Hiding in Moore’s Chasm

by James Matthews

Early on in our Launching Tech Ventures course we had the privilege of a visit from Eric Ries to our classroom for a Q&A session. Eric is a leading proponent of the lean start-up methodology; he has written extensively on the subject and has coined much of the terminology of the (increasingly formalized) discipline.

One particular point that Eric made stood out to me that day. He made the argument that Moore’s Chasm is a benefit, not an obstacle to the lean start-up. Geoffrey Moore’s seminal book, “Crossing the Chasm,” describes a major problem faced by many technology companies: there is a chasm in the product lifecycle between early adopters (or “visionaries”) and the early majority (or “pragmatists”). One fundamental difficulty in crossing the chasm is that your early adopters are not good referees for the mainstream – even if these “visionaries” love your product, the rest of the world does not trust them. Moore observed that many companies failed when crossing this chasm, even if they had a technologically viable and useful product.

Eric’s addendum to this theory is that for a lean start-up, the chasm will in fact
shield you from your early mistakes. In its early stages, a lean start-up deploys early and deploys often, testing and learning what it can from its early adopter user base. Eric posits that the chasm allows you to move quickly, potentially making mistakes that annoy or even harm your early user base, but that this will not hurt you in the long run as their referrals to the mainstream are not heeded.

While this argument was compelling to me at the time, as we have studied more and more lean start-ups over the course of the semester I have come to the conclusion that this concept is far from generally applicable – in fact, it may only apply to a few specific situations.

Firstly, we can rule out applying it to start-ups that sell to businesses, either as their only customers or as part of a multi-sided platform. David Skok of Matrix partners gave us an excellent talk on the marketing/sales funnel for businesses that sell to other businesses, and here it was clear that in this limited pool of customers your reputation is a very precious commodity. It is still true that there are early adopters and mainstream adopters, but references are your most powerful selling tool. Companies, even early adopters, can have low tolerances for ‘mistakes,’ and while positive references may have difficulty crossing the chasm, negative references from early customers are a product killing red flag.

Secondly, there is an entire class of consumer-facing businesses where the subject matter of their product is just too important to have early failures. From our course we’ve seen Dropbox’s handling of their early adopters’ personal files, Cake Financial’s processing of sensitive financial information and Predictive Bioscience’s cancer detecting tests as examples where you wouldn’t want to make ‘learning mistakes’ with an active user base.

Lastly, we have seen businesses where the primary growth strategy was to develop a strong service reputation amongst a specific demographic – here Chegg, the college text-book rental company, stands out. While I’m sure you can split the student population into ‘early’ and ‘mainstream’, in truth Chegg’s reliance on word of mouth acquisitions to get ahead of competitors really meant they had to get it right the first time.

So, which companies have we studied where I am convinced the shield applies? Certainly for Eric’s own start-up, IMVU, where the shield allowed him to experiment and pivot freely amongst his early adopter teenage user base. It may also be relevant for ‘nice to have’ services such as social Q&A facilitator Aardvark.

However, if I were running or working for a business that was still pre-chasm, I would be very reluctant to assume I had a reputation shield. While there are clear benefits to frequent product experimentation, the shield argument presents too black and white a picture. In reality, for most companies, there is always a tricky balancing act between experimentation and reputation.

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