Geoffrey Moore on finding your beachhead, crossing the chasm, and dominating a market

Geoffrey Moore (00:00:00):
The tendency when you're in the chasm is, "I just need more customers. I should take any customer I could find," because we need revenue. It's like taking a match and running it back and forth under a log. It's not going to light the log. So how do you start a fire? Well, you start it by putting a little kindling, little crumpled up paper, and you hold the match in one place until the fire starts. That's why adjacency is so important. If you light the fire, the piece of kindling is here, but the log is in the other room. That doesn't work.

Lenny (00:00:32):
Today, my guest is Geoffrey Moore. Geoffrey is the author of maybe the most influential and important book on go-to-market ever written, Crossing the Chasm. Even though it's sold over a million copies, it still feels like people continue to reinvent many of the lessons that Geoffrey uncovered and shared in a seminal book. In our conversation, we discuss why it's so important to get very narrow with your initial audience, how the bowling pin strategy helps you get past early adopters, what the specific go-to-market playbook is for every stage of the adoption lifecycle, why using the wrong playbook during the wrong phase will slow you down. Also, the seven deadly sins of trying to cross the chasm incorrectly. Also, how to sell your product at different personas, why you don't need to focus on the problem and the pain when you're selling to early adopters, plus some real good life advice that I didn't expect.

(00:01:22):
Geoffrey has so much wisdom to share if you're building a B2B company, and I'm really excited to bring you this episode. With that, I bring you Geoffrey Moore after a short word from our sponsors.

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Geoffrey Moore, thank you so much for being here, and welcome to the podcast.

Geoffrey Moore (00:04:07):
Well, it's nice to be here, Lenny, and thank you for having me.

Lenny (00:04:09):
It's incredibly cool to have you on. You've been at the top of my wishlist of guests to have on this podcast ever since I launched it, so it's surreal to be chatting with you. It almost feels like maybe this podcast has crossed the chasm now that you're on.

Geoffrey Moore (00:04:22):
If you'd called me earlier, I probably would've been on it with you. But anyway, we're together now.

Lenny (00:04:27):
I thought it'd be fun to start with this question of just what frustrates you most about what people still don't get about the things that you teach, particularly Crossing the Chasm. You wrote that, I think, 33 years ago at this point. You have a lot of follow-up books around the topic. What do you think people still don't really understand or often get wrong?

Geoffrey Moore (00:04:45):
All the books I write are about frameworks. They're conceptual models about what patterns should you be looking for as something evolves? Because in disruptive innovation, there's no history. You're always projecting a possible history, and then seeing if you can make it come true. So that implies there's a lot of freedom to exercise the framework however you choose to. People sometimes do that in ways that are just... They actually end up being very misleading about what's possible. I can remember one person early on saying, "Yeah, we're Crossing the Chasm. Our beachhead segments the Fortune 500," and you went, "Well, I don't think maybe you're as clear on this as you could be."

(00:05:32):
To be fair, that's what the function of any third party advisor is, is to say, "Look, time out. You might be looking at this through an inside-out lens. Maybe you should be looking at it from an outside-in lens." That's probably number one. Gosh, after that, I'm just empathetic with the fact that their world's more important than my world, so I try to work with their world.

Lenny (00:05:59):
That's exactly where I actually wanted to go next is this idea of starting very focused with your initial target audience. I think people conceptually know this. They're like, "Yeah, we should be really focused with our initial target market. We should stay very small, and expand this beachhead idea." But I think they still don't quite actually do this because it's like, "Why not go wider?" So could you just talk about why that is so important, and how to actually think about how to do that correctly?

Geoffrey Moore (00:06:23):
If you're essentially in a business where the category is emerging, then the most important thing for you to do is to be able to create enough power around your company that you can navigate your future on your own power. Where does power come from in an early adopting technology world? First of all, it'll come from can you get a lighthouse customer? So one of the things we try to do even before you try to cross the chasm is can you get one or more customers who put you on the map? And they go, "Whoa, did you know that the CIA used AWS?" Like, "Holy smoke." Okay, that's great. It doesn't make a company, but it makes a story, and it lets people know, "Oh, here are the guys that did the CIA project," that kind of thing.

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The Crossing the Chasm model is, "Can you create a viable repeatable business?" And in order to do that, you need to have an ecosystem of partners work with you in order to consolidate your position. Well, why would an ecosystem work with some startup that nobody's ever heard of? The answer would be if you had consolidated a market segment where you were number one. So one of the things we've learned about company power is that basically it's the company power plus the ecosystem together. So ecosystems form around market leaders, and they do not form around the rest of us. If you're a category leader, if you're like Oracle and Databases, you're 40 years in. You're still the leader, because the ecosystem organized around you.

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But when you're little, the only way you can get an ecosystem to organize around you is to go after a segment where you're a big fish in that pond. We talk a lot about fish to pond ratio. You want to be... Your first pond, your target segment should be something that in the next two years, if you hit your really high growth rates, you could be 30, 40, 50% of the market share in that segment. That would cause partners to go, "Whoa, if we're going to serve that segment, we got to work with these guys." So that's the key. The concept there is, "Well, why wouldn't you also do two or three or four segments at the same time?" It's sort of the same reason, "Why wouldn't you run in three or four primaries at the same time if you want the presidential nomination?" Although why you would want that nomination, I have no idea.

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But if you did, you realize if you're running in New Hampshire, votes in Vermont do not count. It's the same thing with Crossing the Chasm. You need to get three or four or five or six reputable companies in a segment to all pick you, for then the rest of the segment to go, "Well, it's pretty obvious who the standard is." I'll just close with one last comment. And the reason, the mechanism behind all that logic, is that pragmatic people buy what they see their peers are buying. So if peer one is buying product A, and peer two is B and C and D, there's no market leader, and the category goes sideways. But if A, B and C, if three out of four people are using the iPhone, it's like, "Oh, I guess I'm supposed to get an iPhone," that kind of thing.

Lenny (00:09:29):
Awesome. I'm glad you went there, because that's essentially the root of this Crossing the Chasm idea that people after the chasm, the pragmatists, wait for references and social proof, and they're waiting for someone to tell them, "This is worth using," versus visionaries right before the chasm. They're like, "I just want to use the future. I need to be there before anyone else."

Geoffrey Moore (00:09:49):
You're right. One of the ways we try to capture that in a thought bubble is before the chasm, the customers you work with are people who say, "We believe what you believe." So in other words, they're on the same side. After the chasm, they say, "I'm not sure about that, but we need what you have." So transitioning from, "We believe what you believe," which is how you sell to visionaries to, "We need what you have," which is how you sell to pragmatists. That's the shift.

Lenny (00:10:17):
Let's actually spend some more time there on what it is that each of these segments needs, and how you convince them to use it, because this is really useful. So in these pragmatists group, you're saying the pitch there is you have a pain. I will solve this pain, and it's important pain. I think people always assume that's the pitch. But interestingly, your point is earlier in the two segments and maybe share what those two are, they use your product for a different reason.

Geoffrey Moore (00:10:41):
In fact, if there's a total in the model of the technology adoption lifecycle that we organize this all around, there's actually four, I call them, inflection points. The first one we call the early market. That's the one we were talking... That's the visionaries and the technology enthusiasts. They are as excited about you as you are. I mean, they want the demo. They want to see the vision. They're exciting. And the key to that market is to have an executive sponsor who has enough clout to essentially fund this thing, because there's no budget for you. So they've got to create the funding, and then drive the organization to go all the way to bright.

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They're not that many visionary customers, but there's always one or two. The reason why it's so important to work with a marquee customer then is you... Look, nobody's ever heard of you, and if they've never heard of your customer, I don't care how amazing the win is. Nobody's going to hear about it. So it's really important you did it with Apple, or you did it with Verizon, or you did it with Mercedes, somebody that people have heard. So that's number one, and that's a project model. Even if what you sell is a product, those early mark... Every one of them is kind of a snowflake. It needs a ton of special services. There's no ecosystem of partners to support you, so you throw a bunch of extra labor at it. You do whatever, because you got to make them successful. So you'll do whatever it takes.

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Okay, very cool. Got my marquee client, not scalable business, I mean, obviously. So then the second one is the Crossing the Chasm playbook. That's the one that organizes around the problem. The good news is those customers are open to hearing from someone new, because they've already talked to everybody they already know, and the problem is still... It's not that it's unsolved. It's being solved in a crummy way and, by the way, in a deteriorating crummy way. So it's getting actually worse. So there's pressure for them to act. This is where you go from the project model to the solution model, and as a vendor, you over commit to their problem.

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From the very beginning, you talk to them. They don't want to talk to you about you. They want to talk to you about them, and you need to ask them probing questions about them. Just like going to a doctor, you don't want the doctor to come and say, "Hey, can I show you a movie of the operation I just did? I want to give you a demo. You mind if I give you a demo?" It's like, "No. What I would like to do is talk to you about this pain I have in my side." And then when the doctor asks you good questions about it, you go, "Ah, this is a good doctor. I'm going to trust this." So that's the whole point about that. Again, that scales a lot more than a project business, but it only scales up to the limit of the target segment.

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So we had this bowling alley model of extending. You could go to a second segment, a third segment if it was adjacent. Adjacent means either it's the same customer with a different use case, or it's the same use case in a different customer base, because the one case, you use your customer references. The other case, you use your partners, because the partners who built the one use case will say, "Well, we got another segment that we work with. Let's bring you into that segment too." So that can take a company from, I don't know, tens of millions of dollars to hundreds of millions of dollars in the bowling alley. And in specialized industries like computer-rated design or things like that, you can actually go to a billion dollars or higher.

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But with most other categories, at some point, you have this third inflection point, which is it's when people go, "Well, wait a minute, wifi isn't just for financial analysts, or isn't just for... Wifi is for everybody." So instead of saying, "We believe what you believe," which we're not there anymore. And these people aren't even really saying, "We need what you have." What they're saying is, "We want what they have. This is really cool. I want what they have," and that creates what we call the tornado. That's when people... This is when you do want sales coverage, and you do want to go broad, and you do want to have a standard product. Basically, you want to capture as much market share as you can. There's a whole playbook around doing that, which was in a book called Inside the Tornado.

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And then the last one, which is actually becoming much more important in this century is called Main Street, but Main Street where products have become commoditized, services become the new place of innovation. We've had taxis for 100 years, but Uber is an incredibly valuable thing. You convert the product to the service, and how do you revolutionize services? That's a situation where now people are saying, "Look, I don't want to own the product. I don't want to own it." Well, kids, "I don't want to own a car. I just want to call Uber. It's convenient." So anyway, those are the four models, and Crossing the Chasm was about that second one.

Lenny (00:15:45):
Amazing. You touched on so many things that I want to talk about. I definitely want to dive into the bowling alley metaphor and strategy there. But to close the loop on this target audience to start with initially. First of all, you have this awesome bonfire analogy that I think might be useful to share. Then along that, is there any example or an example or two you could share of just someone that did that really well of picking a really good initial target?

Geoffrey Moore (00:16:08):
Sure. Well, the bonfire analogy is just the tendency when you're in the chasm is, "I just need more customers. I should take any customer I could find." Because we need revenue, but the analogy I have is it's like taking a match, and running it back and forth under a log. It's not going to light the log. So how do you start a fire? Well, you start it by putting a little kindling, a little crumpled up paper, and you hold the match one place until the fire starts. Then you want to build... The bowling alley metaphor is a little bit about, first of all, how could you win your first segment, but then increasingly, how would you go forward to win it? That's why adjacency is so important. If you like the fire and the piece of kindling is here, but the log is in the other room, that doesn't work. So I think those are the key ideas.

(00:16:59):
There's a lot of people that have made Crossing the Chasm successful. The one that we wrote about first was this company called Documentum, and it's a good example. So it was a document management database back in the day that was not... that nobody had any, "Why would you need this?" It started with the pharmaceutical industry, because pharma said, "Well, new drug approvals are 500,000 page documents, and they really, really, really are hard to manage, and we're screwing it up. And every day we screw it up, we lose a day of patent life of our drug, and the day of patent life's worth about a million or $2 million a day. This is a bad situation. We need to do something."

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So "Okay, pharma, you got pharma." Great. Well, then what happened was the guys in petrochemicals said, "Well, we're in the chemical industry. We're not in the pharmaceutical industry, but we have these standard operating manuals, and we have all these regulatory demands on us too. Not quite like the FDA, but this looks like this could be pretty useful to us too." And then after the petrochemicals guys got... Well, the chemical guys got it, then the petrochemical guys got it. Of course, they're oil and gas, and they say, "Well, in addition, we have all these leases. The lease holds them. It's brilliant. This property is critical to our future plan, so we need a document database for the leases."

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So the guys on Wall Street who are financing these guys are going, "Well, wait a minute. Hell, I mean, we're paper from wall to wall here. Why don't we..." So what happens is you have this thing of this expansion, but in each case, it was into a new segment, but the use cases were close enough.

Lenny (00:18:36):
So if a startup founder is listening and trying to decide is their initial target audience, their ICP too wide, do you have any advice for how to know if this is still too wide, and you should try to get more and more narrow? I know you talk about a single use case. What else should people be thinking about there?

Geoffrey Moore (00:18:53):
Well, so first of all, before you try to cross the chasm, do you have a marquee? Have you won a marquee customer that puts you on the map? Because if you're not... You need to make yourself visible before you can make the Crossing the Chasm play. Let's assume you've done that. So then when we first saw, "Well, why don't I just use that industry?" Turns out that the visionary person you work with... First of all, they did some very weird things because they're visionaries and second of all, they don't want to help their industry. The whole point of this was they wanted to get ahead of their competitors. They didn't want to help. So normally you can't use the visionary project as your beachhead. You'd love to from a point of view of reusing the work. You just can't. So then the question becomes, "Okay, where am I going to go?"

(00:19:41):
So the key formula, and this is the formula... If there's one sort of takeaway from founders listening at this point, you want to have a target segment that is big enough to matter, small enough to lead and a good fit with your crown jewels. That's the formula. So big enough to matter means do I have enough room to double or... Often venture capitalists talk about a triple double followed by a double triple. So if you said, "Okay, let's just, I'm going to make you a million dollars." Put that visionary, but just to give you a number. Okay, so a double triple would be I went from one to four and from four to 12, and then I did a triple double. So that would be 12 to 24, 24 to 48, 48 to 90. Okay, so how would you get from one to a hundred million dollars?

(00:20:31):
So you want to have a segment that says that I could get to a hundred million dollars in a five year... That was a five-year window. So you say, "Okay, but what it can't be is a billion dollar segment." Because if it's a billion dollar segment, you might be able to get there, but you would not be a big fish. So that's a fish to pond ratio thing. So you want to think about, particularly as you're starting out... This is a B2B model predominantly. If I could take the top 20 customers in this segment, meaning... What do I mean by a segment? It's in the same geography. People in Japan don't talk to people in America. People in America don't talk to people in Germany, they even speak different languages. I don't know why everybody doesn't speak English, but apparently they don't. So they have to be same geography, same industry, because dentists do not talk to software designers, who don't talk to advertising people and in the same profession.

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So salespeople don't talk to finance people and finance people don't talk to the guys in the warehouse. So same industry, same geography, same profession. And then the compelling use case, which is the thing... That's the thing that starts the fire. There's segments everywhere and by the way, they all have that... They all do... Every segment works the same way. If I have to make a high risk buying decision, I'm going to talk to my peers about it. And I don't want to be first. I want to be able to do whatever the herd's doing. But what a compelling reason to buy does is it goes well, but I have to act faster than I want to. And that's what you need as an entrepreneur. You need the customer to be coming toward you even though you're new and you're unproven, and frankly you scare the crap out of them, but they're even more afraid of the problem that they're saddled with. So that's why you can build a relationship with them.

Lenny (00:22:19):
Amazing. And this phase comes... You kind of imply it comes after, say you're at a million dollars AR, you don't do this sort of work of trying to cross the chasm at that point, until you reach something like that?

Geoffrey Moore (00:22:31):
I'm not sure AR is going to be the right reference. Here's what you need. You need a major account who's gone all in with you on the new technology and who is willing in some way to talk about it. The good news about visionaries is they tend to have fairly big egos and they tend to like to talk, unlike pragmatists who will not want to talk. Pragmatists, they'll have to go to legal and get permission and blah, blah, blah. But once you've got that, whatever your revenue is at that point, you should be starting to think about, "Well, what is my beachhead segment?" And the good news about Crossing the Chasm, it's not expensive.

(00:23:12):
Think about it, once you've said, I'm going to stay in one geography, in one industry, one profession, think about your marketing budget. You're not buying Super Bowl ads here. There's no sock puppets. That's not what we're doing. We want to get to maybe 200 people with a message. And then do you have the domain expertise to really understand the problem? And if it's a really compelling problem, they'll take the meeting and getting that meeting is... Because if you're an entrepreneurial founder, you're probably fairly charismatic. First of all, you've convinced your spouse that you're willing to work for no money with no benefits, and maybe you pitched a venture capitalist and you fooled them, so why can't you fool these guys? Anyway, that would be the way I would go.

Lenny (00:24:02):
Essentially, the advice here is if you're a new early stage startup, one of the biggest milestones you want to aim for is a big marquee customer. When I think about this and look at a startup deck, if I see something like Figma is using this product or notion or Salesforce. Clearly, I'll be like, "Wow, okay, these really sophisticated people decided this was useful to them." And so I will innately trust that. There's also often advice of don't work with big companies because they'll push you around, they'll take a long time, they'll force you to build a thing just for them and it won't apply to other people. What's your advice to avoid that downside?

Geoffrey Moore (00:24:37):
It has to do with the persona of the executive sponsor. Nine out of 10 executive sponsors are going to be the negative because they're going to be a company person working with company processes. They're going to send you to purchasing, nobody's going to be happy. You're looking for the 10th one. The 10th one is one who says, "I'm so tired of the status quo. I'm looking for people that are visionary like me. I like talking to you better than I like talking to my peers because you're different and I want to be different. I want to leapfrog the world, and these people just want to stay on the escalator. So they're staying on the escalator. God bless them, but I want to jump over the top." So it's a persona based choice is the key thing there.

Lenny (00:25:20):
That is really interesting. And then say that you are an early stage startup again, how soon do you think it makes sense to invest in finding that big marquee customer versus finding some smaller... I imagine you start with some startups to see how people... You don't go straight there.

Geoffrey Moore (00:25:36):
Yes, and so initially, I think... And of course you and I are both playing, let's be clear, we're playing a software game. For example, I was trying to apply this framework to Intel, and Intel said to me, "Geoffrey, you do understand that a prototype product in our industry costs about $500 million." Okay, okay, okay, okay. Maybe that's not the same model. I think in our world right now with digital transformation, most entrepreneurs are doing some software led play, which means you can work with a small team. So I think what I would advise is I would do projects. Even though I have a product vision, I would start with trying to make as much projects, which would be very customer led. And frankly, initially, even if I have a roadmap, the customer's probably going to take me off my roadmap a bit.

(00:26:31):
I'd have to be willing to say, "I'm going to open the aperture enough." Because I just need to get enough experience with the technology. I need to put in people's hands. If it's a freemium play, you can do it for free. But that tends to be more of a consumer play. There are exceptions. There are B2B companies like Atlassian and things that did start as a freemium play, but that's not as normal. I would think more of the consultative play to do that. But what I would try to do, so I would try to get to cashflow break even on my own money with no venture capital. The only reason you need venture capital is if... Well, two things. Either A, the technology is too expensive and you cannot self-fund it, GPUs a bunch of that, training large language modules, those kinds of things. Or this thing is going to catch fire too soon and I don't have time to dither around for two or three years. So those are two reasons to go to venture capital, but just because you want to do a startup doesn't mean you need venture capital.

Lenny (00:27:35):
We had Jason Fried on recently the CO of Basecamp, and he made that point in many different ways. The benefits of not raising and how most VC funded companies do not work out, and even though they do, you often don't make as much as you could if you tried it to bootstrap it. So I think there's a lot of resonance there. And you have this quote that essentially kind of what you just said, that with a single round of funding, you should be able to cross the chasm and dominate a single use case in a single market within 18 to 24 months.

Geoffrey Moore (00:28:03):
Yeah. This is like an English major doing math, so be careful because I am an English major. But in general, because again, I said it's not expensive, and by the way, you're not discounting. In other words, you're actually using value pricing because the problem you're solving is severe enough, the customer doesn't want a discount, the customer wants you to... It is like if you have to have heart surgery, you don't want a coupon that says, "Heart surgery 9.99 this Saturday only." You want to go to the Mayo Clinic or you want to go to wherever, so you don't have to discount.

(00:28:44):
What you do have to do is you have to make almost like a guaranteed commitment to the problem to solve. We're going to take this problem off the table and we're not leaving until you're satisfied. That's the key to the game. That's a little bit weird because if you've invented ChatGPT, and now you're saying, "But I am going to solve the third grade math problem," which is a real problem. But ChatGPT can do anything. I know, but we're going to solve the third grade math problem. That's hard for a lot of entrepreneurs to get their head around.

Lenny (00:29:23):
It reminds me of the way Figma started, even though it took them a long time to find product market fit and started scaling, they ended up working very closely with Coda. I don't know if you know the story where they just wanted to make sure the Coda team, and it was called Krypton back then was very happy with Figma. So they went to the office, they set them all up, they started using Figma. And then on the drive home they called him like, "It doesn't work anymore. Something's broken." And they were already home. And Dylan basically, and this team drove all the way back, I think it was an hour or two, and got there and turned out the Wi-Fi was down and there was some internet issue and fixed it and just was obsessed with making sure they were using it. And they're also just fixing the most ridiculous bugs that were not important because they just wanted to make sure they were really happy with it.

Geoffrey Moore (00:30:11):
[inaudible 00:30:11] a larger company would say, "Look, we'll put you in our queue and you'll be on our... We'll get to you." I think this is... And by the way, this is part of the fun, frankly, of being in a startup because you're so close to the action, because there's nothing between you and the action. So why wouldn't you do that?

Lenny (00:30:29):
Yeah, and I think one of the takeaways I've had for my own research into this is that you need to find one company that just loves you. It's not like "[inaudible 00:30:37], this is cool." It's like, "I love this product. I would never want to give it up."

Geoffrey Moore (00:30:40):
That's kind of what I meant by that marquee ref... We sometimes we call it a radiating reference. It's just somebody really, we talk about you when you're not even in the room. Yeah, very cool.

Lenny (00:30:52):
We've talked about this idea of the chasm and Crossing the Chasm, but it might be helpful just to explain what is the idea, what is this chasm? What is it that people fall into and why is this important?

Geoffrey Moore (00:31:01):
And this was funny, because I was working at Regis McKenna, which was this marketing agency that was sort of the premier high-tech marketing agency in the eighties. And we had all these really successful launches, and then covers of front page articles on Fortune magazine and Wall Street Journal. And then a couple of years later it's like, "Well, what happened to these guys?" So that's where the chasm was like... That's what caused the investigation. What we learned was visionaries make their own buying decisions, and they do not consult their peers. In fact, if their peers are doing it, they're probably not going to do it because they want to be different. So basically these companies were having success capturing the imagination of the visionary, and they thought, "Well, I'll use the visionaries as a reference to get the pragmatist."

(00:31:53):
The pragmatist looks at the visionary and goes, "That's not my guy. First of all, he thinks I'm dumb. He thinks he's smarter than I am. Second of all, he does stuff that I would never do, and he makes decisions in a way that I would never make them. So that's not... No. So but I am interested in talking to my peers, but the problem now is, well, which of the peers are going to go first?" And it was kind of like the junior high dance problem. How do you get the party started? So that was the chasm. That was what created the chasm. The pragmatists need references and they will not accept a visionary as a reference, and they don't have any peers that have tried it yet. So that was what was happening.

Lenny (00:32:35):
I think that's such an important point that I think people don't quite always get that that reference, marques customer needs to be a pragmatist. It can't be one of these early adopters that are just trying stuff. And these other pragmatists need to feel that this is my person, this is just like me. And they love it.

Geoffrey Moore (00:32:53):
By the way, one of the reasons that pragmatists have a certain... It's not contempt for visionaries, but it's definitely wariness, it's because often they have to clean up the messes that these guys leave behind because when you're a visionary, you leave a lot of messes in your wake. And then the pragmatist has to come in and clean it up. So they're going, "Oh, that's another mark against these people."

Lenny (00:33:14):
I saw a deck of yours where you actually represent each of these stages of the lifecycle and the visionary Steve Jobs is the way you represented it, and the pragmatists are just like business people in suits sitting at a conference table.

Geoffrey Moore (00:33:24):
Exactly. And there's six of them. And the key idea behind that is none of us... By the way, I don't think any of these people are a guru and they don't think I'm a guru. We're using the antelope strategy, it's a herd strategy. But at some point... And by the way, we do this all the time, every one of... Airbnb, I want to get an Airbnb in Portland. Have you ever stayed [inaudible 00:33:53]? Is this a good hotel? Is this a good restaurant? Is this a good dentist? Is this a good lawyer? That's how we do it.

Lenny (00:33:58):
I think Uber and Airbnb is the best example of this in action where I would not ride in a random car, especially I think women were most like, "I will never get into a car, into an Uber." This is insane until all of their friends are doing it. And then, "Okay, let's give it a shot."

Geoffrey Moore (00:34:13):
I guess it's okay, yeah.

Lenny (00:34:15):
Yeah. So essentially most people were pragmatists and I guess that makes sense. And pragmatists make up the biggest chunk for it.

Geoffrey Moore (00:34:21):
And by the way, you can be a visionary with some things, a pragmatist with other things, and a conservative with other things. So the way to really think about them is, what is my persona in relation to this decision?

Lenny (00:34:34):
I love this example of the junior high dance problem where nobody wants to go ask the person. It's like, "I'm going to wait for them to come to me. I want to see how this plays out." It's such a good metaphor. In terms of how much of your product needs to be built at each of these stages. What advice do you share? How much do you need for these visionaries versus the next?

Geoffrey Moore (00:34:52):
So with a visionary, you have to have the magic ingredient working. You don't have the whole product. And in fact, your product may be buggy, but it does something... Andy Grove used to call it the 10 x effect. You need to do something that is an order of magnitude better than anything because that's why the visionary is talking to you. They're going, "Oh my gosh, you have this fusion." "Fusion, really?" "Yeah, we got fusion energy." So that's number one. Then what would still cause you to not cross the chasm yet? If there's not enough product there, pragmatists cannot put up with a product that doesn't work. So you may need to do some additional work to say, "Look, we get some more customers. I'm still living hand to mouth. It's mostly project work, but until the product has got enough stability and can be productized, I really can't afford to cross the chasm." So once you have a product that works, then you've got to say, "Okay, now I've got to find a market where it can be the dominant solution." That's the time to cross the chasm.

Lenny (00:36:05):
And a big part of that is obviously they have bosses, they have checklists, they have compliance people, they have IT people, they have people that need to buy into this or this meeting room with six people. They all have to be like, "All right, this is the best choice."

Geoffrey Moore (00:36:18):
And by the way, normally those people are designed to keep you out, and that decision process will take forever and you'll be in the welfare lines before they make their choice. So that's why it's so important to have what we call the compelling reason to buy. You need to have a group of people in a room where the leader, the guy who's going to actually sponsor make this decision is saying, "Look, I already gave this problem to everybody in the room, and our answer sucks." He wouldn't say it that way, but that's the truth. And therefore, we're kind of at the... I mean, I'm getting the message. First of all, my boss's boss's boss knows my name. That's a very bad thing. Secondly, I'm getting the message, you're either going to fix this problem, Geoffrey, or we're going to find somebody who can. So that's what gives them the energy to go against the inertial momentum of the decision-making process in their company.

Lenny (00:37:15):
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(00:37:57):
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(00:38:30):
So April Dunford was on this podcast and she has this book that she put out recently called Sales Pitch. And she make this point that buying software, SaaS software is harder than selling it these days because you can get fired for buying the wrong thing. It's so stressful. There's all these options. Your boss has to be happy with it. So often people end up just not going with anything. We're just going to keep what we have. It's fine, simpler, safer. Salesforce is fine. And it sounds like that's kind of what you're describing. It's so hard-

Geoffrey Moore (00:38:58):
So if you're a pragmatist, the first thing is if it ain't broke, don't fix it. Which makes you totally different than a visionary. A visionary's like, "Yeah, no, come on, break it. Come on, let's move on." It ain't broke, don't fix it. If it is broke, who has fixed it? Is there fix in production? Does the fix work? I want that. In other words, basically to April's point, it is a risk reduction buying strategy. And by the way, you go as slowly as you can normally, but when you're under duress, you have to go faster. So the compelling reason to buy is putting you under duress.

Lenny (00:39:41):
Are there any examples of these compelling reasons to buy that come to mind that give people a sense of here's a really good compelling reason to buy? I don't know if it's a pitch.

Geoffrey Moore (00:39:48):
Well, there's a ton. Well, how about ransomware? I mean, all of a sudden the cybersecurity thing is like holy smoke because it used to be, "Well, they wouldn't attack my company. Or if they did, I mean, I have no assets." Yeah, well, actually... Because it used to be what they did is they would only attack companies that had data that they could resell in the dark web. Then God bless cryptocurrency, people are saying, "Is it cross the chasm yet? Well, their first use case is criminals." It's not a very good use case, I'm sorry to say. But the point is, now ransomware with cryptocurrency can be a monetization, so that means everybody is vulnerable. So that's one kind of compelling reason to buy. But if you look around kids who are struggling with school, the parent has a compelling reason. Anything with healthcare, compelling reason to buy. Anything if you're in a legal problem, you have a compelling risk to buy.

(00:40:48):
So I mean, there's always these situations where you say, "Okay, that's on a personal basis." On a company-wide basis, it may be things like, "Well, what am I supposed to do my office space? Can I get my company to come back to the office or do I have to dump the space? What am I supposed to do? And by the way, I know I'm going to have some kind of space, but do I want to design it the way we used? I'm getting into some space by the way, I got a great deal if it was a fire sale, right? Cool space, what do I put in it? Is it supposed to have offices? Do they have doors, do they not have doors do?" So in other words, there's a bunch of stuff where you get people going, "Okay, how can we help? How can we help?" "I need help. And I've gone to my standard solutions and no, I don't believe that, so I need help."

Lenny (00:41:37):
Okay, so it's interesting that I even misunderstood what you're saying and I think this is a really important point. The compelling reason to buy is not a compelling reason to sell, which people often think about as the pitch you're making. The buy is basically the pain point. They need a really big pain.

Geoffrey Moore (00:41:51):
Yeah, because that's what's going to... So therefore the key to the bowling alley that's different from the tornado, and it's also different from the early market. In the early market it's about you. You tell the story about you and the visionary wants to hear about you. In the tornado it's also about you, because we now have budget to buy this stuff, and you're a candidate. In the bowling alley, it's never about you. And that is so hard for a series of entrepreneurs because they want to give a demo, they want to tell the story, they want to share their vision. The answer is, "We don't care. We don't want to hear your story. We hate demos, and I don't know who you are and I don't care. I'm in trouble. We need to talk about me. We don't want to talk about you."

(00:42:35):
So we have this saying in the Crossing the Chasm playbook. First of all, "Shut the God damn laptop. Just don't open it and start with..." And the way you start the conversation is always the same. "We're here because we've been working with some people in your industry and we understand there's this really serious problem around document management or around Wi-Fi access or whatever it is, and we believe that your company might have it, is that true?" And what's interesting about it is you'll get one of two responses either, "Oh, are you kidding me? Okay, we have that." Or often they'll say, "Well, not exactly." And you go, "Oh," but then before you can say anything else they'll say, "What our real problem is..." So people will talk about their... They want therapy, they'll talk about their problems. So if you're willing to... But as an entrepreneur, you got to realize the gold at this point is problem domain knowledge. That's the thing you really want to collect.

Lenny (00:43:45):
Amazing. So you've sort of answered this question, but I want to make it even more complete. You have this amazing LinkedIn post of these four go-to-market playbooks based on the stage you're in. And you've touched on this already, but it might be helpful just to go through it one by one. And even more helpful would be like, what does it look like when you're in the early market? How do you know if you're in the early market versus in the bowling alley versus in the tornado?

Geoffrey Moore (00:44:08):
Okay, so in the early market, you know you're there because first of all, the story is the technology, and it's specifically the disruptive technology. By the way, you could start a business with a non-disruptive thing, but then you don't need these playbooks, then you're on Main Street. So the assumption is you've got something that nobody's ever done before or seen before. So in that playbook, the first thing is just you hear the responsibilities. And a venture capitalist would say the same thing to you. "Do you have a technology expert who's a wizard? Because we're not going to fund just any two guys and a PowerPoint tech, even though we like your dog."

(00:44:50):
So that's number one. Number two, "Can you demo the technology?" You have to be able to demo thing. And then three, "Can you create a vision which says what forces are going to release?" And the concept that we use in venture, I call it trapped value. And with the idea is where's the trap value that this innovation would release? Because when you release trapped value, the world will give you a portion of the gain, typically 10%. It's easy an number to do math with. As I said, I'm an English major. So if you want a billion-dollar company, you better find $10 billion worth of trapped value that your technology could- [inaudible 00:45:30]

Lenny (00:45:30):
Airbnb is an amazing example of that, right? Where they unlocked people's homes, basically 10%-

Geoffrey Moore (00:45:36):
Yeah. Uber unlocked their backseat of the car. By the way, the free labor force, it was like, "Whoa." Okay, so really cool idea early market fund. For the bowling alley one then the playbook is, "No, where's the problem?" And then you got to take it down to in what geography, what industry, what profession, what use case. And that takes... That's not just... I mean, you want to spend some time in doing that. And then what you want to really do is just maintain intellectual curiosity about the problem as opposed to jumping to the solution. So why is this a hard problem to do? What is going on? Where is the trapped value? By the way, how expensive? What is the cost of not solving this problem?

(00:46:24):
Often it's a risk exposure, or it could be just a gating item on your growth or potentially a churn problem. By the way, if you wanted to pick a compelling reason to buy, how about if you help SaaS companies deal with churn? Do you think they would care about that? I think they might. So the point being... And you're going to say, "Okay, I'm going to learn more about churn and I'm going to really understand... And by the way, I'm going to understand your churn," which is different maybe from somebody else's churn. So it's the problem domain thing. And then you build your go-to market around... The lead gen is, "Hey, do you have any of these seven symptoms of fatal churn?" And the people that respond to that ad are pre-qualified. And then the BDR, if you're at Salesforce, a BDR would call you and say, "Just confirming you have these problems." "Oh yeah, RBI." "And your role at the company is... And are you responsible for doing this?" "Well, actually no, it's Harry, not Mary." "Maybe we should talk to Harry." "Yeah, you probably should talk to Harry."

(00:47:32):
Then you call Harry and you get the appointment with Harry because Harry's got the problem. And then the next thing is you do a diagnostic with them. "So we understand we're talking to your colleagues, here's the problem, here's what we think we're doing. But before we tell you about how great our solution is, let's make sure that we understand what your challenges are." And your goal in that call is to get them to talk as much as possible and for you to take notes. And by the way, this is a place where you probably still want to remember to use a pen because you actually want them to see you writing down their words, because that means, "Okay, he's listening. He's listening."

Lenny (00:48:14):
Oh, interesting. That's a good tip. Like on Zoom, would your advice there be just make sure the camera shows your hands?

Geoffrey Moore (00:48:19):
Oh, yeah, yeah.

Lenny (00:48:22):
Okay. Lean in. Yeah, yeah.

Geoffrey Moore (00:48:23):
Or sometimes... I mean, no, you couldn't do this. I was going to say we record it, but they don't want to record it because they're going to say some things during the call that they won't be necessarily complimentary to all their colleagues and they don't want you to record it.

Lenny (00:48:38):
Got it. So in this bowling alley phase, how do you know you... I know it's not like this binary switch, but that you're ready to move into that versus the early market playbook.

Geoffrey Moore (00:48:50):
Well, I think you get to a point where you realize, "I can't scale my business doing what I've been doing. I mean, I just can't." And if you've taken venture capital, the thing you want to do is, "I don't want to have to raise another..." Well, so understand how venture capital funding works for a second. This is important. A venture capitalist gives you money, and what they're buying from you with this money is, "I want you to use this money to change the state of your company such that when we raise the next round, the next investor will value your company two to three times higher than we're valuing it today."

(00:49:30):
So basically the purpose of this money is to change the value state of your company. If you do anything else with that money, you could have done brilliant things, created amazing demos, hired great people, but if at the end of the day you haven't changed the value state of the company and we have to raise more money, we're going to raise it at the old valuation and I as an investor lose, or even worse, we have a down round and I lose even more.

(00:49:58):
So once you start thinking about that, so we're then Crossing the Chasm. The Crossing the Chasm play is I need to change the state of my company from a cool possibility to what accountants call a going concern. So what is a going concern? A going concern is a company that two years from now you would expect still to be in existence. Why would you do that? Because they have a customer base that's loyal and they have a ecosystem of partners that bring them into new deals and they have established their CAC and LTV, and they've kind of figured out their operating model. And it's not the biggest company in the world.

(00:50:38):
It's somewhere we're now probably in the 10, $20 million, but it's a real company. It's a real company. And that's who you're trying to create when you cross the chasm. And you know you've crossed the chasm when you say, "I don't have to raise any more venture capital. Now, I may want to because I have ambitions to be globally dominant." But you get to raise it on your nickel and on your timeline, not on, "Oh my God, I'm running out of money." So the sooner you can get off with the, "I'm running out..." And particularly last year was fatal to a huge number of companies because that was not how they were thinking about raising funds. They always thought, "Well, there'll be another round, another round, another round." And they were not thinking about changing their valuation state and they're not here.

Lenny (00:51:26):
That's a really interesting insight. This idea that you know you've crossed the chasm if you can survive without more venture funding, how do you think about that, the profit element of that? Because it feels like that's the core to being able to survive without venture funding. Is it about making enough money that you can cut and make a profit, or is there some other reason?

Geoffrey Moore (00:51:47):
All you really care about is cashflow positive. I just want to be able to keep doing what I'm doing. So you don't care about the actual GAAP accounting at all.

Lenny (00:52:01):
I see. So you could cut back and you can get to profitability if you need, but the idea is your cashflow positive?

Geoffrey Moore (00:52:08):
And you'd like to grow and you might want to raise money. But the point is, if you do go out to raise money, you get to raise money at a different valuation. So the way in which venture capitalists categorize you is they say, "What risk is my money going to take off the table?" So an angel investor says, "Well, my money is going to take off the table, the risk of whether you can even create anything, I'm going to give you enough money to get into trouble." That's basically it. And then the Crossing the Chasm money says, "I'm going to take company existence viability off the table. I don't know if you're going to grow, I don't know if you're going to become a venture return, but I'm going to take you going out of business off the table."

(00:52:48):
And then the bowling alley stuff is, "Okay, now I'm buying probably a journey from 10 million to a hundred million dollars," something like that. "And I'm expecting a growth rate," and this is probably where the rule of 40 starts to kick in. If you're playing the rule of 40, we want to raise more money later on, you're going to have a different valuation than we had before. And then the tornado thing by that point, now you say, "You're in Gen AI? You have a large language module? Whoa, okay. You're worth a lot more than we thought," because now the category's in the tornado and that's a different game.

Lenny (00:53:29):
Yeah. I was going to say AI is clearly an example of being in tornado. So maybe just talk a little bit about what that is, the tornado phase and then there's the Main Street playbook.

Geoffrey Moore (00:53:39):
So how do you know the difference between the bowling alley and the tornado? Prior to the tornado, when your sales team calls on the customer, they do not have a budget for you. In the early market, there's no budget for anything. In the bowling alley there's budget, but it's budget for a solution that's not you. It's for the old way of trying to bandaid the problem. So we say in the early market, you have to create budget. In the bowling alley, you have to redirect budget, but that takes sales cycles. It takes time. And if it's a small market... This is why entrepreneurs can win these market segments, because if you're a big established company, this is just a pain in the ass. It's too small a market, it's too much work, it's too hard. Redirecting the... I want my salespeople to go where the budget's already established.

(00:54:28):
Well, when does budget get established? When a category goes horizontal and people go, "Well, yeah, we all want Wi-Fi, we all want mobile apps, we all want cloud computing, we all want whatever it is." And now what happens is... And by the way the pragmatist heard is they went from, "You're not doing that, are you?" "No, me neither." "Okay, good." To, "You are, you are, you are. Oh, we're behind. We better do it." So these budgets come into the market and kind of all at the same time, which is what creates the tornado. Because if you give a department a budget, they will spend it and when they spend it, they're going to spend it with a vendor and whoever vendor they select they're probably going to stay with. So now the market share battle is now on, and whoever gets the most customers early on, the ecosystem starts to form around them.

(00:55:23):
So in the nineties, we saw a lot of tornado, gorilla play. Cisco, Intel, Oracle, obviously Microsoft. I mean these companies, [inaudible 00:55:36], they were all incredibly competitive companies. They were all tornado plays. Between client server and the internet, it just created this massive tornado effect. And that game plan is very competitive sales to grab market share. And then at some point, if you're not number one, then you have to kind of do a defensive maneuver and retreat into a niche and say, "Okay, if I can't be a gorilla, I at least need to be a chimp." And a chimp is like a local gorilla. "I'm not the gorilla, but..." "I'm not Cisco, I'm Juniper." But for telcos, Juniper was the Cisco of telcos at that time. So anyway, I don't know if you saw in the paper today, but at the other end of that lifecycle, HPE has bought Juniper.

Lenny (00:56:28):
[inaudible 00:56:28] is happening. I like that. That's good news. So one of the most interesting lessons you teach is also that these playbooks don't work together well. Basically if you use one in the wrong phase, it's the opposite. It has the opposite effect. So before we get there, let me just summarize maybe quickly the playbook in each of these four. I have some notes here and then maybe just talk about why is it that they fail if you pick the wrong one. So in the early market, you're looking for a visionary customer that just wants to use something new and cool and stay ahead of the curve. In the bowling alley phase, you want to engage with a pragmatic business person who has a huge problem and they need a fix and you're there for them. In the tornado, there's just this land grab, something is just going crazy, AI and everyone's just spend, spend, I need AI in my product. And then Main Street is just, it's kind of the sustaining tech that everyone just needs to make sure continues working and doesn't deteriorate.

Geoffrey Moore (00:57:23):
By the way, the way I would [inaudible 00:57:25] the last two is think of tornado as kind of the land and Main Street as the expand. I mean, that's not a bad way to think about the two as well. Yeah, you got it. You got it.

Lenny (00:57:35):
Okay, great. So why is it that these undercut each other if you're trying to use either the one in the wrong phase or use both?

Geoffrey Moore (00:57:42):
Well, so let's start with classic sales 101 from the nineties. Qualify the customer on budget before you make a sales call. That absolutely is critical on Main Street. I mean it's critical on the tornado, it's dumb on Main Street because obviously they have budget, they've got budgets that even has your name on it if you can go get it. But it's a big mistake in the early market or in the bowling alley because they don't have budget. So you're not going to get it. And the way you win in the early market is with a project model and the way you win in the bowling alley is with a solution model.

(00:58:17):
And the problem is if you bring a project model to the bowling alley, the problem is you won't scale because it won't be repeatable. The ecosystem won't form around you. And if you bring a solution model to the early market, it's like you're over investing in one thing. The visionary's saying, "Well, yeah, but I have so many other things I want to do." So they're going to want to take you way off your solution roadmap. So each one of these things, the market dynamics call for a very clear response. It's not hard to see the response. What people struggle with is, I have been successful with this playbook, the market has moved to the next phase, but I'm really good at the old playbook, so I want to stay with the playbook I'm good at. So that's when they get in trouble.

Lenny (00:59:05):
So I think that's extra reason to pay close attention to which phase you're in and that you're practicing the correct playbook. We've talked about AI a little bit, and I don't want to get too far down this road, but I guess is there any advice you would share for an AI startup in being in this tornado or a company looking to integrate AI? Is there anything that you've seen of just make sure you're doing this right?

Geoffrey Moore (00:59:26):
Well, it's interesting about... And particularly right now, I mean the thing that's caught everybody's imagination is generative AI. So we should be thinking about things like open AI with Microsoft and Co-pilot and those kinds of things. Well, maybe not. It depends on what... So from a customer's point of view, there's AI in the early market, there's AI in the bowling alley, there's AI in the chasm, there's AI in the tornado, and there's AI on Main Street. So I mean, I would argue if you go to Microsoft Copilot, you're on Main Street, you're not taking any risk, you're experimenting with a new thing. It's kind of cool, makes you more productive. God bless. It's kind of like just an add-on to Teams or to your whole Office 365 suite. Stuff that's in the tornado right now, I don't know. I'm trying to think about what is the use case for Gen AI? I'm not sure there is one in the tornado, but the closest I would say is Salesforce is probably close enough.

(01:00:23):
They have a sales co-pilot. They have a services copilot, right? I'm sure there marketing co-pilot. So you're going, but we're going to change our sales motion and we're going to use generative AI in line, in our performance on a very widespread, across our entire base. So all our salespeople are going to use this new tool. That would be okay. And that makes sense because the new tool... First of all, Salesforce has their own large language module. So it's not like you're going out to the open AI world and having all those issues. So you can do it and there's a very high productivity return at a modest risk, I think, and modest disruption. For the bowling alley you'd say, I don't know if this is bowling alley or early market, I'll say it's bowling alley.

(01:01:18):
So if you're Sal Khan and you have the Khan Academy and you're saying, "Look, we want to provide educational resources for the world for young people." The problem with education right now is that particularly after the pandemic, you're a teacher you used to have... When you were a teacher in say K through 12, K through eight, you have a class of 30 kids and probably 10 to 15 of them are middle of the road and some number are actually significantly ahead and some number are behind. And your job as a teacher is to kind of work with that. Well, after the pandemic, you might have five different grade levels in the same classroom, not three or six even. That's an impossible problem. But if you said, "Look, we can use Gen AI tutoring and we can tune it to each one of those sixth grade levels."

(01:02:09):
Now that's a teacher co-pilot, but that's a really specialized idea. So you go, "Well, that's amazing." And then if you wanted to go to the other side, "You say all these ad agencies say they do this really cool advertising, but I think I can do it myself with Gen AI and I'm going to sell it to other people." I mean, you can imagine a whole businesses that say we write legal opinions and we always start with Gen AI. We don't ship Gen AI, there's a human in the loop. We're going to do amazing or more images, maybe. We're going to design visual images with all the really cool stuff you could do. We're going to invent a new agency or a new kind of agency we're going to charge to..." I don't know what it would be, but the point is Gen AI I think can be absorbed by the marketplace at multiple places.

Lenny (01:03:02):
As you were talking about that lawyer example, I was thinking part of the pitch would be... And it's also a lot cheaper, but that reminds me of this other post that you wrote, The Seven Deadly Sins of Crossing the Chasm. And I wanted to chat about some of these, and one of them is discounting before you cross the chasm. Can you talk about why that's something you want to avoid?

Geoffrey Moore (01:03:20):
Back to that issue about, "Heart surgery 9.99, this Saturday only bring a coupon." I mean, the discounting model makes sense when something's commoditized or the let's even do the freemium model. The freemium model makes sense if there is no risk in adopting the offer. But chasms are based on risk bearing decisions. Basically that's the problem that creates the chasm. I have to make a risk bearing buying decision. So discounting does not reduce risk. In fact, it might even increase risk because this vendor might say, "Well, yeah, I'll give you a better price, but now I'm not going to give you the extra support or we'll have a change of scope." We'll say, "Yes, but now, that wasn't in the contract. So you have to add more." And all of that is fair game on Main Street, but it's not for crossing the chasm.

Lenny (01:04:21):
I'm going to pick on a couple of these other sims that you mentioned. One is you call the target customer mix up. Can you talk about that?

Geoffrey Moore (01:04:29):
The key to this whole Crossing the Chasm playbook is start with the world. Don't start with... Well, the question we're trying to answer is where is a small pool of trapped value that we can become our pool? So that's why we have geography, profession, use case. We're just trying to get big enough to matter, but small enough to lead is one. And then once you find that pool, the question you have to say is, "Who controls access to that? Who's going to sponsor my deal in order for me to solve that, to release that trapped value for that company?" That's your target customer. And you may not know them. Typically, my experience is you probably have worked with at least one company in the industry at some point along the line. It's kind of odd if you just had never heard of the industry and you picked that one.

(01:05:24):
Usually that's why I said, "Well, maybe I should have added that to how do you know you're ready to cross the chasm?" You should at least have a hunch. You should at least, "We've done this work, and I think this is the one." Now, you still have to go validate it and make it happen. But basically the way you would validate it is rather than try to go to a research or do something, that won't work. You say, "Well, we're going to run a marketing campaign, a modest one. I'm going to see if I can't get two more of the same use case. I'm willing to bet the next three months of my company by saying in this three months, all we're going to do is try to get two more deals that have this pattern." And that would be kind of the way you might go after it.

Lenny (01:06:10):
So I think this is worth spending a little more time on this idea of how you know you're ready to cross the chasm. So one is you find one very excited marquee customer, then you're sharing, maybe find a couple more and see if it's actually starting to roll and tip.

Geoffrey Moore (01:06:26):
No. Well, I said it wrong. So the marquee customer is probably not in your beachhead market. The marquee customer is a famous company that you have the visionary sponsor. That's the thing, because that's the company that the business press wanted to write about, or the tech press wanted to write about. People went, "Oh, you were the guys who..." You're like Hans Solo. You did whatever that run was in 15 parsecs. I can't even remember what it was. But that's your claim to fame. It's your claim to fame. But the Crossing the Chasm one is, "Oh..." And by the way the press is not interested in the crossing chasm, but the local, if there was a local press, they'd be all over it.

Lenny (01:07:08):
The Kessel Run.

Geoffrey Moore (01:07:11):
The Kessel Run. Thank you. The Kessel Run in 15 parsecs. Thank you.

Lenny (01:07:13):
That's right.

Geoffrey Moore (01:07:14):
Exactly. That was his visionary thing.

Lenny (01:07:16):
So I think the important takeaway there is there's always this advice of talk to customers, make sure they're happy, build what... Not necessarily build what they want, but make sure you're understanding what they need. But I think when your most important insights here is make sure you're talking to the right people. Which are essentially people in the next stage, essentially of the adoption life cycle. The more pragmatists.

Geoffrey Moore (01:07:35):
Yes. And they have to be the... I think you need to talk to the economic buyer as opposed to the end user, because the end user will be saying, "Oh, yeah, you're right. Oh, it's just terrible and we're oppressed." But if their boss doesn't want to sponsor it, it doesn't work.

Lenny (01:07:51):
Which is hard, hard often when you're building B2B software, you just don't make it great. And then it's like, "Oh, these people don't actually care what they're buying it. They just have all these check boxes." And then another deadly sin, which you've touched on, but I think it might be worth sharing again, is just this idea, you call it the compelling reason, confusion, where instead of thinking about your compelling reason to sell, you think about what is the pain point you're solving, compelling reason to buy.

Geoffrey Moore (01:08:16):
Obviously as an entrepreneur, you have a compelling reason to sell. But what they tend to do is in trying to cross the chasm, if they're not using this approach, they think, "Well, I haven't made my product attractive enough." So then they'd say, "Well, I'm going to make a sexier demo, or I'm going to change my deck. I'm going to write a new..." And the sales guy comes back, says, "I had a great presentation. This is the deck that we ought to be using." And that's all about compelling ways to sell, not compelling reasons to buy. And the pragmatist, by the way... And by the way, the practice will take the meeting. One of the problems with the chasm is they don't say no. They just never say yes. And they actually encourage you... "You should come back again with this too. This is really interesting." Yeah, it is really interesting.

Lenny (01:09:09):
Kind of along those lines, positioning, how important is that, and any advice on figuring out your positioning when you're doing this? I know you talk a lot about making sure you focus on their pain point, but at some point you're like, "Here's what we're doing for you."

Geoffrey Moore (01:09:22):
One of the nice things about Crossing the Chasm is the positioning formula is absolutely the same every time. It's really cool. So basically when you're thinking about positioning, you're saying, "Look, I'm going with this use case in this particular segment." So they have an incumbent vendor. The advantage of the incumbent vendor is they understand the business, but they don't have the new technology. Conversely, you have technology competitors who have as good technology, maybe a better technology than you have, but they're not committed to this domain expertise of this thing.

(01:09:56):
So your positioning is, "We are the technology leaders who have specialized and committed to solve this problem. And by the way, we have huge respect for your incumbent vendor. We're not asking you to kick them out. They just can't solve this problem. We also have respect for our peers, but frankly, they wouldn't know your problem if they wouldn't recognize it in a lineup. We are here, and by the way, if anybody comes into our quadrant, we're going to kick their ass. We are going to be beyond compare. Nobody is going to handle this problem with this kind of technology the way we will, and that's our claim of fame. That's what we're going to do, and that's our positioning."

Lenny (01:10:36):
I love that. Say you're building a product led growth company, a bottom up oriented B2B SaaS company. Is there anything that changes in your advice?

Geoffrey Moore (01:10:46):
Yeah, if you're going to use a volume ups approach like Atlassian or anything grows up from the bottom up, you're playing a different game. First of all, you're playing... Because you attract the end user before you attract the economic buyer. So you have some version of a freemium strategy, that's what you're going to do. And Yammer did this, right? And eventually got bought by Microsoft. So the way you play that game is, first of all, you probably do need some funding, not necessarily, maybe you can do this all on AWS and a credit card. But the game that is going to be, how do I create that moment of criticality? What you would do is you'd say... First of all, you need telemetry. So you need to figure out what are the people really doing with our product? And then you need to find a way to communicate with them to see if you can ferret out, is there a compelling reason to buy thing in their environment? So it'd be a different way of doing early market.

(01:11:52):
You would not have a marquee client, but to cross the chasm... You cannot cross the chasm of product-led growth, you can't because it is like saying, "Well, yeah, I'm going to cure Covid by just putting vaccines out in public places." It's like, "No, people need to learn more. No." So you'd have to do that. Where product-led growth plays really interestingly, is in the land and expand phases of the market. If you can land with a hot product, but more importantly, product-led growth, which is really good at is expand because it prompts the user to get more involved. And that's classically a Main Street play. But there's got to be no risk. That product-led growth works when basically the extended the next purchase has very low risk, and therefore you're not really dealing with chasms.

Lenny (01:12:53):
That is incredibly interesting. Interestingly, every product led growth company ends up building a sales team, 100% of them, including Atlassian, which had product led growth for a long time. And I don't know if anyone's heard this perspective on it, that if you really want to cross the gap... I imagine it happens in some form of-

Geoffrey Moore (01:13:12):
Well, and here's the thing. The reason they build a sales team eventually is they need to get enterprise deals. And obviously you need a sales team to get enterprise deals. And one of the mistakes you could make is hiring an enterprise salesperson when you're trying to cross the chasm. Enterprise salespeople are not good chasm crossers because they're used to doing horizontal coverage model. This is like no, domain expert narrow model. You want somebody that looks more like a sales engineer than a salesperson. You want somebody very diagnostic, very committed to the integrity of the problem solution framework. So it's just different.

Lenny (01:13:54):
Okay. Just a couple more questions. You had this very public exchange with Martin Casado, he's a partner at Andreessen Horowitz. And just to summarize briefly, essentially he was arguing that I think some people believe once you've crossed the chasm, life's good. It's all downhill. People are going to start pulling your product out of you. It's going to be so easy. And his argument is he doesn't see that, it's endless pain and suffering and hardships. And I know you went back and forth trying to correct this, but what's a way to think about what happens?

Geoffrey Moore (01:14:25):
So actually, Martin and I had a couple of this... By the way, his biggest point... I'll come back to your point in a second, but his biggest point is, "Jeff..." The venture community at least, and certainly Andreessen Horowitz doesn't deal with the level of granularity of Crossing the Chasm anymore. There's too much money that wants to be put to work. By the way, there's so much software already out there that the notion that your software is going to be that disruptive is increasingly improbable because you're not standing on the shoulders of giants, you're standing on the shoulders of people standing on the shoulders of people standing on the shoulders of people standing on the shoulders of giants. So he was making a bunch of those points, which I thought were pretty interesting. But his other point about, does life ever become easy? No, life never becomes easy. The problems change.

(01:15:17):
The challenge with software is... Well, there's a lot of challenges with it, but software that people use, the application software, we all have different minds. We all have different contexts. To make a product that would work, that would solve what I want and solve what you want and solve what the listener wants. I mean, the margin, no. We're going to have different expectations. So there's always... And then of course there's competition, and then there's funding, and then there's technological shifts, and just about the time it really works well, they say, "No, we got to put it... No, no, no. You put it in the data center. We got to put it in the cloud." "Oh, no, no, you got in the cloud, you got to put it in Kubernetes." "Oh, no, no, no. You don't understand. It's edge AI, it's not cloud." It just goes on and on and on. So I think if you're going to play this game, you got to be up for... Yeah, there's going to be a new headache every week.

Lenny (01:16:17):
That's exactly how I see it. I always tell founders, you shouldn't start a company unless you can't not start a company.

Geoffrey Moore (01:16:23):
Yes. By the way, why did I leave? [inaudible 01:16:28] County was a great place to be, but I had to do my own thing.

Lenny (01:16:32):
And that's a real pull. Kind of along the lines of something you just shared, maybe a final question. Is there something you've changed your mind about or something you've evolved your thinking on recently? Either from the beginning of the book or just even more recent?

Geoffrey Moore (01:16:47):
I think what I realized over time increasingly was this is a model that's really optimized for B2B markets, because it implies federated decision making around high risk buying decisions. I would say for the 20th century, that was 95% of tech. But what was so interesting about the change in the century... Because remember right at the change of the century, B2B tech went in the tank, the tech bubble just... Because everybody was afraid of the Y2K problem. So they did a whole bunch of buying up of software, and then there was a year where they think, "Well, we ate more than we could at Thanksgiving dinner. We're not interested in eating another burger here. "So the market went in the tank. By the way at that point, venture started saying, "Well, maybe we should be investing in biotech, or maybe we should doing clean tech." Venture stepped back from the table too.

(01:17:46):
But out of this, consumer computing came out of nowhere. And for my generation, it was unimaginable. The first time I heard about Google and they said, "We're going to save every search argument." I thought, "That's the dumbest thing I've ever heard in my life. They're not going to be able to afford it." But their model was, "We are rethinking this thing from the ground up. Geoffrey, you have no idea what we're doing." And boy were they right. So the point was when that came in, then consumer computing and then the iPhone hits, and then we have mobile apps. You have a world now where the B2C play can actually be the core of innovation. It used to be B2C was an afterthought. Now it's like, "No, no, no, no, B2B might be the afterthought." So it's completely different... And the whole digital transformation of the universe, and we're still living through the digital transformation 20 years in, and I don't think Crossing the Chasm is designed for that problem. So that's a different problem.

Lenny (01:18:48):
So basically, if you're building a consumer app, don't spend time studying Crossing the Chasm.

Geoffrey Moore (01:18:53):
Yeah, if you're doing B2B, this is the most reliable playbook. It's still on... People are still into this playbook 30 years in. So it's obviously... The playbook kind of works.

Lenny (01:19:05):
I said this earlier, I feel like people are just reinventing many of the things you uncovered 30 years ago. Everyone's like, "Oh yeah, target audience, really important, or finding a marque customer." So I'm really happy that we spent this time digging into many of your theories.

Geoffrey Moore (01:19:22):
Well, Lenny, thank you for being... You've been a really great prompter and questioner, so thank you very, very much.

Lenny (01:19:28):
I really, really appreciate that. Is there anything you want to leave listeners with as a final thought or piece of advice or just anything?

Geoffrey Moore (01:19:35):
Look, I don't know if anybody's reading the paper recently, but the world's not exactly nailing it right now. There's a lot of stuff going on that we could do a lot better, and software enabled technology is almost certainly at the core of any solution that scales to any world problem that matters. I think it's more important to be an entrepreneur now than maybe ever. I wouldn't make becoming a billionaire my goal. Frankly, I don't even know what a billionaire would even do with their money. I don't even how to even imagine their money. That's a thousand million dollars. It doesn't make any sense, but what does make sense? But what does make sense is to... I'm happy to get two... Do I know what to do with 10 million? Yeah. Could I do 20? Probably. Could I use a hundred? Probably not. But at some point, I want people to make yourself a great living, make yourself... But after that, have an impact. If you're gifted enough to be able to start a software company and do something original, you're a scarce resource, so don't waste it.

Lenny (01:20:42):
Amazing. I'm going to sneak it one more question along these same lines actually. Your last book is very unlike all your other books. It's called The Infinite Staircase, which is essentially a guide to living a good life and a meaningful life. Is there maybe one piece of advice you could share with folks of just how to live a better life, a more meaningful life, happier life?

Geoffrey Moore (01:21:00):
The purpose of that book was twofold. One was... So I was looking around... And this is an American sort of experience between social media and the politicians or whatever. Our ability to defend traditional values is becoming increasingly challenging. And historically, you say, "Well, religion was sort of the place where the foundation for solidifying traditional values." But in my lifetime, the counter explanation of how we got here, other than being created by a creator, this whole the Big Bang and the Darwinian model, it's becoming increasingly credible and I'm fascinated by it. So the question I had in the back of my mind is how could you take that model and still support traditional ethics?

(01:21:53):
So the first part was, well, what's the model? It turns out to explain getting from the Big Bang to Lenny and Geoffrey talking on this podcast, there's a lot of steps you've got to go through. But there's a whole thing about complexity and how complexity emerges in layers and the staircase is a series of layers, and the first two thirds of the book takes 11 stairs. That gets you from physics to theory. And it's like, really? Yeah, yeah. From a cloud of atoms to us talking about Crossing the Chasm, 11 steps, we can get you there. It's kind of fun. It's assembling the last 25 years of my reading. It's fascinating stuff. All these different topics, and I was just trying to knit it together. No original research. I was just literally just trying to get the story together.

(01:22:41):
But then the last third was, okay, that's a very reasonable narrative. It's maybe even more reasonable than religious narratives, but now how do you validate ethical action and where does it come from? So the last part was about, okay, how do you do that? How does it derive from that creation story? The secular creation stories were. So that was what was important. At the end of the day, I think the message of that book is just, you really do need to do good, but it's not because you're obeying... In this framework, it's not because you're a bang a divine creator. It's because we're mammals and mammals nurture their young, and we were gifted with unconditional love when we were born because otherwise, you and I could not be here. I mean, a 1-year-old cannot... If somebody doesn't love the hell out of a 1-year-old, they're not going to be two. So we know where we started. So come on, those values were built into us. They don't have to come from above. They can come from below, and therefore, how can you integrate them into your life? And that was where the book... Anyway.

Lenny (01:23:53):
That is a beautiful message to end on. I promised I'd get you out of here in one minute. Just to let people know, you do speaking, you do consulting, where can people find you online if they want to reach out and- [inaudible 01:24:05]

Geoffrey Moore (01:24:05):
LinkedIn. Yeah, I'm on LinkedIn and I have a blog on LinkedIn. And if these topics are interesting to you, you'd probably be interested in the blog.

Lenny (01:24:13):
And then message you on LinkedIn would be the idea?

Geoffrey Moore (01:24:15):
Exactly. Absolutely.

Lenny (01:24:16):
Easy. Geoffrey, thank you so much for being here.

Geoffrey Moore (01:24:19):
Well, thank you, Lenny. It was a pleasure.

Lenny (01:24:22):
It was my pleasure. Bye, everyone.

(01:24:26):
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