Timing Entry to a Market

One of my biggest mistakes with my last company:  I built what I still believe was a great product and it matched the needs and demands of a lot of people out there, but the industry I chose was too mature. The products I was competing with already had significant adoption and major TV advertising began just shortly after I invested into product development, which quickened brand consolidation.  I watched the price per click on AdWords triple from the time I did my initial affiliate testing, until the time I finally had a mature product.  This experience made me painfully aware of my need to pay more attention to timing next time.

I was recently introduced to a concept called the Innovation Adoption Curve, by Sociologist, Everett Rogers.  In his research suggests there is a bell curve distribution with which you can describe how an innovation is absorbed into culture.  Jeffrey Moore further over-layed this idea of an adoption chasm that exists between the innovators , early adopters and the late majority.

I’ve mostly seen this applied to the adoption of a specific technology or product, but I think one could also apply this to macro technologies and trends. For example, the Internet was originally innovated by DARPA in the 1950s (innovators).  It was further made useful by introduction of TCP/IP protocols in 1982.  But the first commercial applications did not really begin until the introduction of Netscape in the early 1990s (early adopters), and it snow-balled from there, as it entered early and late majorities.

Perhaps this conceptual framework can be useful for analyzing timing of trends, enough to see the windows of entrepreneurial opportunity.  If we assume at a macro level that innovators are the academics and scientists creating pure innovation without application, the early adopters are the first to see opportunity for commercial application and either evangelize or commercialize it, and the consumers are the early/late majorities and laggards, then one can get a sense of how to apply this.

So what if we take a look around ourselves in every day life, looking to overlay this framework:  The innovators are the <2.5% scientists and academics innovating without application.  The early adopters follow with first attempts to apply the concepts with novelty products and in the government defense work.  The early majority are the first consumers to buy in and perhaps do so for social status purposes, similar to owning an iPhone in 2008.  Later comes the late majority who are the busy pragmatists around us who cannot invest time until something has proven its value. And finally the laggards are the grandparents who just signed up for Facebook because their children withheld pictures of the grand-children until they did.

So perhaps there is something to be said for looking around you and observing the current level of adoption of an innovation before you begin attempting to commercialize it.  Perhaps the best commercial opportunities will be when the Late Majority kicks in, but you must have already built your brand and some momentum before you get there, which means you must be running with or just before the early majority.  And thus the chasm!  The chasm might also be ideal as you can minimize adoption risk by letting it play out just a little bit in that early adopter phase, before investing yourself. Certainly though, you would not want to enter the market after you have past into late majority phase, as competitors are already entrenched and your window for capitalizing on the innovation before it is commoditized is minimal.

Perhaps the best recent example of this is the mobile market.  In 2007 Apple introduced the iPhone and revolutionized the smart phone industry.  But the raw innovation had been out there since the late 1990s. There were even HTTP and WAP enabled phones prior to the iPhone but none had gained much traction.  These were the early adopters.  The iPhone was the product that was needed to give enough bounce to overcome the chasm and lead the industry into early majority.  Apple enjoyed dominance over the early majority phase until Android hit the market with a free competitive platform, and this led to a proliferation of competitive devices and marked the beginning of the Late Majority phase. They were able to compete however because it is free and they have massive pull as a company.  The introduction of the Android platform marked the entry into the late majority and the beginning of commoditization of the industry.

So the lesson here perhaps is that one can enter the market late as Google did, but you better have significant money to spend to build momentum and catch up,and (b) your role is to lead the commodization on the way down the hill, not up. This is a role only suitable for a major organization, not a small startup who will need the early majority evangelists to gain momentum.

Neal Cabage

Technologist living in Los Angeles, California.