Tips from the Top
| Author | James L. Horvath; David W. Chodikoff |
| Pages | 801-845 |
801
Chapter 29
Tips from the Top
This chapter contains a mix of practice tips and sh ort essays on valuation meth-
odologies and topics by senior and renowned business valuators. T hey relate to
the valuation of technology, m edia, and telcom, and are presented in the order
received by the editors.
THE TECHNOLOGY ADOPTION LIFE CYCLE
zareer n. pavri, c.a. c.b.v.1
The technology adoption landscape may be div ided into six zones which,
linked together progressively, make up the Technology Adoption Life Cycle.
Logical as t his progression may seem in t heory, in actual practice com-
panies often st umble when it comes to mak ing the transition from t he vi-
sionaries to the pragmatists. Visionaries do not make good references for
pragmatists, and market development, instead of gliding across t he transi-
tion, stalls. This is t he chasm.
A. THE TECHNOLOGY ADOPTION LANDSCAPE
The technology adoption life cycle and “chasm” phenomenon is relevant
to consider whenever there is a discontinuous innovation, meaning a new
category of product that incorporates break through technology enabling
unprecedented benefits. Such a product is immediately proposed as the nat-
ural replacement for a whole class of infrastruc ture, and wins a number of
early converts. These are the innovators and early adopters in the life cycle.
The market, however, is a conservative institution; it recoils in the face of
1 Business Valuations & Strateg y Inc. (Toronto).
802 Tips from the Top
new changes and prefers to stay with the status quo. At some point, there
comes a flashpoint of change when the entire marketplace, under pressure
of continually escalatin g disequilibria in price/performance, shifts its alle-
giance from the old architecture to the new. At this point, a company gains
momentum to penetrate the mainstream market.
The technology adoption landscape, as explained by Geoffrey A. Moore,2
may be divided into six zones, which are characterized as follows:
1. The E arly Market, a time of great excitement when customers are tech-
nology enthusiasts and visionaries looking to be the first to get on board
with the new paradigm.
2. T he Chasm, a period of great despair, when the early-market’s interest
wanes but the m ainstream market is still not comfortable with t he im-
maturity of the solutions available.
3. The Bowling Alley, a period of niche-based adoption in advance of the
general marketplace, driven by compelling customer needs and the will-
ingness of vendors to craft niche-specific whole products.
4. The Tornado, a period of mass-market adoption, when the general
marketplace switches over to the new infrastr ucture paradigm.
5. Main Street, a period of aftermarket development, when the base infra-
structu re has been deployed and the goal now is to flesh out its potential.
6. End of Life, which can come all too soon in high tech because of the
semiconductor engine driving price/performance to un heard of levels,
enabling wholly new paradigms to come to market and supplant the
leaders who themselves had only just arrived.
2 Geoffrey A. Moore, Inside the Torna do: Strategies for De veloping, Leverag ing and Surviving
Hypergrow th Markets (New York: Collins Busi ness Essentials, 2005).
Tips from the Top 803
The following five customer profiles may be linked to the aforemen-
tioned landscape zones:
1) Innovators — Technology enthusiasts.
These are people who are fundamentally committed to new technology on
the grounds that sooner or later it is bound to improve our lives. T hey are
typically t he first c ustomers for anything that is tr uly brand new. While as
a market segment the technology enthusiasts do not have much propensity
to spend, they are the gatekeepers to the rest of the life cycle and only with
their endorsement can a discontinuous innovation get a hearing. New mar-
kets are often ceded to this community to gain their support.
2) Early Adopters — Visionaries
These are the true revolutionaries in business and government who want
to use the discontinuity of any innovation to ma ke a break w ith the past
and start an entirely new future. Their expectation is that by being the first
to exploit the new capability they can achieve a dramatic and insu rmount-
able competitive advantage over the old order. This category has significant
influence on h igh tech nology because they are the first constituency with
the propensity to spend. They provide as much money to the high-tech
community as do venture capitalists. The quid pro quo is that each vision-
ary demands special modifications that no one else would consider using.
These demands rapidly begin to over tax the R&D resources of the technol-
ogy developer. Taken together, the technology enthusiasts and visionaries
comprise the early market.
3) Early Majority — Pragmatics
These customers make the bulk of all technology infrastructure purchases.
They believe in evolution not revolution, so they are not visionaries. They are
neutral about technology and look to adopt innovations only af ter a proven
record of useful productivity improvement, including strong references
from people they trust. When they final ly do make the shif t, pragmatists
prefer to buy from the market leader for two reasons. First, everyone else in
the market makes their product work with the leader’s, so while the leader’s
product may not be the best one, systems built upon it are going to be the
most reliable. Second, the market leader attracts many third-party compan-
ies into its aftermarket, so that even when the leader is not responsive to
customer requests, the marketplace as a whole is.
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