Crossing the Chasm: 1. Innovators, 2. Early Adopters, 3. Early Majority, 4. Late Majority
Crossing the Chasm – big diff between stage-2 & stage-3.
Execution Life Cycle
Birth – psIu – highly innovative
Need to be very conscious – cost effective : “just enough” for costs
Too much spending on early stage is bad
Making large investments before concept proven / Presupposing demand / arrogant / scaling up too early.
If too much system too early, will dampen the ability to innovate.
Pilot – Psiu – get verifiable result for customers
Symbol to early growth / pilot phase – got the product right & start to make sales (and want to buy “more”).
What could be done -> What need to be done.
Move fast!
Find the PMF!
Support its early adopter customers, even though there’s no systems yet.
Invest heavily into infra/systems/staff too heavily before true PMF presuppose demand and wrongly assumes the PMF is perfect. Heavier ships are more difficult to pivot.
Still cost-conscious.
Begin to scale to early majority – PSiu
Scale via System.
Make sure system not too much bureaucracy / overhead.
Mission Critical mistakes in this stage:
Wrong people / Wrong position / Give up too much or not enough control
牢记使命，勿忘(entrepreneurial)初心
Fully scale to early majority – PSIu – avoid commodity trap
Scale to late majority – PSIU
Life Cycle Strategy
Four key metrics: 1. Market Growth Rate, 2. Competition, 3. Pricing Pressure, 4. Net Cash Flow
Quadrant four (Phase-4) is the “commodity trap” where company cannot charge the premium (race to the bottom) – should be avoided as long as you can.
Financing / Funding
Three Strategic Follies
1. Face Plant
Solving a problem market already considered solved!
i.e. yet another personal financial management software that can’t compete with quicken / mint etc.
2. Flame out
Try to scale prematurely – Phase1 to Phase3 directly
3. The lost opportunity
Didn’t scale fast enough before market window closes, phase2 -> phase4 directly (commodity trapped)
Market Segment
Startup shall ignore the late majority clients, and only find innovative / trail-blazer clients. Do NOT ask a dinosaur (industry incumbent) “what do they need”.
Example: Square initially target user (business owner) who has smart phone but cannot accept credit card payments.
Custom-driven development (sell, design, build) – masters phase 1 & 2 as well.
Execute Fast – Momentum
Newton’s Three Laws
1. Inertia (Organization’s Inertia)
2. F = M * A. Mass is Organization’s resistance to change.
Mass – example: In US, 300M people with different background & needs, resistance to change very high. “Never waste a good crisis” – when crisis, resistance is much lower, easier to make things happen.
3. Every action has equal & opposite reaction. When scaling fast, systems & teams are falling apart which need active management (this is the opposite reaction).
Gathering the mass – mass in the organization is scattered throughout, need to “gather the mass” first before enact changes.
Four components
1. Vision & Value
Shared vision where the organization is going (ship’s destination)
Great leader create shared vision / value – i.e. Israel & Palestine hard to negotiate because vision / value so different
Starters – train for long-term career dev
Bench – train for task proficiency
Free Agents (Mercenaries) – don’t put in critical/leadership positions, use sparingly in tasks that require specialized skills. Short term compensation – i.e. bonus.
Waivers – throw away
2. Structure
Structure shall follow functionality
Misalignment
Inertia
Rule #1 – when strategy change, also change the structure
Rule #2 – don’t let function focused on efficiency in charge of functions focused on effectiveness
Rule #3 – don’t allow functions that focus on short-range results control functions that focus on long-range dev
Rule #4 – balance autonomy / control
Closer to customer (i.e. Sales) have more autonomy, centralized like legal have more control
Rule #5 – right person in the right role (p/s/i/u style of person)
3. Decision-Making & Implementation Process
Rhythm should be “Slow-quick”. Slow to make good decision, quick to implement.
When team tries to go quick-quick, actually it will be quick-slow.
Rapid fire decision making isn’t good (Fire-Ready-Aim)
Authority (Crown)
Example someone doing a project, need to purchase something, VP of finance cannot say “Ok, here’s your check” – VP of financing needs authority from someone else first.
Power (Lever – Help or Hinder)
Influence (Church)
For a big task, you need authority+power+influence coaleased to push forward
Unfreezing the mental inertia (clear the context to fully focus on the decision)
