Crossing the New Chasm: Focusing on Addiction, Not Just Adoption
While many of today’s successful tech companies have been able to cross this chasm and achieve mainstream adoption and massive scale, many more have gotten stuck in the chasm, unable to evolve their offerings to cater to and engage the mainstream. In the past five years, it has become increasingly difficult for tech CEOs, VCs and entrepreneurs to assess where they are in this S curve and cross the chasm effectively. The main reason is that the profile of the early adopter has changed. As services like Facebook and Twitter have made consumer tech part of pop culture, more mainstream consumers are adopting technologies earlier than ever as a way to be “in the know” of pop culture. However, these new mainstream consumers are not true early adopters; they are just “mainstream tinkerers.” They have an entirely different set of demands and behaviors than their early-adopter predecessors. As a result, they have less patience and churn easily. Essentially, the pace at which mainstream consumers encounter technology has accelerated, and companies must be ready to address their demands.
So how can today’s companies effectively navigate the new chasm?
First, companies need to understand the nature of early consumption by getting to know their customers. It is easy for companies to confuse these “tinkerers” for early adopters. The problem here is that the tinkerer community lacks the essential ingredients of the traditional early-adopter community that allow a company to use its feedback and engagement to “cross the chasm.” The net result is that investors and companies confuse early adoption and tinkerer adoption as a sign that the company has broken into the mainstream. The result is a massive growth ramp in adoption, followed by a rapid downdraft in churn — and eventual failure.
This confusion has happened time and time again to popular companies like Socialcam, Viddy, Formspring and Chatroulette. Through the power of social media, these sites drew incredible numbers of tinkerers and early adopters all at once. They created a lot of buzz, but failed to delight and engage to retain the interest of tinkerers. So, what is the antidote to this?
Focus on Addiction, Not Just Adoption
I recently heard a legendary venture investor say that it is easier than ever to start a company, but harder than ever to make it durable.
To build companies that last, entrepreneurs must deliver a product in a way that translates into “addictive” retention. Early adoption is not enough. Any successful product needs habit-forming attributes that compel customers to return hourly, daily, weekly or monthly.
Think about what you do every day. Do you stop by a coffee shop en route to work, stand in line, order a latte and check your Facebook account? Routines are hard to break, so I’d argue that Starbucks is one of the most addictive services in the world … add caffeine to the mix, and you have super addiction. Social media sites like Facebook and Twitter draw habitual users in this way, and the engagement is both immediate and long-lasting because it is ingrained as part of your daily routine.
Building Blocks for Engagement
So how can companies build products like this? Over and over, I see four elements within successful companies that engage consumers:
- A founder who is obsessed with customer experience
A successful startup needs a founder who wants to over-deliver on UX, no matter what. It needs a founder who is focused on consumer delight and product quality, and also cares about the details. Founders that fit this mold include Apple’s Steve Jobs, Facebook’s Mark Zuckerberg and Twitter’s Jack Dorsey.
- A product that is highly habit-forming
Companies that build products that are engaging from the start and draw repeat visitors help to create a consumer mind-set that leads to habitual use. Making a business engaging means drawing users in. Tap into consumer desires and celebrate the aspirational aspect of a site. Online jewelry design site Gemvara allows consumers to design and create their own rings or necklaces using a template that generates a picture-perfect rendering; these activities fill in the habit-forming engagement in-between purchases. If the consumer isn’t ready to buy immediately, the item can be shared or added to a wish list.
- A focus on network effects or brands
Businesses that build a brand that stands for something specific or that have network effects tend to become much more durable. Skype, Lending Club and Airbnb are great examples of network-effect businesses; more demand brings supply, and more supply brings demand. Similarly, building a great brand will happen naturally if you build a great service or product that has a clear message and mission. Companies like Amazon and Zappos didn’t have a network effect, but they did something else — they delivered a great service, and they did it so well that they became reliable brands consumers could count on.
- Gamification and engagement mechanics
Ensuring traction for your site means getting consumers addicted in such a way that they return again and again. Real estate might not be an obvious habit-forming category, given that the purchase is by definition sporadic, but sites like Trulia and Zillow have transformed what might seem a staid industry into something dynamic and engaging. While most people may move very infrequently, and might not seek out a site as often with homes to rent or buy, these sites added a gamification effect so that it’s easy to track the potential value of a property and compare it to other properties. The data available and algorithms used draw people to these sites again and again out of consumers’ pure curiosity. This helps create engagement and reduce customer-acquisition costs.
Sustaining a business once it is built requires dynamic leadership, ensuring a product is addictive and engaging. Introducing new initiatives and keeping the product engaging means every employee must care about even the smallest details.
More than 20 years later, Moore’s “chasm” notion still holds: Companies must move from the early adopters to the masses to be successful. The new wrinkle is that the popularity of the consumer Web has dramatically accelerated the pace at which the mainstream first engages, so companies — from day one — need to build products that don’t just drive adoption, but spark addiction.
Sergio Monsalve @vcserge is a partner with Norwest Venture Partners.