فصل 7

7

HOW A TIPPING POINT TIPS

If I told you I knew of a company that invented an amazing new technology that will change the way we consume TV, would that pique your interest? Perhaps you’d be interested in buying their product or investing in their company. It gets better. They have the single best product available. Their quality is through the roof, way better than anything else on the market. And their PR efforts have so been remarkable, they’ve even become a household name. Interested?

This is the case of TiVo. A company that seemed to have everything going for them but turned out to be a commercial and financial failure. Since they seemed to have the recipe for success, TiVo’s flop defied conventional wisdom. Their struggles, however, are easily understood if you consider that they thought WHAT they did mattered more than WHY. They also ignored the Law of Diffusion of Innovations.

In 2000, Malcolm Gladwell created his own tipping point when he shared with us how tipping points happen in business and in society. In his aptly named book The Tipping Point, Gladwell identifies groups of necessary populations he calls connectors and influencers. With little doubt Gladwell’s ideas are spot-on. But it still begs the question, why should an influencer tell anyone about you? Marketers are always trying to influence the influencers, but few really know how. We can’t dispute that tipping points happen and the conditions that Gladwell articulates are right, but can a tipping point happen intentionally? They can’t just be an accidental phenomenon. If they exist, then we should be able to design one, and if we can design one, we should be able to design one that lasts beyond the initial tip. It’s the difference between a fad and an idea that changes an industry or society forever.

In his 1962 book Diffusion of Innovations, Everett M. Rogers was the first to formally describe how innovations spread through society. Thirty years later, in his book Crossing the Chasm, Geoffrey Moore expanded on Rogers’s ideas to apply the principle to high-tech product marketing. But the Law of Diffusion of Innovations explains much more than just the spread of innovation or technology. It explains the spread of ideas.

If you don’t know the law, you’re likely already familiar with some of its terminology. Our population is broken into five segments that fall across a bell curve: innovators, early adoptors, early majority, late majority and laggards.

As the law states, the first 2.5 percent of the population are the innovators, and the next 13.5 percent are early adopters. Innovators, Moore says, pursue new products or ideas aggressively and are intrigued by any fundamental advance; being first is a central part of their lives. As their name suggests, innovators are the small percentage of the population that challenges the rest of us to see and think of the world a little differently.

Early adopters are similar to innovators in that they appreciate the advantages wrought by new ideas or technologies. They are early to recognize the value of new ideas and are quite willing to put up with imperfection because they can see the potential. Although quick to see the potential and willing to take risks to try new technologies or ideas, early adopters are not idea generators like the innovators. But both groups are similar, as Moore says, in that they rely heavily on their intuition. They trust their gut.

Early adopters, like innovators but to a lesser degree, are willing to pay a premium or suffer some level of inconvenience to own a product or espouse an idea that feels right. Those on the left side of the diffusion curve are the ones who stood in line for six hours to be among the first to buy the iPhone, Apple’s entry into the mobile phone market, even though they could have walked into a store a week later and bought one without waiting. Their willingness to suffer an inconvenience or pay a premium had less to do with how great the product was and more to do with their own sense of who they are. They wanted to be the first.

These are also the personality types who bought flat-screen TVs when they first came out even though they cost upwards of $40,000 and the technology was still far from perfect. My friend Nathan fits this profile. I walked around his house once and counted no fewer than twelve Bluetooth earpieces for his mobile phone lying around his house. I asked him why he had so many. “Did they all break?” I queried. “No,” he replied, “they came out with a new one.” (There were also about five laptops, various models of BlackBerry smart phones and boxes of other gadgets lying about that never quite worked that well.) Nathan is an early adopter.

The next 34 percent of the population are the early majority, followed by the late majority, and finally the laggards on the far right side of the spectrum. Laggards are the ones who buy touchtone phones only because they don’t make rotary phones anymore. The early and late majority are more practical-minded. For them, rational factors matter more. The early majority is slightly more comfortable with new ideas or technologies, while the late majority is not.

The farther right you go on the curve, the more you will encounter the clients and customers who may need what you have, but don’t necessarily believe what you believe. As clients, they are the ones for whom, no matter how hard you work, it’s never enough. Everything usually boils down to price with them. They are rarely loyal. They rarely give referrals and sometimes you may even wonder out loud why you still do business with them. “They just don’t get it,” our gut tells us. The importance of identifying this group is so that you can avoid doing business with them. Why invest good money and energy to go after people who, at the end of the day, will do business with you anyway if you meet their practical requirements but will never be loyal if you don’t? It’s not too hard to recognize where people fall on the spectrum once you’re in a relationship with them; the opportunity is to figure out which is which before you decide to work with them.

We all sit at different places on this spectrum depending on the product or idea. Most of us are fiercely loyal to certain products and ideas at various times and demonstrate left-side-of-the-curve behavior. And for other products or ideas we exhibit right-side-of-the-curve behavior. When we sit on one side of the spectrum, we often have a hard time understanding those on the other side because their behavior doesn’t make sense to us. My sister is an early adopter when it comes to fashion trends, whereas I’m firmly in the late majority. It was only recently that I finally caved and bought a pair of overpriced designer blue jeans. I admit they look good, but I still think they aren’t worth the money and I can’t understand why my sister thinks they are.

In contrast, I’m an early adopter for some technologies. I bought a Blu-ray DVD player before they had perfected the technology. I paid about four or five times more for it compared to a regular DVD player. My sister can’t understand why I waste my money on all that “useless stuff,” as she puts it. We will never see eye to eye on this stuff.

Each of us assigns different values to different things and our behaviors follow accordingly. This is one of the major reasons why it is nearly impossible to “convince” someone of the value of your products or ideas based on rational arguments and tangible benefits. It’s the ol’ Ferrari and Honda Odyssey debate again. Designer jean companies (or my sister) can talk to me until they are blue in the face about the importance of fabric quality, design and workmanship—it goes in one ear and out the other. Similarly, it can be proven, beyond a shadow of doubt, the rational benefits of choosing a $500 DVD player over a $100 one; my sister won’t hear a word of it. And so the game of manipulation ensues. Again, although always effective, manipulations don’t breed loyalty and they increase costs and stress for all parties involved.

Most people or organizations that have something to sell, be it a product, service or idea, hope to achieve some level of mass-market success or acceptance. Most hope to penetrate the bell of the curve. Getting there, however, is easier said than done. When you ask small businesses about their goals, many of them will tell you they want to be a billion-dollar business in X number of years. The odds of that happening, unfortunately, don’t look good. Of the 27 million businesses registered in the United States, fewer than 2,000 ever reach a billion dollars in annual revenues. And 99.9 percent of all businesses in America have fewer than 500 employees. In other words, mass-market success is really hard to achieve.

Big companies have similar challenges repeating their mass-market success. Just because they’ve done it once or twice doesn’t mean they know how to do it every time. The Zune, Microsoft’s entry into the multigigabyte mp3 player market, for example, was pegged to “take on the iPod.” It didn’t happen. Even if the quality is superior, there is more to succeeding than just the product and the marketing. Don’t forget, the superior Betamax technology did not beat out the substandard VHS technology as the standard format for videotape in the 1980s. The best does not always win. Like any natural law, the Law of Diffusion must be considered if mass-market acceptance is important to you. Refusal to do so will cost a lot of money and may result in a mediocre success, if not complete failure.

There is an irony to mass-market success, as it turns out. It’s near impossible to achieve if you point your marketing and resources to the middle of the bell, if you attempt to woo those who represent the middle of the curve without first appealing to the early adopters. It can be done, but at massive expense. This is because the early majority, according to Rogers, will not try something until someone else has tried it first. The early majority, indeed the entire majority, need the recommendation of someone else who has already sampled the product or service. They need to know someone else has tested it. They need that trusted, personal recommendation.

According to the Law of Diffusion, mass-market success can only be achieved after you penetrate between 15 percent to 18 percent of the market. That’s because the early majority won’t try something new until someone else has tried it first. This is why we have to drop our price or offer value-added services. We’re attempting to reduce the risk tolerance of these practical-minded people until they feel comfortable to buy. That’s what a manipulation is. They may buy, but they won’t be loyal. Don’t forget, loyalty is when people are willing to suffer some inconvenience or pay a premium to do business with you. They may even turn down a better offer from someone else—something the late majority rarely does. The ability to get the system to tip is the point at which the growth of a business or the spreading of an idea starts to move at an extraordinary pace. It is also at this point that a product gains mass-market acceptance. The point at which an idea becomes a movement. When that happens, the growth is not only exponential, it is automatic. It just goes.

The goal of business then should not be to simply sell to anyone who wants what you have—the majority—but rather to find people who believe what you believe, the left side of the bell curve. They perceive greater value in what you do and will happily pay a premium or suffer some sort of inconvenience to be a part of your cause. They are the ones who, on their own volition, will tell others about you. That 15 to 18 percent is not made up of people who are simply willing to buy the product. It is the percentage of people who share your beliefs and want to incorporate your ideas, your products and your services into their own lives as WHATs to their own WHYs. They look to WHAT you do as a tangible element that demonstrates their own purpose, cause or belief to the outside world. Their willingness to pay a premium or suffer inconvenience to use your product or service says more about them than it does about you and your products. Their ability to easily see WHY they need to incorporate your products into their lives makes this group the most loyal customers. They are also the most loyal shareholders and the most loyal employees. No matter where they sit in the spectrum, these are the people who not only love you but talk about you. Get enough of the people on the left side of the curve on your side and they encourage the rest to follow.

I love asking businesses what their conversion is on new business efforts. Many answer proudly, “Ten percent.” Even if you ignore the principles of The Golden Circle, the law of averages says you can win about 10 percent of the business. Throw enough spaghetti against the wall and some of it sticks. To grow the business, all you need to do is more prospecting, which is why growing your business by aiming at the middle of the curve is so expensive. Though the business may grow, the average will stay about the same, and 10 percent is not enough for the system to tip.

Likewise, 10 percent of your existing customers or clients will naturally show loyalty to you. But why are they so loyal? Like our inability to explain why we love our spouses, the best we can muster up to explain what makes them such great clients is, “They just get it.” And though this explanation may feel right, it is completely unactionable. How do you get more people to “get it”? This is what Moore refers to as the “chasm,” the transition between the early adopters and the early majority, and it’s hard to cross. But not if you know WHY.

If you have the discipline to focus on the early adopters, the majority will come along eventually. But it must start with WHY. Simply focusing on so-called influencers is not enough. The challenge is, which influencers? There are those who seem to fit the influencer profile more than others, but in reality we are all influencers at different times for different reasons. You don’t just want any influencer, you want someone who believes what you believe. Only then will they talk about you without any prompts or incentives. If they truly believe in what you believe and if they are truly on the left side of the curve they won’t need to be incentivized; they’ll do it because they want to. The entire act of incentivizing an influencer is manipulative. It renders the influencer completely inauthentic to his or her group. It won’t take long for the group to find out that a recommendation wasn’t made with the group’s best interest in mind, but rather because of one person’s self-interest. Trust erodes and the value of the influencer is rendered useless.

Refusing to Consider the Law of Diffusion Will Cost You

In 1997, TiVo was racing to market with a remarkable new device. Few would debate that from the time the product was introduced to the present day, TiVo has had the single highest-quality product in its category. The company’s PR has been extraordinary. They have achieved an unaided awareness that most brands can only dream of. They have become more than generic terms, like Kleenex, Band-Aids and Q-tips. In fact, they have been able to achieve more than generic status; they are a verb in the English language, “to TiVo.” They were well funded with venture capital and had a technology that could truly reinvent how we consume television. The problem was, they marketed their technology directly to the middle of the bell curve. Seeing the mass-market appeal of the product, they ignored the principles of the Law of Diffusion and targeted the masses. Compounding that bad aim, they attempted to appeal to the cynical majority by explaining WHAT the product did instead of stating WHY the company or the product existed in the first place. They attempted to convince with features and benefits.

They basically said to the mass market:

We’ve got a new product.

It pauses live TV.

Skips commercials.

Rewinds live TV.

Memorizes your viewing habits and records shows on your behalf without your needing to set it.

Analysts were intrigued by the prospects of TiVo as well as its competitor, Replay, a well-funded start-up backed by venture capital. One market researcher estimated that these so-called personal TV receivers would reach 760,000 subscribers by the end of the first year.

TiVo finally shipped in 1999. Mike Ramsay and Jim Barton, two former colleagues who had founded TiVo, were certain the TV-VIEWING public was ready. And they may have been if only TiVo knew how to talk to them. But despite the excitement among analysts and technophiles, sales were hugely disappointing. TiVo sold about 48,000 units the first year. Meanwhile, Replay, whose backers included the founders of Netscape, failed to gain a following and instead became embroiled in a dispute with the television networks over the way it allowed viewers to skip ads. In 2000, the company adopted a new strategy and a few months later was sold to SonicBlue, which later filed for bankruptcy.

Analysts were stumped as to why the TiVo machines weren’t selling better. The company seemed to have everything going for it. After all, they had the recipe for success: a great-quality product, money and ideal market conditions. In 2002, after TiVo had been on the market nearly three years, a headline in Advertising Age summed it up best: “More U.S. Homes Have Outhouses than TiVos.” (At the time, there were 671,000 homes with outhouses in the United States, compared with 504,000 to 514,000 homes with TiVo.) Not only were sales poor, but the company has not fared well for its shareholders either. At the time of the initial public offering in the fall of 1999, TiVo stock traded at slightly over $40 per share. A few months later it hit its high at just over $50. The stock declined steadily for the rest of the year, and except for three short periods since 2001, it has never since traded over $10.

If you apply the principles of The Golden Circle, the answer is clear—people don’t buy WHAT you do, they buy WHY you do it, and TiVo attempted to convince consumers to buy by telling them only WHAT the product did. Features and rational benefits. The practical-minded, technophobic mass market’s response was predictable. “I don’t understand it. I don’t need it. I don’t like it. You’re scaring me.” There were a small number of TiVo loyalists, probably about 10 percent, those who just “got it,” who didn’t need an explicit articulation of WHY. They exist to this day, but there were not enough of them to create the tipping point that TiVo needed and predicted.

What TiVo should have done is talked about what they believed. They should have talked about WHY the product was invented in the first place, and then ventured out to share their invention with the innovators and early adopters who believed what they believed. If they had started their sales pitch with WHY the product existed in the first place, the product itself would have become the proof of the higher cause—proof of WHY. If their Golden Circle was in balance, the outcome might have been quite different. Compare the original list of features and benefits with a revised version that starts with WHY: If you’re the kind of person who likes to have total control of every aspect of your life, boy do we have a product for you.

It pauses live TV.

Skips commercials.

Rewinds live TV.

Memorizes your viewing habits and records shows on your behalf without you needing to set it.

In this version, all the features and rational benefits serve as tangible proof of WHY the product exists in the first place, not the reasons to buy, per se. The WHY is the belief that drives the decision, and WHAT it does provides us a way to rationalize the appeal of the product.

Confirming their failure to tap the right segment of the market, TiVo offered a very rational explanation of what was happening. “Until people get their hands on it,” Rebecca Baer, a spokeswoman for TiVo, told the New York Times in 2000, “they don’t understand why they need this.” If this line of logic was true, then no new technology would ever take hold. A fact that is patently untrue. Though Ms. Baer was correct about the mass market’s failure to understand the value, it was TiVo’s failure to properly communicate and rally the left side of the bell curve to educate and encourage the adoption that was the reason so few people “got their hands on it.” TiVo did not start with WHY. They ignored the left side of the curve and completely failed to find the tipping point. And for those reasons, “people didn’t get their hands on it,” and the mass market didn’t buy it.

Fast-forward almost a decade. TiVo continues to have the best digital video-recording product on the market. Its unaided awareness continues to be through the roof. Nearly everyone knows now what the product is and what it does, yet the company’s future is by no means secure.

While millions of viewers may say they “TiVo” things all the time, unfortunately for TiVo, they aren’t using a TiVo system. Rather, they “TiVo” shows using a digital video recorder provided by the cable or satellite company. Many try to make the argument that TiVo’s failure was due to the cable companies’ superior distribution. But we know that people often go out of their way, pay a premium or suffer an inconvenience to buy a product that resonates on a visceral level with them. Until recently, people who wanted a custom Harley-Davidson motorcycle waited upwards of six months to a year to take delivery of their product. By any standard, that’s just bad service. Consumers could have just walked into a Kawasaki dealership and walked right out with a brand-new bike. They could have found a very similar model with similar power and maybe even for less money. But they suffered the inconvenience willingly, not because they were in the market for a motorcycle, but because they wanted a Harley.

TiVo is not the first to ignore these sound principles and won’t be the last. The meager success of satellite radio technology like Sirius or XM Radio has followed a similar path. They offered a well-publicized, well-funded new technology that attempted to convince users with a promise of rational features and benefits—no commercials and more channels than the competition. Throw in an impressive array of celebrity endorsements, including rap star Snoop Dogg and 1970s pop icon David Bowie, and the technology still didn’t stick. When you start with WHY, those who believe what you believe are drawn to you for very personal reasons. It is those who share your values and beliefs, not the quality of your products, that will cause the system to tip. Your role in the process is to be crystal clear about what purpose, cause or belief you exist to champion, and to show how your products and services help advance that cause. Absent a WHY, new ideas and technologies quickly find themselves playing the price-and-feature game—a sure sign of an absence of WHY and a slide into commodity status. It is not the technology that failed, it was how the companies tried to sell it. Satellite radio has not displaced commercial radio in any meaningful way. Even when Sirius and XM merged, hoping the joined force of their companies would help change their luck, shares for the combined company sold for less than 50 cents apiece. And, last time I checked, XM was offering a discount, a promotion, free shipping and a claim of being “America’s 1 satellite radio service with over 170 channels” to push their product.

Give the People Something to Believe In

On August 28, 1963, 250,000 people from across the country descended on the Mall in Washington, D.C., to hear Dr. Martin Luther King Jr. give his famous “I Have a Dream” speech. The organizers didn’t send out 250,000 invitations and there was no Web site to check the date. How did they get a quarter of a million people to show up on the right day at the right time?

During the early 1960s, the country was torn apart by racial tensions. There were riots in dozens of cities in 1963 alone. America was a country scarred by inequality and segregation. How the civil rights movement lifted an idea that all men are created equal to become a movement with the power to change a country is grounded in the principles of The Golden Circle and the Law of Diffusion.

Dr. King was not the only person alive during that time who knew WHAT had to change to bring about civil rights in America. He had many ideas about WHAT needed to happen, but so did others. And not all of his ideas were good. He was not a perfect man; he had his complexities.

But Dr. King was absolute in his conviction. He knew change had to happen in America. His clarity of WHY, his sense of purpose, gave him the strength and energy to continue his fight against often seemingly insurmountable odds. There were others like him who shared his vision of America, but many of them gave up after too many defeats. Defeat is painful. And the ability to continue head-on, day after day, takes something more than knowing what legislation needs to be passed. For civil rights to truly take hold in the country, its organizers had to rally everyone. They may have been able to pass legislation, but they needed more than that, they needed to change a country. Only if they could rally a nation to join the cause, not because they had to, but because they wanted to, could any significant change endure. But no one person can effect lasting change alone. It would take others who believed what King believed.

The details of HOW to achieve civil rights or WHAT needed to be done were debatable, and different groups tried different strategies. Violence was employed by some, appeasement by others. Regardless of HOW or WHAT was being done, there was one thing everyone had in common—WHY they were doing it. It was not just Martin Luther King’s unflappable conviction that was able to stir a population, but his ability to put his WHY into words. Dr. King had a gift. He talked about what he believed. And his words had the power to inspire: “I believe.”

“I believe.”

“I believe.”

“There are two types of laws,” he shared, “those that are just and those that are unjust. A just law,” Dr. King expounded, “is a man-made code that squares with the moral law. An unjust law is a code that is out of harmony with the moral law. . . . Any law that uplifts the human personality is just. Any law that degrades human personality is unjust. All segregation statutes are unjust because segregation distorts the soul and damages the personality.” His belief was bigger than the civil rights movement. It was about all of mankind and how we treat each other. Of course, his WHY developed as a result of the time and place in which he was born and the color of his skin, but the civil rights movement served as the ideal platform for Dr. King to bring his WHY, his belief in equality, to life.

People heard his beliefs and his words touched them deep inside. Those who believed what he believed took that cause and made it their own. And they told people what they believed. And those people told others what they believed. Some organized to get that belief out more efficiently.

And in the summer of 1963, a quarter of a million people showed up to hear Dr. King deliver his “I Have a Dream” speech on the steps of the Lincoln Memorial.

But how many people showed up for Dr. King?

Zero.

They showed up for themselves. It was what they believed. It was what they saw as an opportunity to help America become a better version of itself. It was they who wanted to live in a country that reflected their own values and beliefs that inspired them to get on a bus to travel for eight hours to stand in the Washington sun in the middle of August to hear Dr. King speak. Being in Washington was simply one of the things they did to prove what they believed. Showing up that day was one of the WHATs to their own WHY. This was a cause and it was their cause.

Dr. King’s speech itself served as a visceral reminder of the belief shared by everyone who stood there listening. And that speech was about what he believed, not how they were going to do it. He gave the “I Have a Dream” speech, not the “I Have a Plan” speech. It was a statement of purpose and not a comprehensive twelve-point plan to achieving civil rights in America. Dr. King offered America a place to go, not a plan to follow. The plan had its place, but not on the steps of the Lincoln Memorial.

Dr. King’s articulation of his belief was something powerful enough to rally those who shared that belief even if they weren’t personally affected by the inequalities. Nearly a quarter of the people who came to the rally that day were white. This was a belief not about black America, this was a belief about a shared America. Dr. King was the leader of a cause. A cause for all those who believed what he believed regardless of skin color.

It wasn’t the details of his plans that earned him the right to lead. It was what he believed and his ability to communicate it clearly that people followed. In essence, he, like all great leaders, became the symbol of the belief. Dr. King came to personify the cause. To this day we build statues of him to keep that belief alive and tangible. People followed him not because of his idea of a changed America. People followed him because of their idea of a changed America. The part of the brain that influences our behavior and decisions does not have the capacity for language. We have trouble saying clearly, in emotional terms, why we do what we do, and offer rationalizations that, though valid and true, are not powerful enough to inspire others. So when asked why they showed up that day, people pointed to Dr. King and said simply, “Because I believe.” More than anything else, what Martin Luther King Jr. gave us was clarity, a way to explain how we felt. He gave us the words that inspired us. He gave us something to believe in, something we could easily share with our friends. Everyone at the Mall that day shared a set of values and beliefs. And everyone there that day, regardless of skin color or race or sex, trusted each other. It was that trust, that common bond, that shared belief that fueled a movement that would change a nation.

We believed.

We believed.

We believed.