparisons vs adoptions of internet and social technologies) – it’s clear that this is one of the fastest chasm-crossings in history, although it’s not yet clear how companies plan to use the new AI products even as they adopt them. The speed and market confusion make it hard to envision what crossing the chasm will mean for mainstream adopters and how the technology will fully solve a specific set of problems.
Defining Success as You Cross
Thinking through these examples made me realize some things I hadn’t understood earlier in my career:
- It’s easy to confuse a large financial outcome (through IPO or acquisition) with “crossing the chasm”, since the assumption is often that you’ve had enough market success for the outcome. In fact, these are not necessarily related issues. It’s possible to have a large $ acquisition or even a successful IPO (as Netezza did) without having yet crossed to mainstream adoption.
- The market and technology trends that surround and support a new company and product can lead to very different experiences in crossing the chasm: You can have a breakthrough and exciting product in a slow-moving market without major technology tailwinds (e.g., data warehousing in the early 2000s) but you can also have a huge tailwind like cloud computing that drives a new product to more mainstream adoption within 10 years (e.g., Datadog’s cloud-based observability). Or you can have a hyper-growth technology shift like GenAI that shrinks the entire process into a few years, leaving the early and mainstream adopters jumbled together and trying to determine how to turn the new products into something truly useful.
- It can be hard to tell if you’ve really crossed the chasm since people think of many metrics that indicate adoption: % of customers in the total addressable market (Moore defines a bell curve with percentages for each stage, but I’ve rarely seen people use these strictly), number of monthly active users, revenue market share, penetration within enterprise accounts, etc. Also at the early majority phase, the company can see so much excitement from early customers and analysts (“We’re a leader in the Gartner Magic Quadrant!”) that founders can confuse market awareness and marketing “noise” with true adoption by customers that are waiting for more proof points and additional product capabilities that weren’t as critical for the early adopters. It’s important to keep your eye on these requirements to avoid stalling out once you’ve reached the other side of the chasm.
I would love to hear from other founders who have made this journey! Please share your thoughts on lessons learned and how you’re thinking about the chasm in the new AI-centric world.