INSIDE THE TORNADO MARKETING STRATEGIES FROM SILICON VALLEY’S CUTTING EDGE GEOFFREY A. MOORE Dylan Thomas: The Poems of by Dylan Thomas. Copyright © 1952 by Dylan Thomas. Reprinted by permission of New Directions Publishing Corp. INSIDE THE TORNADO. Copyright © 1995 by Geoffrey Moore. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, downloaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of PerfectBound™. PerfectBound™ and the PerfectBound™ logo are trademarks of HarperCollins Publishers, Inc. MS Reader edition v 1. October 2001 ISBN 0-06-008734-X A hardcover edition of this book was published in 1995 by HarperBusiness, a division of HarperCollins Publishers. 10 9 8 7 6 5 4 3 2 1 In memory of Patricia C. Moore, who loved literature, had a wonderful way with words, and did her best to pass these gifts on to her son CONTENTS ACKNOWLEDGEMENTS INTRODUCTION PART ONE THE DEVELOPMENT OF HYPERGROWTH MARKETS 1. THE LAND OF OZ 2. CROSSING THE CHASM—AND BEYOND 3. IN THE BOWLING ALLEY 4. INSIDE THE TORNADO 5. ON MAIN STREET 6. FINDING YOUR PLACE PART TWO IMPLICATIONS FOR STRATEGY 7. STRATEGIC PARTNERSHIPS 8. COMPETITIVE ADVANTAGE 9. POSITIONING 10. ORGANIZATIONAL LEADERSHIP ABOUT THE AUTHOR CREDITS ABOUT THE PUBLISHER ACKNOWLEDGEMENTS This book is an attempt to distill the learning of the past four years of consulting since Crossing the Chasm was published. The sources of that learning include a modest amount of published material, none of which I have managed to save or footnote, of which the most valuable are the industry newsletters of Dick Shaffer, Jeff Tarter, and Seymour Merrin, who, along with Computerworld and PC Week keep me abreast of the industry at large. But the bulk of this learning has come from colleagues and clients. On the colleague side, my associates Paul Wiefels, Tom Kippola, and Mark Cavender have all contributed significantly to this work at every stage, sharing ideas, critiquing concepts, adding examples, and generally just wising me up when I stray into the ether. If despite their efforts I still have strayed, it is not for their lack of trying. I’d also like to acknowledge colleagues halfway round the globe, in the Republic of South Africa, who have been applying The Chasm Group methodology to that country’s emerging technology sector: Adriaan Joubert, Renier Balt, Herman Malan, and Johan Visagie. In addition to these associates, there is an informal set of colleagues, many of whom are also consultants, who have taken time from their businesses to critique and advance the argument of this book. These include my daughter Margaret Moore at Regis McKenna Inc., Paul Johnson, a financial analyst at Robertson Stephens, Tom Kucharvy at Summit Partners, Charles Dilisio at KPMG Peat Marwick, Tom Byers, now a consulting professor at Stanford, Andy Salisbury, consulting independently, Tony Morris, also with his own firm, as are Ann Badillo, Bruce Silver, Phillip Lay, Brett Bullington, and David Dunn-Rankin. Another support group includes recovering ex-colleagues from Regis McKenna Inc., including Greg Ruff, Page Alloo, Glenn Helton, Rosemary Remacle, Karen Lippe, and Doug Molitor. All of us have proven unemployable by anyone other than ourselves—which will surprise no one at RMI. And a third comes from colleagues in the public relations field, including Sabrina Horn, Maureen Blanc, Simone Otus, and Pam Alexander. Still further support has come from the venture capital community, including the firms of Accel Partners, The Charles River Group, Atlas Partners, St. Paul Venture Capital, The Mayfield Fund, and Institutional Venture Partners. I owe a special debt to this last group for incubating The Chasm Group in their office space for a year, and I’d like to convey special thanks to Reid Dennis, Pete Thomas, and Norm Fogelsong for their kind attentions. Participating on the boards of companies has also provided numerous lessons, and I would especially like to acknowledge Carl Herrmann and Walt Pounds at Solbourne, Tom Quinn at Gyration, and Richard Furse at PC Upgrades. And then there are the clients. While colleagues advise and friends support, clients teach. I have had the privilege of working with close to a hundred different client groups in the past four years who have brought to our relationship not only great problems but wonderful insights into how to solve them. Of these, the many people of Hewlett-Packard, too many to name individually, have had a special impact on this book, as well as earned a special place in my heart. I would just like to acknowledge Bonnie Paradies and Darleen Bevin for helping to shape this entire relationship. It has been phenomenally rewarding to me, and I deeply appreciate it. Individuals who stand out from other client engagements are so numerous that I no doubt will neglect to recognize many deserving people. Of the ones that come immediately to mind, I’d like to give special thanks to Steve Jobs of NeXT Inc., Scott Silk at Unisys, Jeff Miller and Rob Reid at Documentum, Dave and Al Duffield at PeopleSoft, Bernard Hulme at SCO, Dominic Orr at Bay Networks, Peter Strub at AT&T, Gerry Greeve at Intel, Mark Hoffman and Bob Epstein at Sybase, Richard Probst and Stew Plock at Sun, Franki D’Hoore and Evert Polak at ASM Lithography, Dan Metzger at Lawson Software, Pat Maley at Client Systems, Heather McKenzie at Crystal Services, Rob Reis at Savi, and Al Miksch at Tektronix. To these and to that one other special person that I have forgot to name but meant to, thank you for the challenges, the insights, and the friendship. And then there are the people that support writers in the midst of these journeys they insist upon. These include Jim Levine, my literary agent, and