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Forbes Books presents the Startup Science Podcast
with Gregory Shepherd, brought to you by
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Startupscience dot Io. Greg is an
entrepreneur who has built and sold twelve businesses.
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He's a recipient of four private equity
awards and is a featured ten X
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speaker and Forbes author. Here's Gregory
Shepherd. I'm so excited to have Jeffrey
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Moore on the podcast. Jeffrey is
a renowned author, speaker, and advisor.
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I'm one of Jeff's biggest fans.
I've read his iconic book Crossing the
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Chasm four or five times at least. I tell every founder to read it,
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and I've quoted it in dozens of
articles that I've written over the years.
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So, Jeff, I just want
to start by welcoming you to the
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podcast and thanking you for what you've
done in the startup space. Well,
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thank you for all the work you're
doing in the space too, because as
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you know, there's a ton of
work to get done and startup founders need
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a lot of help. So thank
you. Yeah, it's it's just so
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cool to be talking to you to
start out with. If you're talking to
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founders and you're talking about your book
and what you do even if somebody hasn't
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read the book Crossing the Chasm,
what would you say to a founder that's
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just getting started early stage and they're
like, Okay, I have an idea
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and I'm just starting to raise money. What do I need to know?
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First of all, I think you
know from the book it's mostly a B
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to B world that I work and
as opposed to a consumer world, because
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I think there's an entire consumer trend
that I think you would play with a
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freemium offer, and it's a different
game. And frankly it's my democratic and
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it was after my demographic. But
if they're in a in a business to
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business world, the first thing of
venture capitalist will ask is what's the disruptive
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technology or or how are you going
to be a disruptive Because you're a startup,
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nobody's going to buy you for your
good looks. You've got to be
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doing something unusual. And then where
does intersect what we ended up calling trapped
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value, which is like something in
the existing world system that frankly today just
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is holding people back. And every
system always has a place where it's holding
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people back. Every system has a
limit and how much trap value is there
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stuck under that limit, because that
sort of represents the amount of funding that
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you could presentially tap into as if
you can succeed in releasing that trap value,
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and then why is your technology going
to intersect there? And that'd be
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the first thing I'd start with.
So, people that haven't read the book
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and you talk about trapped value?
Can you unpack trapped value? For the
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people that haven't read your book?
By the way, if you haven't read
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it, you should, absolutely,
it's like one of the bibles of startups.
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But anyway, can you unpacked trapped
value? And the book's really about
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how the technology adoption life cycle unfolds, and I'm sure we're going to get
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into that, But the point is, why would you why would you even
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start it technology adoption? So if
you think about, for example, how
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much trap value was there in the
backseat of people's cars before Uber showed up,
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uh, in the spare bedrooms in
people's houses before Airbnb showed up,
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And in the in the amount of
videotape rental elate fees you were paying to
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Blockbuster before Netflix showed up. In
other words, when you look at a
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system, there's always a place where
it's it's it's it's you know you had
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to go to a bank instead of
using a mobile app, or where you
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had to go to a travel agent
instead of going to Expedia. The bank
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is the trap value in that model. And then the question is if you're
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a fintech firm or whoever, can
you release can you eliminate that trap value?
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Because when you do that, I
think an Amazon Prime is probably the
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ultimate example of how to engineer trapped
value out of a system. And essentially
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when a huge following because you've just
made life easier for people. When I
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talk about founders, I always talk
about there's two types of founders. There's
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visionaries and subject matter experts, right, and the visionary looks from the outside
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in and it's more of an outside, tops down view and you know,
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they're interested in opportunities. And subject
matter experts are usually from the inside out,
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inch wide, mile deep, and
they refine and a subject matter expert
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will define. So trap value then
if we put it into that context,
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trap value is what the subject matter
expert finds, like problem or visionary the
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actual opportunity, right, so it
is the pent up either problem or opportunity,
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yet could be realized that's what you
mean by tap trap value. Yeah,
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I'm trying to define in for people. But I think those two people
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we are talking about because in the
venture world we often fund it two headed
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beasts, one person. The vision
at least in our world, typically is
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the technology visionary. They're the ones
that says, I understand gender do AI?
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You know I've got a machine learning
well, whatever heck I've got And
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the domain expert says, well,
yeah, but I know where the trap
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value is. And so when the
guy with a peanut butter meets the guy
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with a chocolate, you can get
a recus peanut butter. Yeah. Yeah,
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but the so the trap value are
sort of like hidden gems of opportunity
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or problem solving, right that you
release. When you say release the trap
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value, you mean recognizing what it
is and then turning it into a business.
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Well, actually, probably didn't express
it quite right. It's the customer
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who's experiencing the trap value, not
the entrepreneur. Got it right. You're
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going to the customer and you're saying, in the status quo, you know,
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life is what it is, but
there's a much better way to do
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this. I mean, if you've
ever tried to get a taxi and you've
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been in New York fifteen years ago
as opposed to calling Uber. You know,
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you know about trap value because you
were experiencing a significant limit in that
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in that transportation system, which Uber
has to eliminate. We're just obliterate.
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And so that's that's the amazing thing
about entrepreneurship and technology enabled entrepreneurship. We
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can I mean, we can actually
change the electric vehicle is changing the roles.
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I mean that kind of how much
trap value is there in a gasoline
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economy and going to a gas station
every so often and going to a dealer
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as opposed to having your car download
the software and become a better car.
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In the morning. Yeah, yeah, that happened to me this morning.
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Actually, my Ribbean updated itself and
gave me a whole bunch of new features.
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I was like, yes from Fantastic
Yeah, so so, and I
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think that I I don't want to
overstate this trap value of thing, but
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I do think as an entrepreneur,
a lot of times you could be an
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entrepreneur with something cool, but remember
the world's going to pay for it,
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and so where's the world going to
get the money from you're going to get
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the money from releasing the trap.
You're helping them release trap value of their
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world. They'll pay you a portion
of that value in order to get released
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in order to in order to solve
the problem their experience. Yeah, I
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get it. I get it.
So let me ask you this. Then,
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when you think about innovation, right
overall innovation and there's a lot of
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people that have different definitions of innovation. It's kind of like choose your flavor,
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right, but you being like the
first guy to come out with something
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that I anyway, I read and
I do go through these things like constantly.
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I go through these these things one
a week or two a week,
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and yours was the first one that
really stuck with me. And I thought
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of it like a innovation book sort
of, you know about like how do
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you think about innovation and where does
it come from? And what is the
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catalyst of innovation? You know,
like trap value and stuff. Can you
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explain for the listeners a little bit
how you think about innovation? Yeah,
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And this is why I think the
technology adoption life cycle really frames the way
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I think about it, because I
think innovation actually mutates or evolves over the
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course of the of the adoption of
a technology. So at the very beginning
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what we call the early market,
where it's usually visionaries and technology enthusiasts and
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you're doing breakthrough project work. I
mean there's no ecosystem yet, there's no
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standard jet. You're right at the
cutting edge of your space, at your
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you're you're doing something that's just like
amazing. And in that world, innovation
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is it's the think different, you
know, it's it's Steve Jobs, right,
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it's like just you know, completely
you know, or Elon Musk just
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completely reject conventional approaches. You know, be you know, insanely great products.
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I mean whatever, it can't scale
in that form, but that lights
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the fire. That's like, that's
like that burst of you know, atomic
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energy or whatever it is that lights
the fire. The crossing the Chasm piece
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was the first attempt to marshal innovation
in a way that could be economically developed
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in it by mere mortals. And
so what you did there was she said,
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look, if you take a first
use case in a first market segment
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and you just concentrate your energy there
now and bring a solution, re release
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the trap value in that segment,
bring a solution. And we called it
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the whole product. I mean,
just take that problem off the table,
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and it's a problem, it's not
an opportunity. This is a situation where
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pragmatic people are saying, look,
we're struggling with something here. We've tried
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all the conventional stuff. It doesn't
work. We needed help. We don't
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know if you're the right person,
but we're willing to try almost anything because
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it's not working. And then what
you do as an entrepreneurs you say,
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I think I think our technology shaped
correctly and with the right support and the
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right attention to detail, you can
actually blow the cover off of this.
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That's what we're going to go do. And so that was the crossing the
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chasm. So that's innovation kind of
in a box, I mean, and
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try to keep it contained because if
you don't, if you say, well
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i've got three or four problems in
six or seven markets, you evaporate.
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And I would say most entrepreneurs die
in the chasm because they die from evaporation.
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They interesting too many things to too
many people. And so the chasm
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is like, just get to be
the go to player for one thing in
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one market, and you know,
you and I are old enough to remember
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the Macintosh nintash. You know,
it was kind of like just out there
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for the computer for everybody, and
it was desktop publishing actually, which is
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a ton of you market, and
it was not a market that Steve Jobs
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wanted to go into. He didn't
build a computer for corporate graphics people.
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But the fact of the matter was, you know, with the help of
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Adobe PostScript and they took that problem
off the table in a way that was
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just dramatically different, huge amount of
trap value that was back when we had
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thirty five millimeters slides. I mean, it was really, really, really
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awkward. So it's a great thing
to do and word perfect. We're perfect.
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Yes, okay, we're you and
our peeps. So maybe be in
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this call, MA say word what, don't worry about it. Don't worry
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about it. But the point is, uh, if you get so that's
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the second one. And then if
you stay with innovation, now you say,
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okay, solved problem one. Problem
too. At some point it's simply
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being kind of vertically use case specific. People Wait, they go, wait
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a minute, this is horizontal.
This is infrastructure. This is a new
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way. You know, we should
have Wi Fi everywhere, we should have
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smartphone apps, for everything. You
know, we should have cloud computing for
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everything, you know, and we
should we have electric chargers everywhere, not
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just you know, for you know, certain places. So so at that
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point, innovation becomes an innovation around
scaling. And that looks, that doesn't
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look Nope, people don't all that
innovation. But I tell you that's when
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the wars wont. And so by
the way, you're but it's it's competitive
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innovation, you're you're not. It's
actually more about you know, playing the
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market, playing the competitor, you
know, getting out there with the right
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investments, taking the right kind of
risks at the right time. It's the
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kind of stuff that you know,
the business that any business would go through
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in a high growth period. And
then the last one that is close on
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is once the technology has been adopted, then it's a question of making it
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better, better, better, never
best. And again a lot of people
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don't think that's innovation. They think
it's refined, improved, monter incremental.
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Yes it's incremental. Yes it's refining, and yes it's improving. And I
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don't call it innovation too. And
if you don't think it's innovation, try
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it, because it's not easy.
I have tried it. I do it
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all the time, me too.
But merit if you say, if you
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want to know about incremental innovation,
talk to your spouse or your partner.
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Well played, sir, well played. So if you think about I'm going
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to separate these things as objects.
Okay, So you have innovation on one
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side, you have disruption on another
side, and then you have the chasm.
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Can you kind of explain for the
listeners that how these three things play
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together to get you across the chasm
once you explain what the chasm is and
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get to the other side, so
you can actually, you know, grow
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a startup. Because what I'm interested
in talking to you about is what happens
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between the point that you where you're
like, I have an idea and you
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get to the point where you're like
raising money. Because fifty one point seven
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percent of founders fail in that first
twelve months in that period, and your
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book does a really good job explaining
why, but not everybody read it,
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right, So I'm trying to,
like, you know, draw the lines
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together. Okay, Well, let's
see what we can do here. Okay,
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So the first idea would be what
is this chasm? Then we put
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that in clarity. So the HASM
came from a looking at the technology adoption
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life cycle and the various personas that
sort of dominated at various period at various
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points in the adoption of technology.
In the very beginning, there are two
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personas that dominate. The technology enthusiast, who is going to literally know how
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your technology works, you know what? And then the visionary, who is
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going to say, I want to
make a early bet, I want to
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be the first mover, I want
to i want to put my stamp on
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this. I'm going to take this
technology and I'm going to change my world
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dramatically. And so it's kind of
a project during a time because as I
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mentioned, there's no ecosystem yet,
there's no standards, and he say so
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the visionary actually funds a megaproject,
and the goal of the entrepreneur, by
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the way, you can do this
level with no venture funding because basically the
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visionary is giving you effectively your seed
capital. Basically they're paying you for a
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project. You're taking your team and
you're putting them one hundred percent on that
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effort. And you're is to get
is to show the world what bright could
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look like. You want you want
to have a what we call a lighthouse
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reference account, and you will do
anything it takes to make this account successful.
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Now, it's you should be an
account that has some cachet. If
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you if you make Joe's Tire Shop
successful, that's not But if you make
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you know, American Express successful,
that's pretty big. So the police you're
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looking for a company that has a
little bit of brand recognition doesn't have to
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be you know, the Fortune one
hundred, but it's got to be something
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where people go, well, you
did what really? And then you that's
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the early market. But the problem
with that is most of the money in
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the world is not controlled by technology
enthusiasts or visionaries, controlled by a group
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of people we call pragmatists and primates. Say, hey, if this is
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gonna give benefits to me, if
this is going to release trap value in
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my world, I'm gonna want to
use it. But by the way,
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I don't want to use it until
it's ready for prime time. So I
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don't know if you're ready for prime
time. So what I'm to do is
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I'm gonna ask you to come in
and present to me. But you know,
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look at your demos. Want to
call customer references. But mostly I'm
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gonna talk to my peers and I'm
gonna say are you are you? Are
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you doing this thing yet? And
if they say, well, we're still
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again, now okay, I'll wait
too. That's the junior high dance problem,
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you know, that's the chasm.
That is the chasm. It's everybody
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going, hey, good, idea, sounds interesting. Probably, let's just
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let's just see. I don't want
to be a pioneer, but let's see
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how this thing plays out. Yeah, You're right, a lot of them
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because they're trying to get that that
first date right, and everybody's like,
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well, I don't know, I
don't know, and you get stuck in
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that that's happened to me so many
times. And you're like, and you
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hear founders talking about it, right, they're like, Jesus, I could
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just get somebody's brand to just adopt
this. Uh, it would take off.
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Yeah. And and the other thing
that happened out here was if you
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got one to adopt it, then
your VC's thought, well, now we're
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ready to pile on. And that
created the chasm catastrophe because just because you've
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got one or two wonderful clients,
which I would, by the way,
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that really is the being You really
do need to get one or two wonderful
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clients, so you probably you shouldn't
try to raise money. You just don't.
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But if you get one or two
wonderful clients, you're not home free.
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They're the exception. They're not the
room and it's begin they they lean
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in, whereas the other customers are
leaning back. So anyway, that was
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the chasm problem, and then the
other the last thing was so then how
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on the world would you get a
group of people who are sort of reluctant
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to dance start to dance. And
that's where that notion of don't try to
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get everybody to start at the same
time, find a smaller group of people
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that right now really are urgently in
need of doing something different, and find
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one that matches your technology. So
you know, your domain expertise and your
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technology, the trap value idea,
all that's got to that's got to all
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kind of the crosshairs have to meet
in this use case, in this market
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segment. But once it does,
then instead of saying, well I'll try
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that, but I'll still try everything
else, you take You never could take
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one hundred percent of your company which
it probably can take eighty percent of your
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company and say, for the next
six or twelve months, this is all
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we do. We're going to try
to get one customer, and then a
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second customer, and then a third
customer. Is what happens is after you
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get three or four or five customers
with the same use case in the same
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market, they talk to each other
and so why, I say to you,
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why are you doing this? To
say, hell, yes, we're
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doing it. You are yeah,
oh yeah, does it work? Yeah,
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okay, I'm in it's not you
get that tipping point saying that Malcolm
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Badwell told us about, and that
tipping point. Now all of this and
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now the VC's gone, Boy,
I want a piece of that action.
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And the VC has a word for
this. They call it traction. Yeah,
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well you've got traction. And until
you have traction, they're very reluctant
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to put money. And traction is
based getting your keystone tenants. Scratch's getting,
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I would say, getting that first
market segment underway in a way that
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it's clear that you're making really strong
and fast headway with one use case in
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one market segment, to the point
where even though you're still a small company,
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in privately ill people in that segment
who have that use case, they
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know about you. And that's the
key thing, because what really marketing is
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really about is when what do people
say when you leave the room, And
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you want people to talk about you
when you leave the room. So the
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bridge that you build that gets you
from I have an idea to the other
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side and gets you over the chasm
is based off of working to try to
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get those keystone tenants to support you
and vouch for you so that you can
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move into where you can actually start
obtaining real, real customers. So let
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me ask you your opinion on something
that I talk about. I'm curious to
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see. You can criticize it all
you want. I have ought, so
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I don't really care. And we're
here for your customers. We're not here
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for each other. Yeah. So
one of the things I tell people is
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that when you get started, you
need to create what I call a industry
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advisory board and a user advisory board. And the industry advisory board gives you
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vertical subject matter expertise, and the
user advisory board gives you customer subject out
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of expertise. And when you get
a validation from your industry advisory board.
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Then you move forward and you try
to get your user Advisory Board slash customer
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advisory board, and if they adopt, then you have validation. And that
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is sort of my way of teaching
people to do that bridge of your keystone
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tenants. You start them by kind
of explaining to them what you're doing and
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getting their input, and then they
help you create the product, or they
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think they're helping you create the product, and then you have the product of
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their dreams and they're like, yeah, this is great, and then if
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they buy it, then you know
you've built the bridge. It doesn't mean
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you've crossed the chasm, but you've
built a bridge to allow yourself to start
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walking across. Is that would you
how would you criticize that? Or how
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would you put that into your expertise? Because you're to me, you're way
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above my level of understanding this.
I can't even tell you. I'm just
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excited and be talking to you.
Well, okay, well let me let
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me try this, because I do
think you've done something important, which is
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really the end and the ang of
of high tech success is the ecosystem.
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You call it, the industry board. The people that understand the technology as
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an industry, and that tends to
be a kind of horizontal across many markets.
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And then the customer advisory board,
which is more about the user experience.
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And so when I talk about these
four stages, what I call the
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early market, the crossing the chasm
stage, I sometimes called the bowling alley,
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the tornado, and then tornado is
when everybody does it in the main
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street, when everybody's doing it's just
normal in that world. At the very
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beginning, the industry advisory board,
I think, can give you really important
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input. You can't talk to customers
yet because customers don't even know what you're
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talking about, but the industry does
know you, so you want that.
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Then when you cross the chasm and
you're going into that vertical specific domain problem
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use case one, those customers that's
a very specific set of customers, but
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they become your true north, not
the industry, because you're going to go
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into their world, not your world. And so you use their words and
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you understand their problems. But then
as you try to branch out and say,
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well, I can't just serve one
use case in one. This technology
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is much more applicable than that.
Then you go to that third one,
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which is okay, now I need
to go back to what horizonal, which
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would say, go back to my
industry advisory board about okay, how do
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we take this thing to scale?
You know, what kind of an equalisystem,
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who do I need to partner with, what platforms do I need to
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be on, et cetera, et
cetera. And then finally it's at scale,
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and now you're kind of in the
secul or third you know, fourth,
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fifth, sixth, seventh, eighth
year of your of your of your
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business. At that point, now
you kind of want to go back to
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the customer, particularly the user.
Then all the stuff we've been doing about
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user experience and customer experience and product
led growth and letting people upgrade on their
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own and self service all that stuff. So it's funny industry customer, industry
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customer as we can or cycle.
So when you look at the industry,
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I'm just going to try to wrap
it up in a way that I understand
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and maybe it will help the users. You look at the industry advisor,
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this is like somebody flying at thirty
thousand feet and they're like, I have
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this big problem that I can see
from way up here. But then when
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you're looking at the customer or slash
the user. This is your champion,
337
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this is your persona. This is
because a lot of times I tell people,
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I'm like, just because the company
wants it doesn't mean that the people
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that work at the company want it. Sometimes it puts them out of business,
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right they lose their job. And
you're talking to somebody trying to sell
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something that they don't want involved.
You know, they don't want it there
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at all. Maybe they have to
go talk to their CFO that they don't
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like, or it's a bunch of
extra work for them, or it's limiting
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their job, ors one of their
colleagues jobs or whatever. So how do
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you how do you navigate that minefield
when you get the industry is like,
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yeah, we we want this really
bad, and now you go to to
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have conversations with people that don't want
it. Right, Well, you know,
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at the end of the day,
I think you have to find a
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shared value with the people that you
want to sell to or convince. So
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look, if the thing threatens their
their job directly, then either either you
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have to have the conversation which says, look, whether you buy it from
352
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me or somebody else, this is
going to happen, and you got to
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kind of wake This is like Darwinism. You know, we're having a moment
354
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of natural selection. You need to
evolve in order to keep yourself safe and
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provide for your family, et cetera, et cetera. But it may also
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be that look, you know,
if you accept this into your routine,
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yes, you're going to have to
change and learn new behaviors, but it's
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actually going to make you more powerful
in helping your customers. So they shared
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value. There would be we want
to make you more successful with your customers,
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and we hope that you want to
be more successful with your customers.
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It turns out in companies that care
about their customers that works. If you're
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going to certain bureaucratic government agencies,
sometimes they don't care how much it's about
363
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me. It's about me. It's
always about me. Yeah, that was
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a lot of arder. That is
a log arder, absolutely. I mean,
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I could talk to you forever about
this stuff, but we have to
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take a break right now. Coming
up in the second part of my talk
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with Jeffrey Moore, the author of
Crossing the Chasm, jeff shares two of
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the biggest failure points for startup founders, the number one failure point is not
369
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picking a single target, and then
the second thing is not staying on target
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until you get until you Essentially we
call it knock over the first bowling.
371
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And once you knock over the first
bowling and the second, third, fourth,
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or that, they'll come. This
Startup Science Podcast with Gregory Shepherd is
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00:26:12.519 --> 00:26:18.640
brought to you by Startupscience dot Io. Founders can log on too startupscience dot
374
00:26:18.759 --> 00:26:25.279
io and use code Forbes to get
free access. To connect and find out
375
00:26:25.359 --> 00:26:30.599
more about greg go to Gregory sheepherd
dot com. The Startup Science Podcast is
376
00:26:30.680 --> 00:26:33.640
a production of Forbes Books.
1
00:00:01.399 --> 00:00:07.160
Forbes Books presents the Startup Science Podcast
with Gregory Shepherd, brought to you by
2
00:00:07.240 --> 00:00:13.880
Startupscience dot Io. Greg is an
entrepreneur who has built and sold twelve businesses.
3
00:00:14.320 --> 00:00:18.960
He's a recipient of four private equity
awards and is a featured ten X
4
00:00:18.960 --> 00:00:25.079
speaker and Forbes author. Here's Gregory
Shepherd. I'm so excited to have Jeffrey
5
00:00:25.079 --> 00:00:29.679
Moore on the podcast. Jeffrey is
a renowned author, speaker, and advisor.
6
00:00:30.239 --> 00:00:34.439
I'm one of Jeff's biggest fans.
I've read his iconic book Crossing the
7
00:00:34.520 --> 00:00:38.840
Chasm four or five times at least. I tell every founder to read it,
8
00:00:39.159 --> 00:00:43.119
and I've quoted it in dozens of
articles that I've written over the years.
9
00:00:44.039 --> 00:00:47.759
So, Jeff, I just want
to start by welcoming you to the
10
00:00:47.799 --> 00:00:52.359
podcast and thanking you for what you've
done in the startup space. Well,
11
00:00:52.359 --> 00:00:55.240
thank you for all the work you're
doing in the space too, because as
12
00:00:55.240 --> 00:00:58.759
you know, there's a ton of
work to get done and startup founders need
13
00:00:58.799 --> 00:01:02.119
a lot of help. So thank
you. Yeah, it's it's just so
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00:01:02.280 --> 00:01:06.640
cool to be talking to you to
start out with. If you're talking to
15
00:01:06.719 --> 00:01:11.439
founders and you're talking about your book
and what you do even if somebody hasn't
16
00:01:11.480 --> 00:01:17.799
read the book Crossing the Chasm,
what would you say to a founder that's
17
00:01:17.959 --> 00:01:22.000
just getting started early stage and they're
like, Okay, I have an idea
18
00:01:22.519 --> 00:01:25.400
and I'm just starting to raise money. What do I need to know?
19
00:01:25.920 --> 00:01:29.480
First of all, I think you
know from the book it's mostly a B
20
00:01:29.599 --> 00:01:32.719
to B world that I work and
as opposed to a consumer world, because
21
00:01:32.719 --> 00:01:36.959
I think there's an entire consumer trend
that I think you would play with a
22
00:01:37.000 --> 00:01:41.159
freemium offer, and it's a different
game. And frankly it's my democratic and
23
00:01:41.239 --> 00:01:44.680
it was after my demographic. But
if they're in a in a business to
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00:01:44.760 --> 00:01:49.400
business world, the first thing of
venture capitalist will ask is what's the disruptive
25
00:01:49.480 --> 00:01:53.599
technology or or how are you going
to be a disruptive Because you're a startup,
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00:01:53.879 --> 00:01:57.640
nobody's going to buy you for your
good looks. You've got to be
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00:01:57.640 --> 00:02:01.760
doing something unusual. And then where
does intersect what we ended up calling trapped
28
00:02:01.840 --> 00:02:07.120
value, which is like something in
the existing world system that frankly today just
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00:02:07.199 --> 00:02:12.680
is holding people back. And every
system always has a place where it's holding
30
00:02:12.680 --> 00:02:15.840
people back. Every system has a
limit and how much trap value is there
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stuck under that limit, because that
sort of represents the amount of funding that
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you could presentially tap into as if
you can succeed in releasing that trap value,
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and then why is your technology going
to intersect there? And that'd be
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the first thing I'd start with.
So, people that haven't read the book
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and you talk about trapped value?
Can you unpack trapped value? For the
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people that haven't read your book?
By the way, if you haven't read
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it, you should, absolutely,
it's like one of the bibles of startups.
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But anyway, can you unpacked trapped
value? And the book's really about
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how the technology adoption life cycle unfolds, and I'm sure we're going to get
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into that, But the point is, why would you why would you even
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start it technology adoption? So if
you think about, for example, how
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much trap value was there in the
backseat of people's cars before Uber showed up,
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uh, in the spare bedrooms in
people's houses before Airbnb showed up,
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And in the in the amount of
videotape rental elate fees you were paying to
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Blockbuster before Netflix showed up. In
other words, when you look at a
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system, there's always a place where
it's it's it's it's you know you had
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to go to a bank instead of
using a mobile app, or where you
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had to go to a travel agent
instead of going to Expedia. The bank
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is the trap value in that model. And then the question is if you're
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a fintech firm or whoever, can
you release can you eliminate that trap value?
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Because when you do that, I
think an Amazon Prime is probably the
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ultimate example of how to engineer trapped
value out of a system. And essentially
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when a huge following because you've just
made life easier for people. When I
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talk about founders, I always talk
about there's two types of founders. There's
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visionaries and subject matter experts, right, and the visionary looks from the outside
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in and it's more of an outside, tops down view and you know,
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they're interested in opportunities. And subject
matter experts are usually from the inside out,
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inch wide, mile deep, and
they refine and a subject matter expert
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will define. So trap value then
if we put it into that context,
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trap value is what the subject matter
expert finds, like problem or visionary the
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actual opportunity, right, so it
is the pent up either problem or opportunity,
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yet could be realized that's what you
mean by tap trap value. Yeah,
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I'm trying to define in for people. But I think those two people
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we are talking about because in the
venture world we often fund it two headed
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beasts, one person. The vision
at least in our world, typically is
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the technology visionary. They're the ones
that says, I understand gender do AI?
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You know I've got a machine learning
well, whatever heck I've got And
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the domain expert says, well,
yeah, but I know where the trap
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value is. And so when the
guy with a peanut butter meets the guy
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with a chocolate, you can get
a recus peanut butter. Yeah. Yeah,
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but the so the trap value are
sort of like hidden gems of opportunity
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or problem solving, right that you
release. When you say release the trap
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value, you mean recognizing what it
is and then turning it into a business.
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Well, actually, probably didn't express
it quite right. It's the customer
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who's experiencing the trap value, not
the entrepreneur. Got it right. You're
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going to the customer and you're saying, in the status quo, you know,
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life is what it is, but
there's a much better way to do
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this. I mean, if you've
ever tried to get a taxi and you've
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been in New York fifteen years ago
as opposed to calling Uber. You know,
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you know about trap value because you
were experiencing a significant limit in that
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in that transportation system, which Uber
has to eliminate. We're just obliterate.
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And so that's that's the amazing thing
about entrepreneurship and technology enabled entrepreneurship. We
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can I mean, we can actually
change the electric vehicle is changing the roles.
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I mean that kind of how much
trap value is there in a gasoline
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economy and going to a gas station
every so often and going to a dealer
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as opposed to having your car download
the software and become a better car.
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In the morning. Yeah, yeah, that happened to me this morning.
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Actually, my Ribbean updated itself and
gave me a whole bunch of new features.
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I was like, yes from Fantastic
Yeah, so so, and I
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think that I I don't want to
overstate this trap value of thing, but
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I do think as an entrepreneur,
a lot of times you could be an
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entrepreneur with something cool, but remember
the world's going to pay for it,
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and so where's the world going to
get the money from you're going to get
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the money from releasing the trap.
You're helping them release trap value of their
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world. They'll pay you a portion
of that value in order to get released
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in order to in order to solve
the problem their experience. Yeah, I
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get it. I get it.
So let me ask you this. Then,
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when you think about innovation, right
overall innovation and there's a lot of
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people that have different definitions of innovation. It's kind of like choose your flavor,
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right, but you being like the
first guy to come out with something
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that I anyway, I read and
I do go through these things like constantly.
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I go through these these things one
a week or two a week,
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and yours was the first one that
really stuck with me. And I thought
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of it like a innovation book sort
of, you know about like how do
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you think about innovation and where does
it come from? And what is the
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catalyst of innovation? You know,
like trap value and stuff. Can you
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explain for the listeners a little bit
how you think about innovation? Yeah,
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And this is why I think the
technology adoption life cycle really frames the way
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I think about it, because I
think innovation actually mutates or evolves over the
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course of the of the adoption of
a technology. So at the very beginning
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what we call the early market,
where it's usually visionaries and technology enthusiasts and
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you're doing breakthrough project work. I
mean there's no ecosystem yet, there's no
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standard jet. You're right at the
cutting edge of your space, at your
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you're you're doing something that's just like
amazing. And in that world, innovation
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is it's the think different, you
know, it's it's Steve Jobs, right,
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it's like just you know, completely
you know, or Elon Musk just
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completely reject conventional approaches. You know, be you know, insanely great products.
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I mean whatever, it can't scale
in that form, but that lights
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the fire. That's like, that's
like that burst of you know, atomic
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energy or whatever it is that lights
the fire. The crossing the Chasm piece
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was the first attempt to marshal innovation
in a way that could be economically developed
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in it by mere mortals. And
so what you did there was she said,
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look, if you take a first
use case in a first market segment
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and you just concentrate your energy there
now and bring a solution, re release
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the trap value in that segment,
bring a solution. And we called it
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the whole product. I mean,
just take that problem off the table,
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and it's a problem, it's not
an opportunity. This is a situation where
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pragmatic people are saying, look,
we're struggling with something here. We've tried
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all the conventional stuff. It doesn't
work. We needed help. We don't
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know if you're the right person,
but we're willing to try almost anything because
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it's not working. And then what
you do as an entrepreneurs you say,
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I think I think our technology shaped
correctly and with the right support and the
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right attention to detail, you can
actually blow the cover off of this.
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That's what we're going to go do. And so that was the crossing the
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chasm. So that's innovation kind of
in a box, I mean, and
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try to keep it contained because if
you don't, if you say, well
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i've got three or four problems in
six or seven markets, you evaporate.
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And I would say most entrepreneurs die
in the chasm because they die from evaporation.
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They interesting too many things to too
many people. And so the chasm
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is like, just get to be
the go to player for one thing in
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one market, and you know,
you and I are old enough to remember
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the Macintosh nintash. You know,
it was kind of like just out there
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for the computer for everybody, and
it was desktop publishing actually, which is
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a ton of you market, and
it was not a market that Steve Jobs
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wanted to go into. He didn't
build a computer for corporate graphics people.
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But the fact of the matter was, you know, with the help of
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Adobe PostScript and they took that problem
off the table in a way that was
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just dramatically different, huge amount of
trap value that was back when we had
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thirty five millimeters slides. I mean, it was really, really, really
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awkward. So it's a great thing
to do and word perfect. We're perfect.
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Yes, okay, we're you and
our peeps. So maybe be in
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this call, MA say word what, don't worry about it. Don't worry
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about it. But the point is, uh, if you get so that's
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the second one. And then if
you stay with innovation, now you say,
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okay, solved problem one. Problem
too. At some point it's simply
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being kind of vertically use case specific. People Wait, they go, wait
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a minute, this is horizontal.
This is infrastructure. This is a new
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way. You know, we should
have Wi Fi everywhere, we should have
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smartphone apps, for everything. You
know, we should have cloud computing for
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everything, you know, and we
should we have electric chargers everywhere, not
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just you know, for you know, certain places. So so at that
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point, innovation becomes an innovation around
scaling. And that looks, that doesn't
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look Nope, people don't all that
innovation. But I tell you that's when
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the wars wont. And so by
the way, you're but it's it's competitive
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innovation, you're you're not. It's
actually more about you know, playing the
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market, playing the competitor, you
know, getting out there with the right
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investments, taking the right kind of
risks at the right time. It's the
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kind of stuff that you know,
the business that any business would go through
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in a high growth period. And
then the last one that is close on
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is once the technology has been adopted, then it's a question of making it
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better, better, better, never
best. And again a lot of people
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don't think that's innovation. They think
it's refined, improved, monter incremental.
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Yes it's incremental. Yes it's refining, and yes it's improving. And I
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don't call it innovation too. And
if you don't think it's innovation, try
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it, because it's not easy.
I have tried it. I do it
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all the time, me too.
But merit if you say, if you
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want to know about incremental innovation,
talk to your spouse or your partner.
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Well played, sir, well played. So if you think about I'm going
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to separate these things as objects.
Okay, So you have innovation on one
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side, you have disruption on another
side, and then you have the chasm.
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Can you kind of explain for the
listeners that how these three things play
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together to get you across the chasm
once you explain what the chasm is and
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get to the other side, so
you can actually, you know, grow
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a startup. Because what I'm interested
in talking to you about is what happens
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between the point that you where you're
like, I have an idea and you
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get to the point where you're like
raising money. Because fifty one point seven
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percent of founders fail in that first
twelve months in that period, and your
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book does a really good job explaining
why, but not everybody read it,
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right, So I'm trying to,
like, you know, draw the lines
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together. Okay, Well, let's
see what we can do here. Okay,
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So the first idea would be what
is this chasm? Then we put
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that in clarity. So the HASM
came from a looking at the technology adoption
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life cycle and the various personas that
sort of dominated at various period at various
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points in the adoption of technology.
In the very beginning, there are two
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personas that dominate. The technology enthusiast, who is going to literally know how
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your technology works, you know what? And then the visionary, who is
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going to say, I want to
make a early bet, I want to
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be the first mover, I want
to i want to put my stamp on
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this. I'm going to take this
technology and I'm going to change my world
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dramatically. And so it's kind of
a project during a time because as I
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mentioned, there's no ecosystem yet,
there's no standards, and he say so
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the visionary actually funds a megaproject,
and the goal of the entrepreneur, by
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the way, you can do this
level with no venture funding because basically the
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visionary is giving you effectively your seed
capital. Basically they're paying you for a
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project. You're taking your team and
you're putting them one hundred percent on that
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effort. And you're is to get
is to show the world what bright could
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look like. You want you want
to have a what we call a lighthouse
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reference account, and you will do
anything it takes to make this account successful.
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Now, it's you should be an
account that has some cachet. If
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you if you make Joe's Tire Shop
successful, that's not But if you make
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you know, American Express successful,
that's pretty big. So the police you're
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looking for a company that has a
little bit of brand recognition doesn't have to
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be you know, the Fortune one
hundred, but it's got to be something
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where people go, well, you
did what really? And then you that's
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the early market. But the problem
with that is most of the money in
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the world is not controlled by technology
enthusiasts or visionaries, controlled by a group
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of people we call pragmatists and primates. Say, hey, if this is
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gonna give benefits to me, if
this is going to release trap value in
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my world, I'm gonna want to
use it. But by the way,
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I don't want to use it until
it's ready for prime time. So I
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don't know if you're ready for prime
time. So what I'm to do is
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I'm gonna ask you to come in
and present to me. But you know,
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look at your demos. Want to
call customer references. But mostly I'm
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gonna talk to my peers and I'm
gonna say are you are you? Are
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you doing this thing yet? And
if they say, well, we're still
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again, now okay, I'll wait
too. That's the junior high dance problem,
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you know, that's the chasm.
That is the chasm. It's everybody
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going, hey, good, idea, sounds interesting. Probably, let's just
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let's just see. I don't want
to be a pioneer, but let's see
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how this thing plays out. Yeah, You're right, a lot of them
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because they're trying to get that that
first date right, and everybody's like,
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well, I don't know, I
don't know, and you get stuck in
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that that's happened to me so many
times. And you're like, and you
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hear founders talking about it, right, they're like, Jesus, I could
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just get somebody's brand to just adopt
this. Uh, it would take off.
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Yeah. And and the other thing
that happened out here was if you
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got one to adopt it, then
your VC's thought, well, now we're
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ready to pile on. And that
created the chasm catastrophe because just because you've
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got one or two wonderful clients,
which I would, by the way,
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that really is the being You really
do need to get one or two wonderful
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clients, so you probably you shouldn't
try to raise money. You just don't.
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But if you get one or two
wonderful clients, you're not home free.
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They're the exception. They're not the
room and it's begin they they lean
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in, whereas the other customers are
leaning back. So anyway, that was
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the chasm problem, and then the
other the last thing was so then how
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on the world would you get a
group of people who are sort of reluctant
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to dance start to dance. And
that's where that notion of don't try to
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get everybody to start at the same
time, find a smaller group of people
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that right now really are urgently in
need of doing something different, and find
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one that matches your technology. So
you know, your domain expertise and your
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technology, the trap value idea,
all that's got to that's got to all
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kind of the crosshairs have to meet
in this use case, in this market
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segment. But once it does,
then instead of saying, well I'll try
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that, but I'll still try everything
else, you take You never could take
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one hundred percent of your company which
it probably can take eighty percent of your
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company and say, for the next
six or twelve months, this is all
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we do. We're going to try
to get one customer, and then a
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second customer, and then a third
customer. Is what happens is after you
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get three or four or five customers
with the same use case in the same
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market, they talk to each other
and so why, I say to you,
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why are you doing this? To
say, hell, yes, we're
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doing it. You are yeah,
oh yeah, does it work? Yeah,
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okay, I'm in it's not you
get that tipping point saying that Malcolm
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Badwell told us about, and that
tipping point. Now all of this and
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now the VC's gone, Boy,
I want a piece of that action.
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And the VC has a word for
this. They call it traction. Yeah,
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well you've got traction. And until
you have traction, they're very reluctant
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to put money. And traction is
based getting your keystone tenants. Scratch's getting,
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I would say, getting that first
market segment underway in a way that
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it's clear that you're making really strong
and fast headway with one use case in
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one market segment, to the point
where even though you're still a small company,
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in privately ill people in that segment
who have that use case, they
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know about you. And that's the
key thing, because what really marketing is
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really about is when what do people
say when you leave the room, And
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you want people to talk about you
when you leave the room. So the
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bridge that you build that gets you
from I have an idea to the other
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side and gets you over the chasm
is based off of working to try to
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get those keystone tenants to support you
and vouch for you so that you can
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move into where you can actually start
obtaining real, real customers. So let
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me ask you your opinion on something
that I talk about. I'm curious to
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see. You can criticize it all
you want. I have ought, so
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I don't really care. And we're
here for your customers. We're not here
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for each other. Yeah. So
one of the things I tell people is
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that when you get started, you
need to create what I call a industry
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advisory board and a user advisory board. And the industry advisory board gives you
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vertical subject matter expertise, and the
user advisory board gives you customer subject out
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of expertise. And when you get
a validation from your industry advisory board.
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Then you move forward and you try
to get your user Advisory Board slash customer
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advisory board, and if they adopt, then you have validation. And that
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is sort of my way of teaching
people to do that bridge of your keystone
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tenants. You start them by kind
of explaining to them what you're doing and
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getting their input, and then they
help you create the product, or they
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think they're helping you create the product, and then you have the product of
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their dreams and they're like, yeah, this is great, and then if
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they buy it, then you know
you've built the bridge. It doesn't mean
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you've crossed the chasm, but you've
built a bridge to allow yourself to start
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walking across. Is that would you
how would you criticize that? Or how
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would you put that into your expertise? Because you're to me, you're way
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above my level of understanding this.
I can't even tell you. I'm just
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excited and be talking to you.
Well, okay, well let me let
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me try this, because I do
think you've done something important, which is
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really the end and the ang of
of high tech success is the ecosystem.
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You call it, the industry board. The people that understand the technology as
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an industry, and that tends to
be a kind of horizontal across many markets.
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And then the customer advisory board,
which is more about the user experience.
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And so when I talk about these
four stages, what I call the
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early market, the crossing the chasm
stage, I sometimes called the bowling alley,
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the tornado, and then tornado is
when everybody does it in the main
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street, when everybody's doing it's just
normal in that world. At the very
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beginning, the industry advisory board,
I think, can give you really important
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input. You can't talk to customers
yet because customers don't even know what you're
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talking about, but the industry does
know you, so you want that.
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Then when you cross the chasm and
you're going into that vertical specific domain problem
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use case one, those customers that's
a very specific set of customers, but
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they become your true north, not
the industry, because you're going to go
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into their world, not your world. And so you use their words and
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you understand their problems. But then
as you try to branch out and say,
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well, I can't just serve one
use case in one. This technology
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is much more applicable than that.
Then you go to that third one,
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which is okay, now I need
to go back to what horizonal, which
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would say, go back to my
industry advisory board about okay, how do
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we take this thing to scale?
You know, what kind of an equalisystem,
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who do I need to partner with, what platforms do I need to
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be on, et cetera, et
cetera. And then finally it's at scale,
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and now you're kind of in the
secul or third you know, fourth,
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fifth, sixth, seventh, eighth
year of your of your of your
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business. At that point, now
you kind of want to go back to
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the customer, particularly the user.
Then all the stuff we've been doing about
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user experience and customer experience and product
led growth and letting people upgrade on their
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own and self service all that stuff. So it's funny industry customer, industry
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customer as we can or cycle.
So when you look at the industry,
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I'm just going to try to wrap
it up in a way that I understand
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and maybe it will help the users. You look at the industry advisor,
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this is like somebody flying at thirty
thousand feet and they're like, I have
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this big problem that I can see
from way up here. But then when
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you're looking at the customer or slash
the user. This is your champion,
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this is your persona. This is
because a lot of times I tell people,
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I'm like, just because the company
wants it doesn't mean that the people
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that work at the company want it. Sometimes it puts them out of business,
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right they lose their job. And
you're talking to somebody trying to sell
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something that they don't want involved.
You know, they don't want it there
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at all. Maybe they have to
go talk to their CFO that they don't
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like, or it's a bunch of
extra work for them, or it's limiting
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their job, ors one of their
colleagues jobs or whatever. So how do
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you how do you navigate that minefield
when you get the industry is like,
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yeah, we we want this really
bad, and now you go to to
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have conversations with people that don't want
it. Right, Well, you know,
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at the end of the day,
I think you have to find a
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shared value with the people that you
want to sell to or convince. So
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look, if the thing threatens their
their job directly, then either either you
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have to have the conversation which says, look, whether you buy it from
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me or somebody else, this is
going to happen, and you got to
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kind of wake This is like Darwinism. You know, we're having a moment
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of natural selection. You need to
evolve in order to keep yourself safe and
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provide for your family, et cetera, et cetera. But it may also
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be that look, you know,
if you accept this into your routine,
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yes, you're going to have to
change and learn new behaviors, but it's
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actually going to make you more powerful
in helping your customers. So they shared
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value. There would be we want
to make you more successful with your customers,
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and we hope that you want to
be more successful with your customers.
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It turns out in companies that care
about their customers that works. If you're
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going to certain bureaucratic government agencies,
sometimes they don't care how much it's about
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me. It's about me. It's
always about me. Yeah, that was
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a lot of arder. That is
a log arder, absolutely. I mean,
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I could talk to you forever about
this stuff, but we have to
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take a break right now. Coming
up in the second part of my talk
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with Jeffrey Moore, the author of
Crossing the Chasm, jeff shares two of
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the biggest failure points for startup founders, the number one failure point is not
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picking a single target, and then
the second thing is not staying on target
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until you get until you Essentially we
call it knock over the first bowling.
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And once you knock over the first
bowling and the second, third, fourth,
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or that, they'll come. This
Startup Science Podcast with Gregory Shepherd is
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00:26:12.519 --> 00:26:18.640
brought to you by Startupscience dot Io. Founders can log on too startupscience dot
374
00:26:18.759 --> 00:26:25.279
io and use code Forbes to get
free access. To connect and find out
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00:26:25.359 --> 00:26:30.599
more about greg go to Gregory sheepherd
dot com. The Startup Science Podcast is
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00:26:30.680 --> 00:26:33.640
a production of Forbes Books.
