Will the start-up make it? Will the product innovation succeed? Boom, or bust – which will it be?

The ‘chasm model’ developed by G.A. Moore (Crossing the Chasm) helps start-up businesses and tech innovators successfully take their product from one customer segment to the next. The model divides the target market into four customer segments: early market, early majority, late majority and laggards. The early market is divided further into innovators and early adopters. The name of the model and of Moore’s seminal book come from the chasm that exists between the early adopters and the early majority and the techniques required for successfully crossing it.

The chasm model helps entrepreneurs and innovators cross the gap to the mainstream market, which has much larger consumer bases compared to the early markets. Moore’s model is an excellent tool for mapping out successes in the critical early market stage. However, in order to get the most out of the approach and maximise success, start-ups and their investors should first nail down answers to these two key points:

1) What is the business’s Time to Reference (TTR) i.e. total time required to publish new successful customer cases?

2) What is the amount of early adopters within your target market?


Question 1: What is your Time to Reference (TTR)?

The speed at which you are able to publish new, positive customer references has a direct impact on your marketing power; your outbound marketing needs new ammunition regularly.

Remember that one or two positive customer cases aren’t enough. Your audience needs fresh and frequent content, as seeing the same customer reference pop up over and over again gets very old very quickly.

The innovators and tech enthusiasts in your early market segment will keep talking about your product no matter what, as they are naturally interested in all things new. They are not the ones who crave customer references. Customer references are for the early adopters segment; the visionaries who use your public successes to show off to their friends that something they have actually known about for ages is now starting to catch on. Having enough early adopters boast about their early knowledge to enough people will help the company cross the chasm.

Determine your TTR by adding up the total time duration of these five elements:

  1. Your full sales pipeline, i.e. from a lead to closing the deal
  2. Your manufacturing and logistics pipeline
  3. Your customer’s product deployment time i.e. them taking the product into use
  4. Your customer’s value realization time i.e. them realising the full value of their investment in your product
  5. Your content production and approval process for generating customer references.

The longer your Time to Reference is, the more investment you’ll need to recruit an adequate amount of reference-giving customers for crossing the chasm to the early majority segment. What the adequate amount of customers or investment is depends on the product and the target market.

TTR varies massively from product to product. Think about the TTR of a military grade network traffic encryption software, or the TTR of a cloud-based chat platform such as Slack.

Question 2: What is the amount of early adopters within your target market?

A TTR streamlined to perfection won’t be of much use if your early adopters segment is small. The innovators are not hugely important at this stage as they will be interested in your innovation anyway, plus the segment is small. It’s the amount of early adopters that is critical here.

According to E.M Rogers’s theory (Diffusion of Innovations), innovators generally represent around 2.5 % of the total market and early adopters around 13.5 %. This means that around 90 percent of potential sales revenue in the early market comes from the early adopters. So, if you succeed in getting them on board, you can generate enough profit to fuel your jump over the chasm to the next segment.

Start-up founders and investors: pay attention to TTR and the size of early adopter segment

As a start-up founder: When planning your go-to-market, and pitch deck, consider the Time to Reference and the size of your Visionary SOM (Serviceable Obtainable Market.) Out of these two factors, influencing your TTR is easier. Think about ways you could further streamline each element of the TTR. Gauge also the size of your early target market and pay attention to the proportion of early adopters in it when assessing your investment needs. And consider in advance what are your options if you’ve saturated the early adopters segment, but the amount of customer case references you have isn’t enough to convince your target market’s early majority?

As a start-up investor: When planning your investment, consider the start-up’s Time to Reference and the size of its Visionary SOM (Serviceable Obtainable Market.) Will the team be able to streamline the TTR? Can they present evidence they’ve already improved TTR a bit? Have they looked at the percentage of early adopters in their early target market? Will the profits generated from the early adopters be enough to take the business into its next growth stage, or will it need extra investment to convert more early adopters from several target markets before successfully crossing the chasm to the majority segments?