There is a specific marketing strategy for each and every kind of product or service. "Inside the Tornado" gives stimulating introduction to guerilla marketing tactics in Silicon Valley and detailed analysis of various marketing strategies. Read book summary compiled by Prof. Sameer Mathur for more insights.

1. BOOK SUMMARY
1
Geoffrey Moore

2. What do you do when your company has a new
technological product or service?
How do you introduce it to the market and
target new customer segments?
How do you form strategic alliances in order to
deliver on time?
How do you sell disruptive products to
mainstream customers?
All of this (and more) it is cover by Geoffrey
Moore on its bestseller “Inside Tornado”
Overview
2

3. CONTENTS
3
1.The Land of OZ
2. Crossing The Chasm – And Beyond
3. In The Bowling Alley
4. Inside The Tornado
5. On Main Street

4. 6. Finding Your Place
7. Strategic Partnerships
8. Competitive Advantage
9. Positioning
10. Organizational Leadership
Contents
4

5. LESSON 1
5
The Land of OZ

6. THE CONSUMERS
6

7. Consumers are clustered in 5 groups; as
we will see, each demands a different
approach and treatment. The graph
moves from left to right, being the
Innovators, those willing to try
something truly new.
THE CONSUMERS
7

8. Innovators:
• They love to get their hands on the latest
innovations. They will try anything new.
Early adopters:
• They want to use the discontinuity of any
innovation to break with the past and start a
new future.
Early majority:
• They make the bulk of purchases. They
believe in evolution, not revolution.
THE CONSUMERS
8

9. Last Majority:
• Price sensitive, very demanding and
sceptical. They are a huge untapped
opportunity for tech companies
Laggards:
• They always challenge the hype and love
to critic. The idea with this group is not to sell
them directly, but sell around them.
THE CONSUMERS
9

10. Innovators = Technology enthusiasts.
Early Adopters = Visionaries.
Early Majority = Pragmatists.
Late Majority = Conservatives.
Laggards = Skeptics.
10
Lesson 2

11. LESSON 2
11
Crossing The Chasm and Beyond

12. The first two clusters represent early adopters
that are willing to try anything new, however -
right after this “honeymoon”- there comes the
CHASM, that critical and delicate moment in
which companies can MAKE or BREAK.
The chasm, or tornado is a moment in which
the adoption cycle will play a determinant
role, since after all the excitement, the market
will be waiting for a complete product that
meets all their demands.
The Chasm
12

13. LESSON 3
13
In The Bowling Alley

14. LESSON 3
The Bowling Alley:
Once a company has successfully established
a whole product with a chosen beachhead, they
now enter the phase known as “The Bowling
Alley”.
It is the first taste of the mass market, but the
company is still quite a way from The Tornado.
During The Bowling Alley phase the company
must use the initial beachhead customer as the
head bowling pin to win further niche market
opportunities.
14

15. LESSON 3
It is only after establishing itself within a
community of niches that the technology
innovation can become standardized enough to
be adopted by the pragmatists and the mass
market and to ultimately enter The Tornado.
It is still too early to control the market, in fact
you are at the mercy of your first customers, but
it is these customers that will become your allies
in attracting further clients in order to gain the
mass market standards.
15

16. How should
navigate the
chasm?
Focus on a niche
market to validate
the idea.
Spot a clear
problem of an
underserved area
and solved it.
The Bowling Alley
16

17. Gain access to one key segment in order to
start moving into the next one.
This approach is based on two principles:
1.- Never serve a segment whose current
expenditure on your category exceed your
current annual revenue.
2.- Focus on the end-user community, not the
technical one.
The Bowling Alley
17

18. “ The only safe way to cross the CHASM is
in fact to put all your eggs in one basket.
..the key to winning strategy is to identify
a single beachhead of pragmatism
customers in a mainstream market
segment and to accelerate the formation
of 100% of the whole product.
The goal is to win a niche foothold in the
mainstream as quickly as possible - that
is what is meant by crossing the chasm”.
Remember
18

19. So, how do we choose a segment?
1.- The segment has a compelling reason to
buy.
2.- The segment is not currently served by
any competitor.
How do we choose a segment?
19

20. Questions To Ask:
Is the target customer well funded and are they
readily accessible to our sales force?
Do they have a compelling reason to buy?
Can we today -with the help of partners- deliver
a whole product to fulfil the reason to buy?
If we win this segment, can we leverage it to
enter additional segments?
How do we choose a segment?
20

21. LESSON 4
21
Inside The Tornado

22. Once a company
can actually gain a
customer segment
and solve its issues, a
new market might
be forming.
When competitors
realize there is
potential there, they
will attack
immediately.
Inside the Tornado
22

23. The Gorilla – Market leader. They set the bar
and the market ‘reference price’.
The Chimps – At one point could have been the
Gorilla, but lost out.
The Monkeys – Companies catering to the
edge cases that aren’t covered by the market
leaders. They should focus on a niche
unattended by the gorilla (a new tornado
could be ignited from a monkey).
Once the market stabilizes,
you have
23

24. Market share by
revenue
Gorilla
Chimp #1
Chimp #2
Monkeys
Market share by profit
Gorilla
Chimp #1
Chimp #2
Monkeys
Inside the tornado
Tornado strategy: Just ship
24

25. Characteristic:
Paradigm shift with swift ferocity
One company assumes market leadership pushing
all others aside
New Infrastructure
New players, new industries, new jobs
25
Inside the Tornado

26. Reasons:
When it is time to move, let us all move together
When we pick a vendor to lead us to the new
paradigm, let us all pick the same one
Once the move starts, the sooner we get it over
with the better
26
Inside the Tornado
Inside the Tornado

27. Given this scenario, companies that are
pioneering should follow three rules:
ignore the consumer (it doesn't know what
he needs, so there is no point in getting
feedback from him),
attack competitors ruthlessly (the leader
company has to make sure that no one will
try to steal market share away) and
expand distribution channel as fast as
possible (be there always, when the need
comes up in the consumer’s mind).
Inside the Tornado
27

28. NEVER!
(a) try to control the tornado
(b) try to introduce a discontinuity during a
tornado,
(c)design services out, not in,
(d) try preventing the tornado.
Inside the Tornado
28

29. Once a company has successfully faced the
TORNADO, it can start moving into a growth
model that will ensure (most of the cases) a
bright future. This is the moment to create
and validate a new industry in which the
most successful company will own market
share and earn the most profits.
This stage it is called MAIN STREET.
In the Tornado
29

30. Two great tornadoes of 1980’s
Midrange computer tornado
PC market
What to do in a tornado?
Attack the competition ruthlessly
Expand your distribution channel as soon as
possible
Lesson 4
30

31. Tornado mistakes:
Tornado forces are bigger than any one
company’s ability to control, so don’t try
Don’t introduce discontinuity during a tornado
Tornado design service out, not service in
Don’t bet on preventing a tornado
Lesson 4
31

32. Intel and Microsoft way:
Recruit partners to create a powerful whole
product
Institutionalize the whole product as the market
leader
Commoditize the whole product by designing out
your partners
Lesson 4
32

33. Lessons that HP taught us:
Just ship
Extend distribution channel
Drive to the next lower price point
Lesson 4
33

34. 34
On Main Street
Lesson 5

35. Now, the company that created strategic
partnerships and validated a new market,
has to act ruthlessly in order to own and lock
as many customers as possible.
By now, the competitive advantage should
be clear and the market actually has a need
that this product(s) or service(s) solve.
High Tech Sector Growth
35

36. We move into operational excellence
(decreasing cost) and building intimacy with
the consumer (engagement).
During this stage, the company starts to solidify
its positioning and build top of mind among
consumers.
36

37. Companies that have developed an innovative
technological product or service need to start
working on their delivery strategy.
This is in order to face the tornado and serve the
market in which the pioneer company aims to
be a gorilla (or clear leader).
High Tech Sector Growth
37

38. LESSON 6
38
Finding Your Place

39. In the Early Market, you must not segment,
simply follow visionaries wherever they lead you
To cross the Chasm and negotiate the Bowling
Alley you must segment
Once Inside The Tornado you must not segment
On Main Street you must segment but not in the
way you did in Bowling Alley, here the
segmentation is the basis of your +1 strategy
When To Segment
39

40. There are two kind of discontinuity that shape
the technology adoption life cycle
Paradigm Shock: Whether experienced by
end users or the infrastructure that supports
them
Application Breakthrough: The result of
dramatic changes in end-user roles enabled by
new technology, which in turn spur equally
dramatic returns on investment
Discontinuity and The Life Cycle
40

41. DISCONTINUITY AND THE LIFE CYCLE
41

42. Quadrant 1: TECHNOLOGY ENTHUSIASTS
Life cycle starts here and paradigm shock is
high while benefit is low typically because
applications for new technologies is yet to be
fielded
It is the realm of pure sciences and prototypes
Discontinuity and The Life Cycle
42

43. DISCONTINUITY AND THE LIFE CYCLE
43

44. Quadrant 2: VISIONARIES
Here we see the emergence of the early market,
buildup around one or more visionaries seeing
the benefit potential for new technology
Dramatic competitive advantage is generated by
visionaries, thereby warranting the pain of
displacing the paradigm shift
Pragmatists like to incorporate breakthroughs but
not at the price of paradigm shock required
which creates the chasm
Discontinuity and The Life Cycle
44

45. DISCONTINUITY AND THE LIFE CYCLE
45

46. Quadrant 3: Pragmatists
This is Bowling Alley phase, where clever
marketing can accelerate what otherwise will be
a prolonged period in the chasm.
Since pragmatists move as a hard, they create a
de-facto standards and stimulates the broad
base of supplier support needed to obliterate
paradigm shock together while still delivering
application breakthrough.
Discontinuity and The Life Cycle
46

47. DISCONTINUITY AND THE LIFE CYCLE
47

48. Quadrant 4: CONSERVATIVES
As the Tornado subside the conservatives are
able to buy in to the market for the first time
The paradigm shock has been fully absorbed
and application breakthroughs have become
standard
The market now moves to main street with further
innovation focused on secondary value
prepositions
Discontinuity and The Life Cycle
48

49. DISCONTINUITY AND THE LIFE CYCLE
49

50. WALL Between First and Fourth Quadrant:
The wall says you cannot move from one to the other without going
through the right hand side of the diagram
If you come with a discontinuous technology whose sole benefit is to
lower cost and improve productivity within a well-worn application
arena, you have an essentially unmarketable opportunity
Conservatives will not tolerate paradigm shock nor will they invest in
helping vendors reduce the shock over time
Discontinuity and The Life Cycle
50

51. Signals of Early Market:
One sure signal of early market product is
when its own developer declines to comment
on it
Another is when the coverage focuses on
technology and product features, the two
items of greatest interest to early-market
players
Calibrating Market Acceptances
51

52. Calibrating Market Acceptances
Signals of Mainstream Market:
Mainstream Markets are more interested in
market and company in formation
52

53. Signals of Tornado Market:
A lot of Emphasis on cut throat competition
If there is a lot of porting activity focused on
a single vendor, even if that vendor is not
you, it’s a good sign that you and they are in
a tornado market
Calibrating Market Acceptances
53

54. Calibrating Market Acceptances
A second sign from the infrastructure is
cloning
Widespread price discounting within the
product category – both for gorilla
product and for clone products
54

55. Just because a product is not shipped does not
mean it is in early stage, rather place the product
where the group think it will enter life cycle when
shipped
The same product can be at different points in life
cycle depending on global context so specify
geography when making a group choice
You can have a “local tornado” within a single
bowling alley segment
How To Keep Group on Target
55

56. Some product get to main street without going
through a tornado. The whole product does
eventually become a commodity within the
niches they serve
Just because your product is going down the
tubes does not mean you are in chasm, product
can fail anywhere within the life cycle, although
failing in a tornado takes special work
How To Keep Group on Target
56

57. How To Predict Start of Tornado
First, Bowling Alley successes help tornadoes
to start because they validate product
architecture
Second, in retail markets, price point is a key
indicator of tornado readiness
More abstractly, tornadoes require the
commoditization of the whole product
57

58. The big signal for the tornado is “killer app” but
it is not clear whether tornado causes killer app
or vice versa
You can know a tornado has started when a
gorilla company begins to emerge
Finally betting on the tornado coming at a
specific time is like buying a lottery ticket and
expecting to win
How To Predict Start of Tornado
58

59. Part Two
Implications for Strategy
59

60. LESSON 7
60
Strategic Partnerships

61. Lesson 7
Strategic Partnerships
Closed System
• Vendor lock-in
• Vertical Integration
• Focus to minimize
dependency and
maintain control
Open System
• Vendors free to
pursue best of
breed strategy
• Favors smaller
and more
entrepreneurial
entities
61

62. An OPEN SYSTEM business strategy puts a
premium on partnerships to ensure rapid
development of new technology markets
Learning how to COMPETE in such environment is
the single biggest challenge
Learning how to make and keep COMMITMENTS
in such an environment is second biggest
challenge
Partnerships
62

63. Stage 1: In this stage there is a core product but
it is raw and hence you need to provide a
gamut of services to sell the product. It is where
you need a set of partners who can provide
these services in the initial phase
Evolution of a Product
63

64. Stage 2: In this phase you start to eliminate
partners by integrating the critical services with
the product itself, so you start to buy out
partners or develop excellence in the critical
services and make them part of the product
Stage 3: In this phase the product is in last stage
and again you need partners who can provide
services to take care of the customers. This part
is also commercially very important for the
companies and is very profitable
Evolution of a Product
64

65. Early Market: In the early market power lies
with the technology provider and the systems
integrator. The former has the bait that brings
visionary customers into range; the latter has
the tackle necessary to land them
Bowling Alley: Power Centralizes in the hand of
the ringleader of the niche market attack
In the Tornado: Power in the tornado centralizes
in the hand of Gorilla Companies and their
cronies non as “The Club”
Power Play
65

66. 1) How do I know if a partnership is
really strategic?
A Partnership is only strategic when it is focused on the
whole product necessary to win you the number one
position in the target market.
Market leadership is the only strategic object. Therefore,
partner only if a partner adds to the objective of
achieving the leadership position in the market
Five Questions of Strategy
66

67. 2) How do I manage strategic
partnerships created with no specific
whole product in view?
Partnerships formed in absence of a focal point
are simply unmanageable and they consume
resources like crazy
For a partnership formed in advance of a
commitment to a specific whole product, make
TARGET MARKET SELECTION your top priority
otherwise run away from partnership
Five Questions of Strategy
67

68. 3) How do I decide when to partner as
opposed to make or buy?
Partnership confer critical leverage but
they are expensive and exhausting to
manage.
Five Questions of Strategy
68

69. As a rule, a total of two to three partners in any
one opportunity is optimal. Within this team
each partner needs something real and
challenging to do along with a reward
commensurate for doing it
When these conditions are met it is good to go
for partnership else choose for make or buy
Five Questions of Strategy
69

70. 4) Why should not I keep all the
partnering revenue to myself?
No other vendors will be attracted to the
market, unless there is something for
them to gain,
The market will grow faster with a larger
vendor base
Five Questions of Strategy
70

71. Five Questions of Strategy
Juicy service margins seduce vendors
into staying in the bowling alley instead
of commoditizing the whole product for
a run at the tornado
71

72. 5) How do dance with a Gorilla in a
Tornado and come out in one piece?
The strategic principle is, if we are not the
gorilla it is not our market and eventually we
will be forced out.
Five Questions of Strategy
72

73. The only viable way out of this dilemma, in
the short to medium term, is to sustain enough
ongoing innovation to keep us just outside
the gorilla’s reach. Longer term, of course, we
have to find some place where we can be
the gorilla
Five Questions of Strategy
73

74. PARTNERING AS A SERVICE PROVIDER
Service component of the whole product is
inversely proportional to its state of pre-
integration
74

75. At the Front of Cycle pre-integration is low and
the service provider is high margin “deep
water” fish
At the Back End pre-integration is high requiring
the service vendor to be a “shallow water” fish
Fish Model
75

76. At some point in swallowing of margins, it
behooves the service provider to merge with
the sales channel because there is no longer
sustenance for more than one service
organization
At every stage in this evolution, however, a fish
can thrive
Fish Model
76

77. Instead of arguing about why discount
margins are getting less and less favorable to
the reseller the conversation should instead
be based on
What gross margins does the service partner
need to make to have a healthy business?
Let us agree to do business only where those
margins can be earned
Fish Model
77

78. The most constructive path forward for both
service and product vendor is to pursue
Taking the service providers margin
requirement as constant, what whole products
are now drifting out of its range?
How in short term can a service provider
squeeze a last good year out of business by
productizing its experience into less costly to
deliver?
Fish Model
78

79. Looking to the future what kind of
opportunities are coming downstream to
replace those lost sources of revenue?
How in the short term can the product vendor
accelerate the market development of those
opportunities to increase deal flow for the
service provider?
Fish Model
79

80. LESSON 8
80
Competitive advantage

81. Can be gained by using one of the following
three approaches:
Product Leadership
Operational Excellence
Customer Intimacy
Competitive advantage
81

82. Value Disciplines and the Life Cycle
COMPETITIVE
ADVANTAGE
82

83. Lesson 8
Competitive Advantage
Product
Leadership
only
Product Leadership +
Customer Intimacy
Product
Leadership +
Operational
Excellence
Operational
Excellence
+
Customer
Intimacy
Two
Elements
Capability of
Inducing
Radical
change
Flexibility to
adapt to the
visionary’s
plan
83

84. Bowling alley: Product Leadership (leverage
technology), Customer Intimacy (Segment focus)
Tornado: Product Leadership, Operational
Excellence
Gorillas use operational excellence to ship in
high volume and also uses new product releases
to keep competitors at bay
Lesson 8
84

85. Monkeys compete on low price. Operational
excellence by reducing overhead.
Chimpanzees compete with their own version of
product leadership.
Lesson 8
85

86. Main Street: Operational Excellence,
Customer Intimacy
Low cost commodity provider and niche
oriented premium brand
Hypercompetitive Behavior
It is damaging as goal is to win the game,
not beat the competition
Lesson 8
86

87. 87
Positioning
Lesson 9

88. It is about the place we occupy within two
interrelated systems, both of which predate
our existence, and both of which can get
along just fine without us. They are:
The system of purchase choices available
to the customer
The system of companies interacting to
make a market
Positioning
88

89. Market – Maker’s View of the Marketplace
Imperialists
Vs.
Natives
Explorers
& Forty-niners
Old Guard:
Gorillas
Chimpanzees
Monkeys
Barbarians
Vs.
Citizens
New
Market
Established
Market
Established Product New Product
Positioning
89

90. 90
Organizational Leadership
Lesson 10

91. ORGANIZATIONAL LEADERSHIP
91
Organizational Imperatives:
Customer
Intimacy
Operationa
l
Excellence
Product
Leadership
Bowling
Alley Tornado
Main Street

92. Lesson 10
Bowling Alley Tornado Main Street
Economic Buyer Infrastructure Buyer End-User
Vertical Markets Horizontal Markets Secondary Markets
Event-Driven
(External/ Internal)
Process- Driven
(Internal)
Process-Driven
(External)
Key Disciplines:
• Business
knowledge
• Application
Engineering
• Recruiting
• Revenues Within
Target
Key Disciplines:
• Sales Management
• System Engineering
• New-Hire
Orientation
• Cash Flow
Key Disciplines:
• Convenience
Engineering
• Marketing
Communications
• Staff Development
• Margin Management
92

93. ORGANIZATIONAL LEADERSHIP
93
BOWLING ALLEY TORNADO MAIN STREET
Economic Buyer
Vertical Markets
Infrastructure Buyer
Horizontal Markets
End-User
Secondary Markets
Product Leadership
+
Customer Intimacy
Not Operational
Excellence
Product Leadership
+
Operational Excellence
Not Customer Intimacy
Operational Excellence
+
Customer Intimacy
Not Product Leadership
Event-Driven
(External / Internal)
Key Disciplines:
Process-Driven
(Internal)
Key Disciplines:
Process-Driven
(External)
Key Disciplines:
• Business Knowledge
• Application Engineering
• Recruiting
• Revenues Within Target
• Systems Engineering
• Sales Management
• New-Hire Orientation
• Cash Flow
• Convenience Engineering
• Marketing
Communications
• Staff Development
• Margin Management

94. SUMMARY OF LEARNING
94
1. The Land of OZ
2. Crossing The Chasm – And Beyond
3. In The Bowling Alley
4. Inside The Tornado
5. On Main Street

95. SUMMARY OF LEARNING
95
6. Finding Your Place
7. Strategic Partnerships
8. Competitive Advantage
9. Positioning
10. Organizational Leadership

96. 96
Prepared By: Prof. Sameer Mathur, Ph.D.
Sameer Mathur
Indian Institute of Management,
Lucknow
Marketing Professor 2013 –
Marketing Professor 2009 – 2013
Ph.D. and M.S. (Marketing) 2003 – 2009