Inside the Tornado

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Overview

"The chasm is where high-tech fortunes are lost... the tornado is where they are made."— Steve Jobs, Founder & CEO, Next Computer, Inc.
  • Now, in this fascinating sequel, Moore shows how to capitalize on the profit-rich niches and hyper-growth markets beyond the chasm. Continuing to chart the impact of the Technology Adoption Life Cycle, he explores its effects not just on marketing but on overall business planning, especially strategic partnerships, competitive advantage, ...
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1995 Hard cover New in fine dust jacket. Sewn binding. Cloth over boards. With dust jacket. 256 p. Contains: Illustrations. Audience: General/trade. NO PREVIOUS OWNER'S NAME

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1995 Hardcover First Edition; Twenty-Third Printing New in New dust jacket 0887307655. Book and DJ are New, first edition so stated, 23rd printing, Laurie 23, ; 9.30 X 6.30 X 1 ... inches; 256 pages. Read more Show Less

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Overview

"The chasm is where high-tech fortunes are lost... the tornado is where they are made."— Steve Jobs, Founder & CEO, Next Computer, Inc.
  • Now, in this fascinating sequel, Moore shows how to capitalize on the profit-rich niches and hyper-growth markets beyond the chasm. Continuing to chart the impact of the Technology Adoption Life Cycle, he explores its effects not just on marketing but on overall business planning, especially strategic partnerships, competitive advantage, positioning and organizational leadership.
  • Moore's most startling lesson is: "As markets move from stage to stage in the Life Cycle, the winning strategy does not just change — it actually reverses the prior strategy. The very skills that you've just perfected become your biggest liabilities; and if you can't put them aside to acquire new ones, then you're in for tough times."
  • As challenging as this lesson is to apply, Moore leads the way. Using actual examples of cutting-edge firms, he applies the Life Cycle model to all aspects of managing a market-focused business strategy, including how to manage people effectively through each phase of the cycle. There are significant management implications: Chasm-crossers who love the customer intimacy of niches may rebel against the depersonalizing power of the tornado; tornado managers who relish the gales of hyper-growth may resist the inevitable return to the niche, in the guise of mass customization, once the rush to the new paradigm subsides.
  • All industries relying on technology — not just computer hardware, software and telecommunications, but entertainment, publishing, broadcasting, banking, insurance, health care, aerospace, defense, utilities, pharmaceuticals and retail — must master Moore's lessons to see the year 2000. If you are marketing technology-based products or managing the people who do, then you will find yourself Inside the Tornado.
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Editorial Reviews

Wired
A must-read for start-up cowboys with delusions of Pixar grandeur, as well as aw-just-one-more-button developers and their reengineer-till-ya-puke overlords in the nice offices upstairs.
Steve Jobs
The chasm is where many high-tech fortunes have been lost...the Tornado is where many have been made.
Library Journal
Moore (Crossing the Chasm, HarperBusiness, 1991) claims that marketing technology-based products is different from marketing standard consumer products. He explores marketing stages through a discussion of the "Technology Adoption Life Cycle," which follows a product from birth to death and suggests a course of action for each phase. He also charts power distribution within a company and the marketplace as these high-tech companies engage in traditional business strategies (i.e., strategic partnerships, competitive advantage, positioning, and organizational leadership). Moore provides examples from high-tech firms such as Hewlett-Packard, Apple, and Pyramid. Although other recent books address technology marketing (see TechnoBrands, AMACOM, 1991), none addresses life cycle issues. Written for those with a prior knowledge of marketing theory, this book is recommended for business libraries.-Kathy Shimpock-Vieweg, O'Connor-Cavanagh Lib., Phoenix, Ariz.
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Product Details

  • ISBN-13: 9780887307652
  • Publisher: HarperCollins Publishers
  • Publication date: 10/5/1995
  • Edition description: 1st ed
  • Edition number: 1
  • Pages: 256
  • Product dimensions: 6.12 (w) x 9.25 (h) x 0.89 (d)

Read an Excerpt

The Development of Hypergrowth Markets

Chapter One The Land of Oz

At the beginning of The Wizard of Oz, Dorothy and Toto are caught up inside a tornado, swept away from their mundane world of Kansas, and deposited into the marvelous land of Oz. This miraculous form of ascension is also reenacted from time to time on our own public stock exchanges.

Consider the following:

  • Compaq Computers, which in recent years has overtaken IBM as the leader of the Intel-based PC market, grew from zero to $1 billion in less than five years.
  • Ditto for Conner Peripherals, the disk-drive storage company who slipstreamed Compaq's hypergrowth by supplying it, as well as many of its competitors, with low-cost Winchester hard drives.
  • Over a six-year period from 1977 to 1982, Atari's home game business doubled in size every year, driving the company from $50 million to $1.6 billion in revenues.
  • In successive years during the mid-1980s, Mentor Graphics grew from $2 million to $25 million to $85 million to $135 million to $200 million.
  • For the entire decade of the 1980s, Oracle Corporation grew at an annually compounded rate of 100 percent.

    *More recently, Cisco Systems and Bay Networks have appeared out of nowhere to become billion-dollar companies—leaders, respectively, in the network router and the network hub markets. We didn't even know what routers and hubs were until just a few years ago.

  • In the seven years prior to 1992, Sony shipped their first ten million CD-ROM players. The next ten million were shipped over the following sevenmonths, and the ten million after that in the following five months.
  • Hewlett-Packard's PC printer business, a $10 billion enterprise in 1994, shipped its first product a scant ten years earlier.
  • And finally, Microsoft in less than fifteen years has grown from a boutique language software company focused on BASIC to the richest and most powerful software company in the world.

Such are the market forces generated by discontinuous innovations, or what more recently have been termed paradigm shifts. These shifts begin with the appearance of a new category of product that incorporates breakthrough technology enabling unprecedented benefits. It is immediately proposed as the natural replacement for a whole class of infrastructure, winning early converts and enthusiastic predictions of a new world order. But the market is a conservative institution, and it presses back against the new changes, preferring to stay with the status quo. For a long time, although much is written about the new paradigm, little of economic significance happens. Indeed, sometimes the innovation is never embraced, falling back into some primordial entrepreneurial soup, as did artificial intelligence in the 1980s and pen-based computing in the early 1990s. But in many other cases there comes a flash point of change when the entire marketplace, under the pressure of continually escalating disequilibrium in price/performance, shifts its allegiance from the old architecture to the new.

This sequence of events unleashes a vortex of market demand. Infrastructure, to be useful, must be standard and global, so once the market moves to switch out the old for the new, it wants to complete this transition as rapidly as possible. All the pent-up interest in the product is thus converted into a massive purchasing binge, causing demand to vastly outstrip supply. Companies grow at hypergrowth rates, with billions of dollars of revenue seeming to appear from out of nowhere.

We have seen this happen again and again in our own lives. Take communications. After the better part of a century being content with letters, telegrams, and telephones, we have in the past thirty years adopted touch-tone phones, direct-dial long distance, Federal Express, answering machines, fax machines, voice mail, e-mail, and now Internet addresses. In every case, until a certain mass was reached, we didn't really need to convert. But as soon as it was, it became unacceptable not to participate. As members of a market, our behavior is invariable: we move as a herd, we mill and mill and mill around, and then all of a sudden we stampede. And that is what creates the tornado.

Nowhere has the tornado touched down more often in the past quarter-century than in the computer and electronics industry. In the domain of business computing, it began with the proliferation of the IBM mainframe, which won worldwide support as the first major computing infrastructure standard. Then, in the space of less than a decade beginning in the late 1970s, three new architectures arose to challenge and displace that paradigm: the minicomputer, the personal computer, and the technical workstation, and we came to know a whole new set of companies, including DEC, HP, Sun, Apollo, Compaq, Intel, and Microsoft. In conjunction with these three architectures came a communications networking paradigm shift that moved from the centralized hub-and-spokes approach of mainframe-centric computing to the decentralized world of Local Area Networks interconnected via Wide Area Networks, and we met companies like 3-Com, Novell, Cisco, and Bay Networks. And concurrent with both these shifts, virtually all of our software, from the underlying operating systems to the databases, to the applications and the tools that build them, was overthrown or reworked, in most cases more than once, driving companies like Oracle, Sybase, Lotus, Ashton-Tate, and WordPerfect into our consciousness.

Yet during this same period we still bought most of our cars from General Motors, Ford, and Chrysler. And we flew United or American or Delta. And we drank Coke or Pepsi or Dr. Pepper. While some sectors, in other words, were generating whole industries out of thin air, creating hordes of market leaders from early unknowns, others continued along relatively familiar paths—because they did not introduce discontinuity into their infrastructure paradigms. The car you drive today is not materially different from one driven forty years ago. Ditto for the air transportation and the soft drinks. By contrast, high tech's insistence on repeatedly swapping out all its infrastructure is exceptionally expensive, and more than one corporation has challenged the whole rationale behind this behavior. But there is a dynamic in operation that gives people little choice. All computing is built atop an underpinning of semiconductor-based integrated circuits, which has the remarkable property of dramatically increasing its price/performance far faster than anything else in the history of our economy. In the 1970s, the rate was already an astounding order of magnitude every ten years. In the 1980s it decreased to an order of magnitude every seven years. In the middle of the 1990s the time has compressed to three and a half years. By the end of the decade microprocessor-based systems will increase ten times in power every 2.5 years. And there is no foreseeable end in sight.

This phenomenon has an extraordinarily destabilizing effect on every industry within the high-tech sector. All high-tech products ultimately take their value from software, and the software written at any point in time must work within the power constraints of the current or soon-to-be-shipped hardware. But after only a few short years, another order of magnitude of additional power has come on the scene, making these same design constraints obsolete. New products, designed to the new performance vectors, incorporate software that simply blows away the old reference points. Their new capability translates into the kind of competitive advantages that stimulate virtually any business customer—better communications, faster time to market, more efficient transaction processing, deeper understanding of their customers, earlier detection of trends. You name it, it now appears within reach.

To be sure, nobody currently enjoying success with their old paradigm really wants to change. Everybody agrees that there is already too much cycling and recycling of high-tech products, and that we would be better served if we could just take a brief time out and catch our breath. But all the while the semiconductor engine keeps rumbling beneath our feet, and at some point the attraction of dramatically escalated capabilities simply overwhelms the inclination not to change, and despite everyone's best intentions, yet another tornado gets under way.

Each one of these changes generates massive new influxes of spending, as if we were to build up and then tear down our cities over and over again. These new pools of capital, in turn, create some of the fiercest economic competition on the planet, in part because winning or losing is compressed into such a short span of time. And with each revolution, it seems, it is not the old guard but rather a whole new set of players who are swept into prominence, redrawing the boundaries of the high-tech marketplace and realigning the power structures that dominate it.

We're Not in Kansas Anymore

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Table of Contents

Acknowledgements ..... ix
Part One: The Development of Hypergrowth Markets ..... 1
Chapter 1: The Land of Oz ..... 3
Chapter 2: Crossing the Chasm -- And Beyond ..... 13
Chapter 3: In the Bowling Alley ..... 27
Chapter 4: Inside the Tornado ..... 63
Chapter 5: On Main Street ..... 101
Chapter 6: Finding Your Place ..... 131
Part Two: Implications for Strategy ..... 151
Chapter 7: Strategic Partnerships ..... 153
Chapter 8: Competitive Advantage ..... 175
Chapter 9: Positioning ..... 201
Chapter 10: Organizational Leadership ..... 219
Index ..... 239
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  • Anonymous

    Posted June 16, 2001

    Prosper in High Technology Markets after Crossing the Chasm

    Inside the Tornado is the 1995 sequel to the 1991 book, Crossing the Chasm. Inside the Tornado repeats the arguments of Crossing the Chasm, and adds three new stages of how to manage a business during the lifecycle of a technology. While Crossing the Chasm was primarily about marketing with some strategy emphasis, this book reverses the emphasis. I recommend the 1999 paperback version because it contains a new introduction that serves better as a helpful afterword to the book, as Mr. Moore suggests, in updating it for the Internet. In Crossing the Chasm, Mr. Moore successfully argues that new technologies first attract customers who love technology, and will try anything. If you succeed with that group, you will next attract visionary customers who will want to use the technology to steal a march on their competitors. After that comes the chasm, getting into broad acceptance. Many technologies never make it. The method to cross is described in Inside the Tornade as the bowling alley. You pick a few key segments that may reflect the needs of other segments. By providing custom solutions for these segments, you create a ricochet effect into striking good solutions for other niches. The analogy is to the way that after the bowling ball first hits the one and three pins (for right handers) and then continues on to take out the five pin, those three pins hit the pins behind them, which in turn go backward to take out the pins in the final row, until you have a strike. The tornado is the period of mass market acceptance. This is when there is a lot of demand as everyone who decides about infrastructure adopts the new standard simultaneously. You have to standardize, get your costs down, and ship at low prices. Your strategy is just the opposite of the bowling alley period. The metaphor here is to the tornado in the Wizard of Oz that sweeps Dorothy, Toto, and her house from Kansas to Oz. Then comes Main Street, when the market demand is now filled and you are looking at 'aftermarket development, when the base infrastructure has been deployed and the goal now is to flesh out its potential.' You once again focus on segments, and create custom solutions. The final period is End of Life, when 'wholly new paradigms come to market and supplant the leaders who themselves had only just arrived.' In essence, you start a new technology cycle. The best companies (like Intel) will do this to themselves. The book also describes the importance of becoming the gorilla who will have about 50 percent market share and earn 75-80 percent of industry profits as a result of dominating the tornado period. Gorillas are made during the tornado. Oracle is described as an example. During the bowling alley your company needs to be very good at product leadership and customer intimacy, during the tornado you need to shift to product leadership combined with operational excellence, and in Main Street the focus is on operational excellence and customer intimacy. This thinking will remind you of the book, The Discipline of Market Leaders, and the work of Dr. Adizes. Most companies will not be agile enough to make these transitions. Examples abound in the book. Apple's example will hit home with you, I'm sure. As to the Internet, things are different. In the original book, the Internet is only mentioned three times. In the introduction here, Mr. Moore says that the 'Internet market tornado, however, is so powerful that it has sucked all four models into its vortex.' Companies are succeeding simultaneously in different parts of the Internet space at the same time with each of the strategies outlined here. In the future, I think technologies will evolve more like the Internet has. During these evolutions, I think that business model discontinuities will be more important than technology discontinuities. While you can only put technology discontinuities in during parts of the cycle (never during the tornado), business model shifts can occur

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