TALC and Open Source Networking

CSD Course, Fall 2008. Open Case Team Presents. KTH, Stockholm

This podcast is a literature review from the “Crossing the Chasm: Marketing and Selling High-
Tech Products to Mainstream Customers – by Geoffrey Moore, Regis McKenna” and “Inside the
Tornado: Marketing Strategies from Silicon Valley’s Cutting Edge – by Geoffrey Moore” and their
application to Open Source Networking in Africa. Most of this document is created by using these 2
books and other resources in the references part.

Executive Summary
In the 1990s the computing industry shifted from expensive proprietary
systems to open systems based on standard, low-cost hardware. This move
changed a 20-year pattern of IT buying and deployment models. Some of the
biggest IT buyers, like universities and research centers, also started to look for
better, flexible and cheaper IT solutions.
National Research & Education Centers are generally start point of knowledge
and innovation. These institutions must create value for the benefit of their
people. To be able to do that, they need to be connected with the other source
of information, like universities and research centers in other parts of the
world. For example health, education, security and economy are the top
priority topics for most of the countries and Africa is not an exception. To be
able to increase the development level of society and create economic value
for people, research institutions must be connected to internet and share
knowledge and experiences with each other. That is how and why those
institutions come to be called “research and education centers (NRENs)”.
On the other hand, ever increasing IT needs and innovations force IT
companies to have high performance and low cost products and services. To
be able to reach this goal open-source is one of the options to accelerate this
movement. Every high tech company must adopt its marketing program and its
performance measures to reflect where their products are in the technology
adoption life cycle. The personality of potential buyers is more important to
the adoption of any new technology than on any other factor.
To be able to understand the manners and expectations of buyers we need to
study the market, product and expectations of customers very deeply. In this
paper we will try to demonstrate open source networking market in Malawi
and Mozambique by using the approaches from TALC model.

What is TALC?

TALC model gives clear guidance on how to create market for a discontinuous
innovation, which force a significant change of behavior by the customer. Our
solution, which is a PC-Based Open Source Networking System, is also some
how a destructive technology for the already established solutions in the
market. The basic flaw in the model is that implies a smooth and continuous
progression across segments over the life of a product. The high-tech
marketing guru Moore1 offers time tested insights into the problems and
dangers facing growing high-tech companies, and a blueprint for survival. This
classic text (first published in 1991) is widely accepted as “the bible for bringing
cutting-edge products to progressively larger markets.”

Understanding each of these segments at TALC2 model is extremely important
to be able to identify the best performance measures. The leading indicators
differ depending on the position of the company’s products in the technology
adoption life cycle. A company’s different products can be in the different
segment of TALC depending on the market conditions and time being.
Moore says that in fact, there are cracks in the curve, between each phase of
the cycle, representing a disassociation between any two groups; that is, “the
difficulty any group will have in accepting a new product if it is presented the
same way as it was to the group to its immediate left.” Marketing and sales
tactics must be different from segment to segment to be able to be successful
in the product life cycle itself. There can be small size crack between each step
and also inside every segment. But, the largest crack, so large it can be
considered as a chasm, is between the Early Adopters and the Early Majority.
Many (most) high tech ventures fail trying to make it across this chasm.

These are the specific characteristics of every step in TALC model.
Innovator = Technology enthusiasts
- Pursues new technology aggressively, often for its own sake.
- Will overlook all kinds of short falls in the deliverable.
- Easiest buying population to satisfy: want the truth, access to top technical
support, first to get hands on new stuff, and want low cost (cheap).
- Gatekeepers to the life cycle
- If they hate it implies trouble
- They like being “cool”

Early Adapter = Visionaries
- Not technologists but appreciate the benefits of new technology. However,
need more help than Innovator.
- Believe in competitive advantage via discontinuous innovation – use
technology to leapfrog competition
- Bring money to table but demand modifications
- In pursuit of major benefits early-on…these are visionaries, if you will, as
they can see the strategic opportunity represented by new technology.
- The least price sensitive of any user category.
- Easy to sell and very hard to please.
-Want to see “productized” technology.

- Always in a rush but contract closure is next to impossible.

- Each additional visionary has a unique dream and makes unique demands
for customization which in turn overtaxes an already burdened development
group.
- Optimum solution is to identify a single compelling application and focus
entirely on that solution.
- This is the sector where a competitor first materializes and you better be
across the chasm by then.

Early Majority = Pragmatists
-Similar to Early Adapters but far more practical and pragmatic. Aversion to
risk, wants a proven solution.
- Insist on seeing well-established references of other Early Majority users.
- Not intimidated by technology, but will not pursue technology for
technology’s sake.
- Believe in evolution not revolution
- Use marketplace wisdom to see what’s valuable and then be a fast follower
- Want to improve organizational effectiveness
- Prefer to buy from market leaders

Late Majority = Conservatives
- Similar to Early Majority
- They are not confident in their ability to handle a technology product.
- Switch only when technology fully debugged
- Delay may cause them to lose out in long run

Laggard = Skeptics
- Want nothing to do with technology and not worth the trouble to try to
convert.
- Refuse to adopt; Works only when technology “fails”
- Tend to “fight the use of new technology.”
After understanding the characteristics of each and every step, another
important issue is that defining our market. Actually, in this context, defining
marketing is not really difficult. It is simply taking actions to create, grow,
maintain or defend markets. For open source networking market in Africa, we
need to really understand these;
- a set of actual or potential customers
- a given set of products or services
- who have common set of needs
- who reference each other when making a buying decision

All of this definition is easy to define, except the last one. We, at this stage,
think that definition of “who reference each other” is crucial for us to decide
start point [5]. From the current reports from OpCon and meetings with them,
we believe that NRENs of Mozambique and Malawi are “good enough” start
points for us. Even if Malawi looks a bit better than Mozambique.

In addition to all of this information, these four factors that raise showsstopper
issues [5] to create a market for our solution.
1- Target Customer:
There is a single, identifiable economic buyer for our offer from Mozambique
and Malawi NRENs. They are readily accessible and sufficiently enough-funded
to pay for the intended whole product.
2- Compelling Reason to Buy
There is an obvious compelling reason to buy, which are low price and flexible,
open technology behind our solution.

3- Whole Product
Whit the help of partners and allies, our company can field a complete solution
to the target customer’s compelling reason to buy. But, at this point, our whole
product and partnerships are not yet ready. We need to spend some significant
time to improve our whole product, which means documentation, pre-sales
services, after-sales services, customer support and so on.
4- Competition
High price, low internet speed problem has not been addressed by another
company such that they have crossed the chasm ahead of us and occupied the
space we are targeting. This is definitely a good thing for us. So, we are not
attacking a fortified hill.
In addition to all of these reasons, an already established relationship with
NRENs is also a very crucial enabler for us to decide to start from NRENs of
Mozambique and Malawi.

How to Cross the Chasm?
To cross the chasm, we must focus on a single market, a beachhead, win
domination over a small specific market and use it as a springboard to adjacent
extended markets to win. By taking this into consideration, can Open-Source
Routing cross the chasm by focusing to the NRENs (National Research and
Education Network) in African market? We do believe so.
How this will happen then? Most probably, at the very beginning, innovators will
be excited about the technology itself and also understand that; our product has
80% solution of the problem, not %100 working product. After we pursue them to
buy our solution, they will be a perfect chance for us to proof our solution and
gain some reference customers. They will be our niche market and reference
customers for the later stages of the TALC.
Actually, the way to cross the chasm requires concentration. We need to target
a specific market niche as our point of attack and focus all our resources on
achieving the dominant leadership position in that segment.” Includes
identifying the primary market identifiers: target customer, compelling reason
to buy, whole product, competition; and secondary market factors: partners
and allies, distribution, pricing, positioning, next target customer3.
For whole product leverage, for word of mouth effectiveness and for perceived
market leadership, it is critical that, when crossing the chasm we must focus exclusively on achieving a dominant position in one or two narrowly bounded market segments.

Concentration is very important while crossing the chasm but unfortunately;
firm does not want to place all eggs in one basket and devotes energies to
several different applications at the same time. This is also encouraged by
venture capitalists, who would like to earn their money as fast as possible. So
firm comes up with a 90% solution to various applications, and in the process
does not satisfy any group of pragmatists. This is a very dangerous situation
because it widens the chasm. The only safe way to cross the chasm is by
putting all eggs into one basket.
To sum up, at this point we need to focus to NRENs and use our full resources
to dominant this market segment. In Africa, there are already established
NRENs in South Africa, Kenya, Rwanda, Tanzania, Sudan, Uganda and Zambia.
Almost all of these NRENs share the same pain which is lack of resources. They
need to have cost effective alternative solutions in their networks.

There are also emerging NRENs in Botswana, Burundi, Ethiopia, Lesotho, Namibia, Somalia, Swaziland and Zimbabwe. This means, our target niche market is very well defined and it has enough numbers of member institutions and universities for us to make money at the early stages and gain reference
customers.
All in all, we have a good niche market in front of us. If we can win some of
these NRENs and make them happy customers, they will bring other NRENs
from the continent. At the end, when we dominate the NRENs market, they
will let us cross the chasm and gain more market share before some other
open source networking company starts operating in Africa. If we can do that,
we will also gain sustainable competitive advantage over our competitors and
increase the level of entry barriers for other companies. Moreover, we need to
create close relationship with NRENs. This can be done by free workshops at
Africa or educating their personnel for a very good price and providing them
some extra services. Instead of thinking marketing as a generic thing, we need
to focus building real relationships with NRENs, not just focusing to sales.

Later Stages of TALC

Since the Open Source networking business is still in the early market
segments, we do not have to focus on the later stages. But, sooner or later first
main street customers will show up and we have to take them into account then. That’s why we would like to give a brief introduction about the late market characteristics.

Actually one of the very basic ideas about TALC is that, business strategy must
change dramatically as marketplaces move through stages. Some important
key points of its arguments are as follows:
In the Bowling Alley: The forces that operate in the bowling alley argue for a
niche based strategy that is highly customer-centric .
Inside the Tornado: Those in the tornado push in the opposite direction
toward a mass-market strategy for deploying a common standard
infrastructure .
On Main Street: Then on main street market forces push back again toward a
customer-centric approach, focusing on specific adaptations of this
infrastructure for added value through mass customization .
In addition to all of these dramatic reveals in strategy, it is imperative that
organizations be able to agree on where their markets are in the life cycle. In
the mean time, the economic cataclysm of the tornado deconstructs and
reconstructs the power structure in the market so rapidly that simply
understanding who is friend and who is enemy becomes really difficult.
Within this newly emerging market structure, companies must compete for
advantage based on their status within it. Positioning in this context consists of
a company taking its rightful place in the hierarchy of power and defending it
against challengers. And finally, moving fluidly from strategy to strategy is the
ultimate challenge of any organization, demanding an extraordinarily flexible
response from its management team.

Open Source Networking and TALC

Even if the OpCon4 team positioned the Open Source Networking into the
Visionaries segment, we believe there is a problem. Each of the segments in
the bell curve represents a standard deviation from the norm and has different
characteristics. Let’s have a look at to the characteristics of Innovators and the
Early Adaptors and then see where really we are.

Innovators = Technology enthusiasts. First of all they love to get their hands
on the latest and greatest innovation. And thus they are typically the first
customers for anything that is truly brand-new. From marketing point of view,
they are easy to contact with and make them satisfied. Because, they find you
any way and they are wiling to use your product. But on the other hand, they
do not have any money! What they have instead is influence. The reason why
we spend so much time with them is that, they are the gatekeepers to the rest
of the life cycle. If they do not like the product, no one else will love it. Only
with their support and good comments a discontinuous innovation get a
hearing, and so often companies/institutions give products to this community
to gain their support. And make marketing for the later stages [5-6].
So, if we put the NRENs, who are our first “customers”, they pretty much fit to
the innovators profile. They are some how helping us to make our
discontinuous innovation get through the market segments successfully. In
addition to this, but no problem at this stage, they do not have much money
and they will not pay us a lot. This is also fitting to the NRENs profile perfectly

Early Adaptors= Visionaries. In fact these groups of customers are real
innovators. They are quite open to use any discontinuous innovation in their
business and make something out of it. They are the first ones, who are
interested in the technology it self but want to have something out of it. Their expectation is that, by using a real innovative product, they want to achieve a
dramatic and sustainable competitive advantage over the old order [5-6].
Visionaries have an extraordinary influence on high tech because they are the
first constituency who can and will bring the real money to the table. In so
doing, they provide at least as much funding for entrepreneurs as does the
venture capital community. Also, they will help entrepreneurs to gain market
share in the early market segments and make marketing for us for free [5-6].
If we look at to the characteristics of the early adaptors it does not really the
same with the characteristics of NRENs. This is the reason why we put them
one step back, to the innovators segment.
Taken together, technology enthusiasts and visionaries make up the early
market [5-6]. This is the segment where we should focus on right now. Because
Open Source Networking is, we believe at the innovators segment in Africa,
any way still at the early market segments and need special marketing &
business development and sales strategies.

In the early stages, our technology is important for customers. But, what we
will need soon is a good whole product; which means consultancy, pre-sales,
after-sales, documentation and so on. Customer support is crucial for us to
make our customers happy. When they feel good and comfortable with our
solution, they will be reference customers for us.

Conclusion
To sum up, PC-Based Open Source Networking is still in the early market stages
for African countries. As of the beginning of 2007, there were 7 operational
NRENs in Africa (Algeria, Egypt, Kenya, Malawi, Morocco, South Africa and
Tunisia) with only two being in sub-Saharan Africa (Malawi and South Africa).
All these African NRENs save for Malawi are reliant on fiber optic networks and
all of them are said to lease their connectivity infrastructure from existing
providers [13].
Our solution will be very beneficial for African NRENs because, If African
academic and research institutions are to fulfill their role as creators and
bearers of knowledge, fostering innovation and research, and transferring that
knowledge and innovation through skills and new tools and technologies to the
public and private sectors, for the social and economic benefit of all, then the
current situation has to change.
There is still a lot to be change, starting from policies, IT infrastructure and
much more in the continent. But, there is a good and available market for us.
Our solution means a lot for them, both increasing economic and social
development level of the countries in Africa. There is a good window of
opportunity right now and by using this chance we can be a well established
market player as provider of networking solutions.

CSD Course, Fall 2008. Open Case Team. KTH, Stockholm