Wednesday, January 21, 2015

"The End of Trickle-Down Technology"

From Stratechery:
One normally wouldn’t expect farmer psychology and technology to have much in common, but drawing unexpected connections is the mark of truly innovative thinkers, and Geoffrey A. Moore’s Crossing the Chasm is a truly innovative book.

Building on the work of three Iowa State professors studying the spread of hybrid seed corn, Moore developed the technology adoption cycle, which breaks the market for new technologies into five parts:
  • Technology Enthusiasts love tech first and foremost, and are always looking to be on the cutting edge; they are the first to try a new product
  • Visionaries love new products as well, but they also have an eye on how those new products or technologies can be applied. They are the most price-insensitive part of the market
  • Pragmatists are a much larger segment of the market; they are open to new products, but they need evidence they will work and be worth the trouble, and they are much more price conscious
  • Conservatives are much more hesitant to accept change; they are inherently suspicious of any new technology and often only adopt new products when doing so is the only way to keep up. Because they don’t highly value technology, they aren’t willing to pay a lot
  • Skeptics are not just hesitant but actively hostile to technology
Moore was primarily concerned with “crossing the chasm” from the early market – enthusiasts and visionaries – to the mainstream market – pragmatists and conservatives, and if there is one product that clearly crossed the chasm, it is the smartphone. There are an estimated two billion smartphones in use around the world, and in developed countries penetration is reaching the 80% mark – only the skeptics are left. Surely this is a mature market.

That, though, makes the fates of the three biggest smartphone companies – Apple, Xiaomi, and Samsung – particularly interesting:
  • Apple offers by far the most expensive phones on the market, but even though the early price-insensitive market has presumably been saturated, the iPhone is actually growing
  • Samsung phones are widely available at multiple price points, making them an easy choice for low information customers on the right side of the cycle, yet the company is struggling
  • Xiaomi has very aggressive prices, but their brand proposition is very much tuned to the left side of the cycle
All of this seems to fly in the face of Moore’s assumption that late-stage adoption would be driven by price and pragmatism (or, in the case of conservatives, necessity). Price and pragmatism might as well be Samsung’s motto, while Apple is super expensive and Xiaomi is avowedly geeky.1 I suspect the problem is that while Moore has updated “Crossing the Chasm” (the third edition came out last January), the book is still a product of 1991 when nearly all technology buyers were businesses located in developed countries. Smartphones don’t have either qualification: people buy smartphones, not businesses, and developing countries are just as much a market as developed ones....MUCH MORE