Lenny's Podcast: Product | Career | Growth - Geoffrey Moore on finding your beachhead, crossing the chasm, and dominating a market

Starting point is 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, right? Because we need revenue, right? It's like taking a match and running it back and forth under a log. It's not like the lock. So how do you start a fire when you started by playing a little kindling, a little crumpled up paper, and you hold the match one place until the fire starts. And that's why adjacency is so important.

Starting point is 00:00:24 If you like the fire, the piece of kindling is here, but the log is in the other room, that doesn't work. Today, my guest is Jeffrey Moore. Jeffrey is the author of maybe the most influential and important book on GoTo Market ever written, Crossing the Chasm. Even though it's sold over a million copies, still feels like people continue to reinvent many of the lessons that Jeffrey uncovered and shared in a seminal book.

Starting point is 00:00:50 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 life cycle, 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.

Starting point is 00:01:22 Jeffrey 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 Jeffrey Moore, after a short word from our sponsors. Let me tell you about Command Bar. If you're like me and most users I've built product for, you probably find those little in-product pop-ups really annoying. Want to take a tour? Check out this new feature.

Starting point is 00:01:45 And these pop-ups are becoming less and less effective, since most users don't read what they say. They just want to close them as soon as possible. But every product builder knows that users need help to learn the ins and out of your product. We use so many products every day, and we can't possibly know the ins and outs of everyone. Commandbar is an AI power toolkit for product, growth, marketing, and customer teams

Starting point is 00:02:05 to help users get the most out of your product without annoying them. They use AI to get closer to user intent, so they have search and chat products that let users describe what they're trying to do in their own words, and then see personalized results, like customer walkthroughs or actions. And they do pop-ups too, but their nudges are based on in-product behaviors, like confusion or intent classification, which makes them much less annoying and much more impactful. This works for web apps, mobile apps, and websites.

Starting point is 00:02:33 And they work with industry-leading companies like Gusto, Freshworks, HashiCorp, and Launch Darkly. Over 15 million end users have interacted with CommandBar. To try out CommandBar, you can sign up at Commandbar.com slash Lenny, and you can unlock an extra 1,000 AI responses per month for any plan. That's Commandbar.com slash Lenny. This episode is brought to you by WorkOS. If you're building a SaaS app, at some point, your customers will start asking for enterprise features,

Starting point is 00:03:05 like SAML authentication and SCIM provisioning. That's where WorkOS comes in, making it fast and painless to add enterprise features to your app. Their APIs are easy to understand so that you can ship quickly and get back to building other features, and hundreds of other companies are already powered by WorkOS, including ones you probably know,

Starting point is 00:03:24 like Versel, Webflow, and Loom. WorkOS also recently launched AuthKit, a complete authentication and user management service. It's essentially a modern alternative to Auth0, but with better pricing and more flexible APIs. Authkits design is stunning out of the box, and you can also fully customize it to fit your app's brand. It's an effortless experience from your first user all the way to your largest enterprise customer. Best of all, AuthKit is free for any developer up to 1 million users. check it out at workos.com to learn more. That's workos.com.

Starting point is 00:04:02 Jeffrey Moore, thank you so much for being here and welcome to the podcast. Well, it's nice to be here in Lenny, and thank you for having me. It's incredibly cool to have you on. You've been at the top of my wish list of guests to have on this podcast ever since I launched it. So it's kind of surreal to be chatting with you. And it almost feels like maybe this podcast has crossed the chasm now that you're on. If you'd call me earlier, I probably would have been on it with you. But anyway, we're together now.

Starting point is 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? All the books I write are about frameworks. I mean, they're conceptual models about what patterns should you be looking for as something evolves. Because in disruptive innovation, there's no, there's no history, right? I mean, you're always projecting a possible history and then seeing if you can make it come true.

Starting point is 00:05:05 So that implies there's a lot of freedom to sort of exercise the framework however you choose to. And people sometimes do that in ways that are just, they actually end up being very misleading about what's possible. So, I mean, I can remember one person early on saying, yeah, we're crossing. the Casimir, Beachhead segments the Fortune 500. I don't think maybe you're as clear on this. And to be fair, that's kind of what the function of any third-party advisor is, as to say, look, timeout, you might be looking at this through an inside-out lens. Maybe you should be looking at it from an outside-in lens.

Starting point is 00:05:46 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. So 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 their initial target market. We should stay very small and expand this beach chat idea.

Starting point is 00:06:13 But I think they still don't quite actually do this because it's like, why not go wider? So can you just talk about why that is so important and how to actually think about how to do that correctly? 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. So where does power come from in an early adopting technology world? First of all, it will 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 kind of put you on the main? map. And they go, whoa, did you know that the CIA used AWS? You know, like, holy smoke. Okay, that's great. It doesn't make a company, but it makes a story. And it lets people know,

Starting point is 00:07:05 oh, you're the guys that did the CIA project, that kind of thing. 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. And 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 it's basically it's the company power plus the ecosystem together. And 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 know, you're 40 years

Starting point is 00:07:47 in, you're still the leader because the ecosystem organized around you. 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. So we talk a lot about fish to pond ratio, right? You want it. Your first pond, your target segment should be something that the next two years, if you hit your really high growth rates, it would be 30, 40, 50 percent of the market share in that segment. That would cause partners to go, well, if we're going to serve that segment, we've got to work with these guys, right? And so that's kind of the key.

Starting point is 00:08:24 And 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. But if you did, you realize if you're running in New Hampshire, votes in Vermont do not count. And it's the same thing with crossing the chasm. You need to get three or four or five or six. you know, reputable companies in a segment to all pick you for then the rest of the segment

Starting point is 00:08:57 to go well. It's pretty obvious who the standard is. And I'll just close with one last comment. And the reason of the mechanism behind all that logic is that pragmatic people buy what they see their peers are buying. And 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 kind of goes sideways.

Starting point is 00:09:21 But if A, B, and C, if three out of four people are using the iPhone, say, oh, I guess I'm supposed to get an iPhone, that kind of thing. Awesome. I'm glad you went there because that's essentially the root of this causing 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.

Starting point is 00:09:49 Right. And 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 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 kind of how you sell the visionaries, to we need what you have, which is how you sell the pragmatists. That's kind of the shift.

Starting point is 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 pragmatist group, you're saying the pitch there is you have a pain, I will solve this pain, and it's important pain.

Starting point is 00:10:32 And 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. In fact, if there's a total, in the model of the technology adoption lifecycle that we organized this all around, there's actually four, I call them inflection points.

Starting point is 00:10:50 So the first one we call the early market, that's the one we were taught, 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 cloud to essentially fund this thing because there's no budget for you. So they've got to create the funding and then kind of drive their own. organization to go all the way to Bright.

Starting point is 00:11:21 And they're not of that many visionary customers, but there's always one or two. And the reason why it's so important to work with a marquee customer then is, 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, you know, Mercedes, somebody that people have heard. So that's number one.

Starting point is 00:11:53 And that's a project model. Even if what you sell is a product, those early markets, 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 out of it. You do whatever, because you, whatever, you've got to make them successful. So you'll do whatever it takes.

Starting point is 00:12:13 Okay. Very cool. Got my remarky client. Not scalable business. I mean, obviously. So then the second one is the Crossing the Casm playbook. That's the one that organizes around the problem. The good news is those customers are open to hearing from someone new

Starting point is 00:12:29 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 deterioratingly 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, the solution model. And as a vendor, you over-commit to their problem. From the very beginning,

Starting point is 00:12:55 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 know what the doctor to come and say, hey, can I show you a movie of the operation I just did? You know, 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 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. And again, that scales a lot more than a project business, but it only scales up to the limit of the target segment, right? So we had this bowling alley model of sort of extending,

Starting point is 00:13:34 you could go to a second segment, a third segment, if it was adjacent. So adjacent means either it's the same customer with a different use case, or it's the same use case. Or it's the same use case in a different customer base. And 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.

Starting point is 00:13:59 So that can take a company from, I don't know, tens of millions of dollars to hundreds of millions of dollars. You can, in the bowling up. And in specialized industries like computerated design or things like that, you can actually go to a billion dollars or higher. 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, Wi-Fi isn't just for financial analysts or isn't just for Wi-Fi is for everybody. And so instead of saying we believe what you believe, which we're not there anymore, and even 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.

Starting point is 00:14:41 I want what they have. And that creates what we call the tornado. And that's when people, you know, everybody, this is when you do want sales coverage and you do want to go broad and you do want to have a standard product. And basically you want to capture as much market share as you can. I mean, there's a whole playbook around doing that, which was in a book called Inside the Tornado. And then the last one, which is actually becoming much more important in this century, is Main Street. but Main Street, where products have become commoditized, services become the new place of innovation.

Starting point is 00:15:19 So, you know, we've had taxis for 100 years, but Uber is an incredibly valuable thing. And you convert the product to the service and how do you revolutionize services? And 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.

Starting point is 00:15:37 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. 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,

Starting point is 00:15:54 first of all, you have this awesome bonfire analogy that I think might be useful to share. And then along that, is there an example or an example or two you could share of just someone that did that really well of picking a really good initial target? Sure. So the bonfire. It's just, you know, the tendency when you're when you're in the chasm is I just need more customers. I should take any customer I could find, right? Because we need revenue, right? But the analogy I have is it's like taking a match and running it back and forth under a lock.

Starting point is 00:16:28 It's not the light of the law. So how do you start a fire? When you started by putting a little kindling, a little crumpled up paper, and you hold the match one place until the fire starts. And then you want to build. The bowling alley metaphor is a little bit about how, first of all, how could you win your first segment, but then increasingly, how would you go forward to win it? And that's why adjacency is so important. If you like to fire the piece of kind of kind of work, right? So I think those are kind of the key ideas. There's a lot of people that have made crossing the chasm successful. The one that we wrote about her first was this company called Document. And it's a good example. So it was a document management database back in the day. That was not, that nobody had any. He said, what would you, why would you need this?

Starting point is 00:17:17 Started with the pharmaceutical industry because pharmacists said, well, new drug approvals are 500,000 page documents and they really, really, really are 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, this is a bad situation. We need to do something. So, okay, pharma.

Starting point is 00:17:38 You got pharma. Great. Well, then what happened was the guys in petrochemicals said, well, you know, we're in the chemical industry. We're not in the pharmaceutical industry. But we have these standard operating manuals. 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 petrochemical guys got, well, the chemical guys got, then the petrochemical guys got it.

Starting point is 00:18:07 And, of course, they're oil and gas. And they say, well, you know, in addition, we have all these leases. And the leaseholds, and what's brilliant, we need this. This property is critical to our future plan. So we need a document database for the leases. 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. And so what happens is you have this thing of this expansion.

Starting point is 00:18:31 But in each case, it was into a new segment, but the use cases were close enough. So a startup founder is listening. 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? 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? So don't, don't, that's, that, because if you're not, you need to get vis, you you make yourself visible before you can make the crossing the chasm play. Let's assume you've done that.

Starting point is 00:19:12 So then when you first thought, 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 them. So normally you can't use the visionary project as your bee-check. 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? And so the key formula, and this is the formula, if there's one sort of takeaway from founders listening at this point,

Starting point is 00:19:49 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 with that visionary way, just to give you a number. Okay, so a double triple would be I went from one to four and from four to twelve. And then I did a triple double. So that would be 12 to 24, 24 to 24, 48, 48 to 98. So how would you get from one to 100 million

Starting point is 00:20:26 dollars? So you want to have a segment that says that I could get to $100 million in a five-year, That was a five-year window, right? 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-d-pong ratio thing. So you want to think about, particularly as you're starting out, if you could, if you could, if you can admit, this is a B-to-B model predominantly. If I could take the top 20 customers in this segment, meaning, well, what do I mean by a segment?

Starting point is 00:21:00 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, you know, software desires who don't talk to advertising people. And in the same profession. So salespeople don't talk to finance people, and finance people don't talk to guys in the warehouse.

Starting point is 00:21:29 So same industry, same geography, same profession, and then the compelling use case, which is the thing that, and that's the thing that's the thing that starts the fire. I mean, there's segments everywhere. And they all, 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.

Starting point is 00:21:56 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 you frankly you scare the crap out of them but they're even more afraid of the problem that they're saddled with and so that's why you can build a relationship with 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? I'm sure AAR is going to be the right reference. Here's what you need. You need a major

Starting point is 00:22:36 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. So that it's a pretty, unlike pragmatists who will not want to talk, pragmatists, and they'll have 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, how, what is my beachhead segment? And the good news about crossing the chasm, it's not expensive. I mean, 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. I mean, you're not buying Super Bowl ads here. There's no sock puppets.

Starting point is 00:23:23 You know, 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, you know, if you're an entrepreneur founder, you're probably fairly charismatic. First of all, you've convinced your spouse that you're willing to, like, work for no money with no benefits.

Starting point is 00:23:52 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 it would go. 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. Like when I think about this and look at a startup deck, if I see something like Figma's using this product or Notion or Salesforce, like clearly I'll be like, wow, okay, these really sophisticated people decided this is useful

Starting point is 00:24:22 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? It has to do

Starting point is 00:24:38 with the persona of the executive sponsor. Nine out of ten 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

Starting point is 00:24:59 that are more 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 him. But I want to, I want to jump over the top. So it's a persona-based choice is the key thing. 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 like some startups to see how people...

Starting point is 00:25:35 You know, you don't go straight there. 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. I mean, like for example, I was trying to apply this framework to Intel. And Intel said to me, Jeffrey, you do understand that, a prototype product in our industry costs about $500 million.

Starting point is 00:25:55 It's like, okay, okay, okay, okay. Maybe that's not the same model. But for most of the, I think in our world right now with digital transformation, most entrepreneurs are doing some software-led, which means you can work with a small team. And so I think what I would advise is I would do projects. I would initially, even though I'm a product, even though I have a product vision, I would start with trying to make as much projects, which would be very customer-led.

Starting point is 00:26:24 And frankly, initially, even if I have a roadmap, the customer's probably going to take me off my roadmap a bit. 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 get, they need to put in people's hands. If it's a premium play, you can do it for free. But that tends to be more of a concern.

Starting point is 00:26:47 newer play, their exceptions. There are B-to-B companies like Elassian and things that did start as a premium play, but that's not as normal. I would think more of the consultative play to do that.

Starting point is 00:26:58 But what I would try to do is I would try to get to cash flow break even on my own money with no venture capital. The only reason you need venture capital is if the, well, two things. Either, A, the technology is too expensive

Starting point is 00:27:12 and you cannot self-funded. GPUs, a bunch of that training large language modules, those kind of things. Or this thing is going to get 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.

Starting point is 00:27:35 Yeah, we had Jason Freed on recently, the CEO of Basecamp, and he made that point in many different ways of the benefits of not raising and how most BC-funded companies do not work out. And even when 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 residents 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 it.

Starting point is 00:27:59 A single use case in a single market within 18 to 24 months. Yeah. Yeah. I mean, you know, this is like another, an English major doing math, right? So be careful. But because I am an English major and, you know, but in general, because, again, I said it's not expensive. And by the way, you're not discounting. In other way, you're actually using value pricing because the problem you're solving is severe enough. The customer doesn't want to discount. The customer wants you to, it's like, you know, if you have to have heart surgery,

Starting point is 00:28:33 you don't want a coupon that says heart surgery, $9.99 this Saturday only. You know, I mean, you want to go to the Mayo Clinic or you want to go to wherever. So you don't have to discount. What you do have to do is you have to. have to make a 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 that, to the game. That's a little bit weird because if you've invented chat GPT and now you're saying,

Starting point is 00:29:07 but I am going to solve the third grade math problem, which is a real problem, but chat GPT 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. That reminds me of the way Figma started, even though it took them a long time to find product market fit and start 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 Cota team, and it was called Crypton Beckman, was very happy with Figma. And so they went to the office, they set them all up, they started using Figma.

Starting point is 00:29:44 And then on the drive home, they called them like, it doesn't work anymore. Something's broken. And they were already home. And Dylan 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's some internet issue and fixed it. And just wanted, was obsessed with making sure they were using it.

Starting point is 00:30:04 And they were also just fixing the most ridiculous bugs that were not important because they just wanted to make sure they were really happy with it. And whereas a larger company would say, look, we'll put you in our queue. and you'll be on our, you know, you'll get you. Yeah. I think this is the, 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. And so, you know, why wouldn't you do that? Yeah, and I think one of the takeaways I've had for my own research into this is that

Starting point is 00:30:33 you need to find one company that just loves you. It's not like, we hear, this is cool. It's like, I love this product. I would never want to give it up. That's kind of what I meant by that marquee. We sometimes we call it a radiating reference. It's just somebody, really, we'll talk about you when they're not even in the room. I mean, yeah, you know, very cool.

Starting point is 00:30:51 We've talked about this idea of the chasm and crossing the chasm, but it might be helpful just to explain why is, what is the idea, what is this chasm? Why does it that people fall into and why is this important? And this is 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 80s. And we had all these really successful. That's what launches and then covers of front page articles on Fortune magazine and Wall Street Journal.

Starting point is 00:31:20 And then a couple of years later, it's like, well, what happened to these guys? And so that's where the casual was like, that's what the investigation 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 visionary as a reference to get the pragmatist.

Starting point is 00:31:52 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. And so, but I am interested in talking to my peers. So, but the problem now is, which of the peers are going to go first? And we had, it was kind of like the junior high dance problem.

Starting point is 00:32:21 How do you get the party start? So, 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. I think that's such an important point that I think people don't quite always, get that that reference marquee customer needs to be a pragmatist.

Starting point is 00:32:42 It can be one of these early adopters that are just trying stuff. Yeah. And these other pragmatists need to feel that. This is my person. This is just like me. And they love it. By the way, one of the reasons that pragmatists have a certain, it's not, they just, it's not contempt for visionaries, but it's definitely where it is.

Starting point is 00:33:00 It's because often they have to clean up the messes that these guys leave behind. Because when you're a visionary, you make, you leave a lot of messes in your wake. And then the pragmatists has to come in and clean it up. So they're going, oh, that's a second. That's another mark against these people. I saw a deck of yours where you actually represent each of these stages of the life cycle and the visionary is Steve Jobs is the way you represented it. And the pragmatists are just like business people in suits sitting at a conference table.

Starting point is 00:33:24 Exactly. And there's six of them. And the key idea behind that is, yeah, 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 of, you know, it's a her. strategy, you know? And, you know, we're, but, but at some point, and by the way, we do this all the time. Everybody, every one of them, like Airbnb.

Starting point is 00:33:47 Well, I want to get an Airbnb in, you know, Portland. You know, have you ever stayed? 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. I think Uber and Airbnb is the best example of this inaction where I would not ride in a

Starting point is 00:34:04 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. I guess it's okay. Yeah. So essentially, most people were pragmatists in, I guess that makes sense. And pragmatists make up the biggest chance. 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? I love this example of the junior high dance problem, where

Starting point is 00:34:37 nobody wants to go ask the person, right? 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 of like how much do you need for these visionaries versus the next? So with a visionary, you have to have the magic ingredient working. You don't have the whole product.

Starting point is 00:35:00 In fact, your product may be buggy, but it does something. Andy Garof used to call it the 10x 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 you still cause you to not cross the chasm yet?

Starting point is 00:35:29 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 just, 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 it can be productized, I really can't afford to cross the chasm. Once you have a product that works, then you've got to say,

Starting point is 00:35:58 okay, now I've got to find a market where it can be the dominant solution. That's the time to cross the chasm. And a big part of that is obviously they have bosses, they have checklist, they have compliance people, they have IT people, they have people they have people they need to buy into this year, this meeting room with six people. They all have to be like, all right, this is the best choice. 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 they're going, where the leader, the guy who's going to actually sponsor

Starting point is 00:36:39 to make this decision as 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,

Starting point is 00:36:52 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,

Starting point is 00:37:03 Jeffrey, or we're going to find somebody who can. And so that's what gives them the energy to go against the inertial momentum of the decision-making process in their company. Let me tell you about a product called Arcade. Arcade is an interactive demo platform that enables teams to create polished, on-brand demos in minutes. Telling the story of your product is hard, and customers want you to show them your product, not just talk about it or gate it.

Starting point is 00:37:31 That's why Product 4 teams, such as it last. Cartia and Retool. Use Arcade to tell better stories within their home pages, product change logs, emails, and documentation. But don't just take my word for it. Quantum Metric, the leading digital analytics platform, created an interactive product to our library to drive more prospects. With Arcade, they achieved a 2x higher conversion rate for demos

Starting point is 00:37:53 and saw five times more engagement than videos. On top of that, they built a demo 10 times faster than before. Creating a product demo has never been easier, easier. With browser-based recording, Arcade is the no-code solution for building personalized demos at scale. Arcade offers product customization options, designer-approved editing tools, and rich insights about how your viewers engage every step of the way. Ready to tell more engaging product stories that drive results, head to Arcade.com software slash Lenny and get 50% off your first three months. That's Arcade. Dot Software slash Lenny. So April Dunford was on this podcast and she had

Starting point is 00:38:32 this book that she put out recently called The Sales Pitch. And she makes at this point that buying software or 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.

Starting point is 00:38:52 Simpler, safer. Salesforce is fine. And it sounds like that's kind of what you're describing. It's so hard. So if you're a pragmatist, the first thing is, if it has, if it has, ain't broke, don't fix it, which makes you totally different than a visionary. The visionary's like, yeah, come on, break it, come on, let's move on. They ain't broke, don't fix it.

Starting point is 00:39:10 If it is broke, who has fixed it? Is there fixed in production? Does the fix work? I want that. In other words, it's basically, to April's point, it is a risk reduction buying strategy. And by the way, you go as slowly as you're, to April's point, it is a risk reduction buying strategy. and by the way, you go as slowly as you can, gambling, but when you're under duress, you have to go faster.

Starting point is 00:39:38 So the compelling reason to buy is putting you under duress. Are there any examples of these compelling reasons to buy that come to mind that give people a sense of like, here's a really good compelling reason to buy? I don't know if it's a pitch. Well, there's a ton. Well, how about ransomware? I mean, all of a sudden, the cybersecurity thing, it's like, holy smoke, Because it used to be, well, they wouldn't attack my company.

Starting point is 00:40:00 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 crossed the chasmia? 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. can be a monotization.

Starting point is 00:40:28 So that means everybody is vulnerable. And then this, so that's one kind of compelling reason to buy it. But if you look around like kids who are struggling with school, the parent has a compelling reason to buy, anything with health care, compelling reason to buy, anything with if you're an illegal problem, you have a compelling reason to buy. So, I mean, there's always these situations where you say, okay, that's on a personal basis. on a company-wide basis, it made me things like, well, what are we supposed to do with my office space? Can I get my company to come back to the office or do I have to dump the space?

Starting point is 00:41:03 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 use it? I'm getting into some space. By the way, I got a great deal because it was a fire sale, right? Cool space. What do I put in it? Is it supposed to have offices? They have doors?

Starting point is 00:41:20 Do they not have doors? You know, how do we? So, in other words, there's a bunch of things. 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 like, no, I don't believe that. So I need help. 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 is the pitch you're making. The buy is basically the pain point. Like they need a really big pain.

Starting point is 00:41:51 Yeah. Because that's what's going to go. 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've now had 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,

Starting point is 00:42:20 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 You need to talk

Starting point is 00:42:32 We need to talk about me We don't want to talk about you And so we have this saying In The Crossing the Casm Sales book Playbook Leave it First of all

Starting point is 00:42:41 Shut the goddamn laptop Just don't open And start with And the way you start The conversation is always the same You know We're here because

Starting point is 00:42:51 We've been working with some people in your industry, and we understand there's this really serious problem around, you know, document management or around, you know, Wi-Fi access or whatever it is. And we believe that, you know, your company might have. Is that true? And what's interesting about it is you get two response, one of two responses, either, oh, are you kidding me? Okay, we have that, or are often they'll say, well, not exactly. And you go, oh, But then before you can say anything else to say, what a real problem is, so people will talk about their, they want therapy. They'll talk about their problems.

Starting point is 00:43:32 And so if you're willing to, but you've got as an entrepreneur, you've got to realize the gold at this point is problem domain knowledge. That's the thing you really want to collect. 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? Like, how do you know if you're in the early market versus in the bowling alley versus in the tornado?

Starting point is 00:44:07 Okay. So in the early market, you know you're there because, first of all, the story is the technology. So if you, 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. And so in that playbook, the first thing is just,

Starting point is 00:44:33 here are 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 in a PowerPoint tech, even though we like your dog. So that's number one. Number two, can you have proof of, can you demo, can you demo the technology? You have to be able to demo me.

Starting point is 00:44:56 And then three, can you create a vision which says what forces are going to release? And the concept that we use in venture, we call it trapped value. And the idea is, where's the trap value that this innovation would release? Because when you release trap value, the world will give you a, portion of the gain, typically 10%. It's an easy number to do math with a, as I said, I'm an English major. So if you want a billion dollar company, you better find $10 billion for the trap value that your technology could move.

Starting point is 00:45:30 Airbnb is an amazing example that, right, where they unlocked people's homes. Yeah. Right. Basically 10%. They unlocked their back seat of the car. I mean, yeah. But with the free labor force. I mean, it was like, whoa.

Starting point is 00:45:44 Okay. So really cool idea, early market fun. For the bowling alley one, then the playbook is no, where's the problem? And then you've got to take it down to what geography, what industry, what profession, what use case. And that takes, that's not just obvious. 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.

Starting point is 00:46:12 So why is this a hard problem to do? What is going on? Where is the trap value? By the way, how expensive, what is the cost of not solving this problem? And often it's a risk exposure or it could be just a gating item on your growth or potentially a churn problem. I mean, by the way, if you want to pick a compelling reason to buy, how about if you help SaaS companies deal with churn?

Starting point is 00:46:39 Do you think they would care about that? I think they might. Okay. So the point being, you're going to be and you're going to say, okay, I'm going to learn more about churn than any, 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 turn. So it's the problem domain.

Starting point is 00:46:57 And then you build, you build your go-to-market around the lead gen is, hey, do you have any of seven symptoms of, you know, fatal churn? And people that respond to that ad are pre-qualified. and then the BDR, if I'm here at Salesforce, a BDR would call you and say, just confirming you have these problems, oh yeah, RBA, and your role of the company is, and are you responsible for doing this?

Starting point is 00:47:26 Well, actually, no, it's Harry, not Mary. Maybe we should talk to Harry. Yeah, maybe you probably should talk to Harry. So then you call Harry and you get the appointment with Harry because Harry's got the problem. And then the next thing is, you know, you do a diagnostic with them, right? So we understand, we're talking to your colleagues, here's the problem,

Starting point is 00:47:48 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 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.

Starting point is 00:48:11 He's listening. He's listening. Oh, interesting. That's a good tip. Like on Zoom, would your advice there be? Just make sure the camera shows your hands. Yeah, okay, lean in. Yeah, yeah. Or you, and sometimes, I mean, you know, you couldn't do this. As you 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 don't,

Starting point is 00:48:33 there won't be necessarily complimentary to all their colleagues. And they don't want you to record that. Got it. Okay. 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? 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 want to be able, I don't want to have to

Starting point is 00:49:02 raise another. Well, so I 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, 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. So basically, the purpose of this money is to change the value state of your company. If you do anything else with that money, like 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

Starting point is 00:49:50 valuation and I as an investor lose. Or even worse, we have a down round and I lose even more. Okay, 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?

Starting point is 00:50:21 Because they have a customer base that's loyal, and they have an ecosystem of partners that bring them into new deals, and they have established their TAC and their LTV, they've kind of figured out their operating model. And it's not the biggest company in the world, it's somewhere here. We're not probably in the $10, $20 million,

Starting point is 00:50:41 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

Starting point is 00:50:54 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 of the, running on, and particularly last year was, well, 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, there'll be another round and another round, another round. And they were

Starting point is 00:51:21 not thinking about changing their valuation state. And they're not here. That's a really interesting insight, this idea that you, you know you've crossed the chasm if you can survive with that more venture funding. How do you think about that, like with the profit element of that because it feels like that's the core to be able to survive without venture funding. Is it about making enough money that you can cut and make a profit? Or is there's some other reason? All you really care about is cash flow positive. I just want to be able to keep doing what I'm doing.

Starting point is 00:51:55 So you don't care about the actual gap accounting at all. I see. So you could cut back and you can get to profitability if you need. But the idea is your cash flow positive. Yeah, 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

Starting point is 00:52:20 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. It's basically it. And then the crossing the Kazan money says, I'm going to take company existence viability off the table. I know if you're going to grow. I know if you're going to become a venture return, but I'm going to take you going out of business off the table. And then the bowling alley

Starting point is 00:52:49 stuff is, okay, I'm buying, now I'm buying a, I'm buying probably a journey from $10 million to $100 million, something like that. And I want to see, and I'm expecting a growth rate. And if I, if you, and this is probably where the rule of 40 starts to kick in. If you, if you're playing the rule, Rule 40, if 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 that cat, you're in Gen A.I. You have a large language module. Whoa.

Starting point is 00:53:23 Okay, you're worth a lot more than we thought because now the category is in the tornado, and that's a different game. Yeah, I was going to say AI is clearly an example of being in the tornado. So maybe just talk a little bit about what that is, the tornado phase, and then there's the Main Street playbook. So how do you know there's the bowling out 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 area, there's budget, but it's budget for a solution that's not you.

Starting point is 00:53:56 It's for the old way of trying to band-aid 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. I mean, it's too small a market. It's too much work.

Starting point is 00:54:21 It's too hard. Redirecting the only. I want my salespeople to go where the budget's already established. 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.

Starting point is 00:54:41 And now what happens is, and by the way, the pragmat just 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. kind of all at the same time, which is what creates the tornado.

Starting point is 00:55:01 Because if you give a department of the 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. So in the 90s, we saw a lot of tornado guerrilla play. Cisco, Intel, Oracle, you know, obviously Microsoft. I mean, these companies, Sun, they were all incredibly competitive companies.

Starting point is 00:55:38 They were all tornado plays. The client server, the internet, between client server and the internet, it just created this massive tornado kind of effect. So in that game plan is very competitive sales to grab market. 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 for my, you know, I'm not, I'm not Cisco, I'm Juniper. But for Telcos, Juniper was the Cisco of Telcos, you know,

Starting point is 00:56:18 at that time. So anyway, that's the, I don't know if you saw in the paper today, but we're at the other end of that way. HPE is bought juniper. And many 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

Starting point is 00:56:38 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. 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.

Starting point is 00:57:00 In the bowling alley phase, you want to engage with a pragmatic business person who has like 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, spin, I need AI in my product. And then Main Street is just, it's kind of the sustaining tech that every just needs to make sure continues working and doesn't deteriorate. The way I would just have last two is think of tornado as kind of the land and Main Street

Starting point is 00:57:28 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. Okay, great. Yeah, 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? Well, so let's start with classic sales 101 from the 90s,

Starting point is 00:57:46 qualify the customer on budget before you make a sales call. Okay? That absolutely is critical on Main Street. It's dumb on, I mean, it's critical on the tornado. It's dumb on Main Street because obviously they have budget. They've got budgets. It 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

Starting point is 00:58:06 because they don't have budget. And 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 house with a solution model, And the problem is if you bring a project model to the bowling alley, you know, the problem is you won't scale because it won't be repeatable. The ecosystem won't form around you. If you bring a solution model, the early market, it's like you're overinvesting in one thing.

Starting point is 00:58:30 The visionary is saying, well, yeah, but I have so many other things I want to do. And 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. And 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.

Starting point is 00:59:03 And so that's when they get in trouble. 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 like make sure you're doing this? Right.

Starting point is 00:59:25 Well, it's interesting about particularly right now. I mean, the thing that's caught everybody's imagination is generative AI, right? And so we should be thinking about things like OpenAI with Microsoft and co-pilot and those kinds of things. Well, maybe not. So from a customer's point of view, there's AI in the early market. There's AI in the Boeing 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 co-pilot, you're on Main Street.

Starting point is 00:59:54 You're not taking any risk. You're experimenting with a new thing. It's kind of cool. Makes you more productive. God bless, you know. 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 kind of thinking about what in the, what is the use?

Starting point is 01:00:14 What is the use case for JETA? I'm not sure there is one of the tornado. But the closest I would say, sales source is probably close enough. They have a sales co-pilot. They have a services co-pilot, right? I'm sure they're marketing co-pilot. So you're going, but we're going to change our sales motion

Starting point is 01:00:32 and we're going to use, we're going to use generative AI in line, in our performance, on a very wide spread 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.

Starting point is 01:00:57 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 we're in modest disruption. for the bowling alley you'd say I don't know if this is bowling alley or early early market

Starting point is 01:01:16 I'll say it's bowling alley so if you're Sal Khan and you have the Khan Academy and you're saying look we we want to provide educational resources for the world for for young people the problem with education right now is that particularly after the pandemic you're a teacher used to have

Starting point is 01:01:34 when you were a teacher in K through 12 K through 8 you have a class of 30 kids. And probably, you know, 10 to 15 of them are middle of the road. 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 great 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 six grade levels. Now, that's a teacher co-pilot, but that's a really specialized idea.

Starting point is 01:02:14 So you go, well, that's amazing. And then if you wanted to go to the other side, you say, you know, 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. We don't ship Gen.

Starting point is 01:02:37 I, there's a human in the loop, but we do, but we do, you know, we have, we're going to do amazing, or more images, maybe. We're going to, we're going to design visual images with all the really cool stuff you can do it. We're going to invite and invent a new agency or a new kind of agency. We're going to charge to, I don't

Starting point is 01:02:53 know what it would be, but the point is Gen AI, I think, can be absorbed by the marketplace at multiple places. 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 Casm. 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

Starting point is 01:03:19 you want to avoid? Back to that issue about, you know, heart surgery, 999, this Saturday only bring a coupon. I mean, the discounting model makes sense when something's commoditized or there is a 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. I mean, basically, that's the problem that creates the chasm. I have to make a risk-bearing by decision. And so discounting does not reduce risk, right?

Starting point is 01:03:55 I mean, and so, in fact, it might even increase risk because they might, 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, you know. And all of that is fair game on Main Street, but it's not for Crossing the Casin. I'm going to pick on a couple of these other sins that you mentioned. One is you call the Target Customer mix up.

Starting point is 01:04:28 Can you talk about that? The key to this whole crossing the chasm playbook is, you know, start with the world. Don't start with, well, stop. We're trying to, the question we're trying to answer is, where is a small pool of trap value that we can become our pool? So that's why we have geography, profession, use case. We're just trying to get big, you know, big enough to matter, but small enough to lead is a one. And then, once you find that pool, the question you have to say is, who controls.

Starting point is 01:04:58 controls access to that. Who's got to sponsor my deal in order for me to solve that, to release that trap 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 pick that one. 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 know, you should at least, you know, we've done this work,

Starting point is 01:05:36 and I think, 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 research or do something, that won't work. You say, well, we're going to run a marketing campaign, a modest one, but I'm going to see if I can't get two more of the same use case. and I'm willing to bet the next three months of my company by saying in this three months,

Starting point is 01:06:02 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. 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.

Starting point is 01:06:26 No, well, I see that it's not. wrong. The barquee 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 want, oh, you were the guys who, you know, you're like Han Solo. You did the, whatever that run was in 15 parsecs. I can't even remember what it was. But that's what put you, it, it's your claim to fame, right? It's your claim to fame. But the, but the crossing the chasm one is, oh, and by the way, the press is not interested in the crossing Casum,

Starting point is 01:07:01 but the local, if there was a local press, they'd be all over it. The Castle Run. The Castle Run. Thank you. The Castle run in 15 Parsecs. Thank you. Exactly. That was his vision, everything. So I think that important takeaway there is there's always this advice of talk to customers, make sure they're happy, build with, you know, not necessarily build what they want, but make sure you're understanding what they need. But I think one of your most important insights here is make sure you're talking to the right people,

Starting point is 01:07:29 which are essentially people in the next stage, essentially of the adoption lifecycle, the more pragmatists. 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. We're oppressed. But if their boss doesn't want a sponsor, it doesn't work. Yeah. Which is hard.

Starting point is 01:07:52 Hard often when you're building B2B software, you just don't make it great. And it's like, oh, these people don't actually care when they're buying it. They just have all these checkboxes. Yeah. Okay. 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. Yeah.

Starting point is 01:08:14 And we, you know, obviously it's not true. You have a compelling reason to sell. I mean, but the thing that you, that, 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. And so then they say, well, I'm going to make a sexier demo, or I'm going to, I'm going to change my deck. I'm going to write a new.

Starting point is 01:08:40 And the sales guy comes back, 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. The privateists, by the way, and by the way, the privateists will take the meaning. One of the problems with the chasm is they don't say no. They just never say yes.

Starting point is 01:09:00 And they actually encourage you. You know, you should come back and deal with this to our, this is really interesting. Yeah, it is really interesting. Kind of along those lines, positioning, how important is that and any advice on figuring out your positioning when you're doing this? And 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. One of the nice things about crossing the chasm is the positioning for, formula is absolutely the same every time. It's really cool. So basically, when you're thinking about positioning, you say, look, I'm going into a, I'm going with this use case in this, you know,

Starting point is 01:09:36 particular segment. Okay. So they have an incumbent vendor. The advantage of the incumbent vendors, they understand the business, but they don't have the new technology. Okay. Conversely, you have technology competitors who have as good technology, maybe even better technology than you have, but they're not committed to this domain expertise of this thing. 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.

Starting point is 01:10:12 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 company. 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 to think. That's what we're going to do.

Starting point is 01:10:34 And that's our positioning. I love that. Say you're building a product-led growth company, a bottom-up oriented B2B SaaS companies. Is there anything that changes in your advice? Yeah. If you're going to use a volume-ops approach, like Atlassian or like, you know, anything it kind of grows up from the bottom up, you're playing a different game.

Starting point is 01:10:55 So 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 how what you're going to do. And Yammer did this, right? And the ambition got bought by Microsoft. So the way you play that game is, first of all, you probably do need some funding. Oh, not necessarily.

Starting point is 01:11:18 Maybe you can make, you know, maybe you can do this all on the AWS and a credit card. 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 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 would be a different way of doing early market. You wouldn't have a marquee. You would not have a marquee client.

Starting point is 01:11:56 But to cross the chasm, you cannot cross the chasm of product and growth. You can't. Because it's like saying, well, yeah, I'm going to cure, 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 was really good at, is expand.

Starting point is 01:12:32 And that's because it prompts the user to, you know, get more involved. And that's classically a mainstream play. But there's got to be no risk. That product-led growth works when basically the extent. extended the next purchase has very low risk. And therefore, you're not really dealing with castoms. That is incredibly interesting. Interestingly, every product-led growth company ends up building a sales team, 100% of them,

Starting point is 01:13:00 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... 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.

Starting point is 01:13:28 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, you know, very diagnostic, very committed to the integrity of the problem solution framework. And so it's just different. Okay. Just a couple more questions.

Starting point is 01:13:56 You had this very public exchange with Martin Casato. He's a partner at Andrewson Horowitz. And just to summarize briefly, essentially he was arguing that I think some people will 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.

Starting point is 01:14:19 And I know you went back and forth trying to correct this, but what's your, what's a way to think about what happens? So actually, Martin and I had a couple of this. Well, his biggest, 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 in recent Horowitz,

Starting point is 01:14:40 doesn't deal at 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 just like, you're standing on the... You're not standing on the shoulders of giants.

Starting point is 01:14:59 You're standing 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... this life ever become easy? No, life never becomes easy. The problems change. But software, I mean, the challenge with software is, well, there's a lot of challenges with it, but software that people use, the software that we, you know, the application software, you know, we all have different

Starting point is 01:15:32 minds. We all have different contexts. To make a product that would work, that would solve what I want, solve what you want and solve what the listener wants. I mean, at the margin, no. We're going to have different expectations. And 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.

Starting point is 01:15:55 They say, no, we've got to put it. No, no, no, you put it in the data center. We've got to put in the cloud. Oh, no, no, no, you got to put it in Kubernetes. Oh, no, no, no, you don't understand. It's edge AI. It's not the cloud. I mean, it just goes on.

Starting point is 01:16:07 on and on. And so I think if you're going to play this game, you've got to kind of be up for, yeah, there's going to be a new headache every week. That's exactly how I see it. OASELF founders, you shouldn't start a company unless you can't not start a company. Yes.

Starting point is 01:16:24 And by the way, why did I leave? I was at, Regis McCannochial was a great place to be, but I had to do my own thing. Yeah, and that's a real, that's a real poll. Kind of along the lines of some of you just shared, maybe a final question, is there something you've changed your mind about or something

Starting point is 01:16:41 you've evolved your thinking on recently, either from the beginning of the book or just even more recent? 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. And so, and I would say for the 20th century, that was 95%. percent of tech. But what was so interesting about the change in the century, because remember, if right to change the century, B2B tech went in the tank. It was a tech bubble just because everybody was afraid of the year 2K problem, Y2K problem. So they did a whole bunch of buying up of software. And then there was like a year where they think, well, we, we ate more than we could

Starting point is 01:17:29 at Thanksgiving dinner. We're not eating. We're not interested in eating another burger here. So the market went in the tank. And so by the way, At that point, Venture started saying, well, maybe we should be investing in biotech or maybe we should be doing clean tech. Venture kind of stepped back from the table, too. But out of this consumer computing came out of nowhere. And it was, for my generation, it was unimaginable. The first time I heard about Google and they said, we're going to save every, we're going to save

Starting point is 01:17:58 every search argument. 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're rethinking this thing from the ground up. Jeffrey, 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.

Starting point is 01:18:21 You have a world now where the B to C play can actually be the core of innovation. It used to be B to C was an afterthought. Now it's like, no, no, no, no, B to B might be the afterthought. And so it's a completely, 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. So basically if you're building a consumer app, don't spend time studying crossing the chasm.

Starting point is 01:18:53 Yeah. If you're doing B2B, this is the most reliable play. I mean, it's still, people are still into this playbook 30 years in. So it's obviously the playbook kind of works. Yeah, and I think 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 marquee customer. So I'm really happy that we spent this time digging into many of your theories.

Starting point is 01:19:22 Well, Lenny, thank you for me. You've been a really great propter and questioner, so thank you very, very much. 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? Look, I don't 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.

Starting point is 01:19:44 And software-enabled technology is almost certainly at the core of any solution that scales to any world problem that matters. And so I think it's more important to be an entrepreneur now than maybe ever. And I wouldn't make becoming a billionaire my goal. I mean, frankly, I don't even know what a billionaire would even do with her money. I mean, I don't even imagine the money. That's $1,000 million. It's making sense.

Starting point is 01:20:13 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 $100? Probably not. But at some point, I want people to, yeah, make yourself a great living.

Starting point is 01:20:29 Make yourself a, but after that, have an impact. I mean, 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. Amazing. I'm going to sneak in 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, a happier life? The purpose of that book was twofold.

Starting point is 01:21:02 One was, so I was looking around, 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 you, the foundation for solidifying traditional values. But in my lifetime, the counter explanation of how we got here, other than being created by the creator, this whole, the Big Bang and the Darwinian model, it's becoming increasingly credible. And I'm fascinated by it.

Starting point is 01:21:43 So the question I had the back of my mind is, how could you take that model and still support traditional ethics? So the first part was, well, what's the model? It turns out to explain, getting from the Big Bang to Lenny and Jeffrey 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 to get you from physics to theory. And it's like, really?

Starting point is 01:22:16 Yeah, yeah, from a cloud of atoms to us talking by crossing the chasm. Now, 11 steps. We can get you there. So it's kind of fun. And it's just, it's assembling the last 25 years of my reading. I mean, it's just fascinating stuff in all these different topics. And I was just trying to knit it together. No original research.

Starting point is 01:22:38 I was just literally just trying to get the story together. But then the last third was, okay, that's a very reasonable narrative. It's, you know, maybe even more reasonable than religious narratives. But now, how do you validate ethical action? And where does it come from? And so the last part was about, okay, how do you do that? And so how does it tie into the, how does it derive from that creation story, the secular creation stories were.

Starting point is 01:23:07 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 obeying a divine creator. it's because we're mammals and mammals nurture their young and we were gifted with unconditional love where we were born because otherwise you and I could not be here.

Starting point is 01:23:34 I mean, a one-year-old cannot, if somebody doesn't love the hell out of a one-year-old, they're not going to be two, right? So we know where we started. So come on, those values were built into us. They didn't come, they don't have to come from above. They can come from below. And therefore, how can you integrate them into your life

Starting point is 01:23:52 and that was where the book. That is a beautiful message to end on. I promised I'd get you out of here in one minute. And so just to let people know, you do speaking, you do consulting, where can people find you online if they want to reach out and work? LinkedIn. Yeah, I'm on LinkedIn. And I have a blog on LinkedIn.

Starting point is 01:24:09 And if these topics are interesting, you'd probably be interested in the blog. And then message you on LinkedIn would be the idea. Absolutely. Easy. Jeffrey, thank you so much for being here. Well, thank you, Lenny. It's a pleasure. It was my pleasure. Bye, everyone.

Starting point is 01:24:25 Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny'spodcast.com. See you in the next episode.

Lenny's Podcast: Product | Career | Growth - Geoffrey Moore on finding your beachhead, crossing the chasm, and dominating a market

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.