The Technology Adoption Curve & PMF (part 2)
We introduced the first two stages of the technology adoption curve in part one. Here, I round out the technology adoption curve with the final three stages.
In Review – Innovators and Early Adopters
Technology adoption is how individuals and organizations adopt and use new technologies. The technology adoption curve is a model that helps to understand and predict the adoption of new technologies. Everett Rogers first proposed it in his book “Diffusion of Innovations,” published in 1962.
According to the technology adoption curve, adopting new technologies follows a bell-shaped curve with five distinct stages: innovators, early adopters, early majority, late majority, and laggards. These stages are based on the characteristics and behaviors of individuals and organizations as they adopt new technologies.
The first stage every startup will encounter as they approach the market is ‘Innovators.’ Innovators are the lifeblood of every early-stage disruptive innovation technology startup. These people will buy advanced technology even when it doesn’t entirely work, which is pretty awesome. But they don’t have the most significant budgets and won’t be putting your solutions into production. It limits their revenue potential and can cause difficulties when word spreads that you are deployed but not actually in production.
The second buyer type is the ‘Early Adopter.’ The motivation of an early adopter is to utilize technology to gain an advantage or solve a problem ahead of their competitor. The early adopter is a visionary and generally will have a clear mission they want to accomplish, and they see innovative technology as central to achieving that goal. An early adopter will have some tolerance for inconsistencies, but they expect that the product will be fully functional and able to meet an SLA at some point.
The technology enthusiast (Innovator) and the early adopter are the first stop every disruptive innovation technology company must make on their go-to-market journey. As key as these groups are, crossing the chasm occurs when the company moves beyond niche applications and custom adaptations to a universal solution that can meet the market need at scale. Reaching the ‘Early Majority’ is crucial because it’s where the mass market begins to form. And to be clear, a company is not built until the mass market is reached. Which begs the question, what is product-market-fit (PMF) actually, since many companies claiming to have PMF do so at just $10-20mm in annual revenue?
The Mass Market
Stage 3. Innovation and technology pragmatists: ‘Early Majority.’
The early majority are often called pragmatists because of their propensity for products and solutions with a low risk of failure. This group operates systems that touch millions of users, which makes their aversion to failure easy to understand. Pragmatists are less afraid to break convention and try something new, but they will only do so when there is a benefit and can mitigate the risk. The early majority is a networked user segment above and below their place on the adoption curve. Thus, they may be willing to seek input from an early adopter but will likely be suspicious of praise from an innovator.
While the Innovator is ok if a solution is incomplete since they are excited about the technology, sometimes even more than the product, they may seek to reference someone from the late majority group. But by definition, they are late to the party, making it challenging to find a referenceable source.
Stage 4. Conservatives: ‘Late Majority.’
When you are regularly selling and closing business with this group, the late majority, it’s fair to say that you have reached PMF. Production teams are easy to spot and will almost always fall in the late majority category because they are skeptical of anything new and not particularly interested in exploring unproven technology. The first question they will ask is, “who else is using you?”
Based on your answer, this may mean a quick cutting off of the conversation. Many late majority teams view working with startups or disruptive innovation companies as career suicide since every failure will be on their head. In contrast, successful innovation initiatives are home to the CTO group or innovations team. Here is where the tug of war between the innovation group and the operators occurs.
As a seller, it’s critical to understand this reality since you’ll likely make fast and positive progress with the innovations group only to find your sales process grind to a screeching halt, causing you to ask, “what happened?”
Think carefully about the role of the person you plan to approach inside a target company. If they are operations focused, it is best to skip past them and proceed to an innovations group. Yet, for many enterprises that serve customers, there will be a step in the buying journey where even the innovators, including the CTO office, will need approval or validation from an operator.
In my own experience, I have found that when selling to the late majority, you want to approach them appropriately. Only engage with this group once you have strong references they will respect. This group tends to have long-term memory, which means it will be challenging to shift their mindset from the early finding if they test your product and find it needs improvement.
The late majority is not incented to take risks and are incented to mitigate risk. A startup bouncing into its office with the latest earth-shaking technology will be bounced out until it can demonstrate that others have taken the same risk and not failed. This is why an early-stage sales team in an innovation-focused startup must have domain expertise to navigate the customer’s organization, understanding the optimum timing and risks of approaching the various groups out of sequence.
Stage 5. Innovation adverse, skeptics: ‘Laggards.’
By the time the market has developed to the place where laggards are a viable segment to pursue, the value of the company’s solution has eroded as a result of being a commodity at this stage, and for some markets and product niches, pennies matter. Still, laggards are a group to pay attention to. Just save time with them before the cost of producing and delivering your solution has fallen as low as possible. At that time, you can successfully compete with commodity pricing. Getting to the mass market should be the goal for every B2B/enterprise or small to medium business-focused startup, and how to do this effectively is the question of the ages.
The technology adoption curve applies to every startup regardless of market, product type, customer segment, or the industry targeted. Read ‘How to drive competitive advantage by Michael Skok.
In the context of B2B sales, the technology adoption curve can impact the behavior of technology buyers in several ways.
First, the stage of the adoption curve that a technology buyer is in can influence their decision-making process. For example, innovators and early adopters are typically more willing to take risks and try new technologies. In contrast, the early majority, late majority, and laggards are typically more skeptical and cautious. As a result, organizations selling to innovators and early adopters may need to focus more on the potential benefits and value of the technology. In contrast, selling to the early majority and beyond may need to provide more concrete evidence of the technology’s value and reliability.
Second, the technology adoption curve can influence the level of competition that organizations face when selling new technologies. Innovators and early adopters are typically more willing to pay a premium for new technologies, and as a result, there may be fewer competitors in this market. However, as the technology moves through the adoption curve and becomes more widely accepted, competition may increase as more organizations enter the market. This can impact the pricing and positioning strategies of organizations selling new technologies.
Third, the technology adoption curve can impact the resources and support organizations must provide to technology buyers. For example, innovators and early adopters may require more support and resources to learn how to use the technology effectively. In comparison, the early majority and beyond may need less support as they become more familiar with the technology. Organizations selling new technologies should consider the level of support and resources different buyers may need to facilitate adoption and use.
The technology adoption curve may feel “dated.” Buyer behaviors have significantly changed. Still, buyers fit into similar groups. It’s incumbent on marketers and sellers to ensure they are appropriately matched and use the tactics and messages with the highest probability of being understood and actioned.
I’ve outlined a helpful framework and playbook for demand creation to enable startup founders and executive teams to achieve the highest probability of success. I love working with disruptive innovation companies. Let me know how I can help you through this process.
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