A while ago I went to a seminar delivered by Dr Uday Phadke at the Engine Shed in Bristol. With Shailendra Vyakarnam, Phadke outlined the key aspects of their book “Camels, Tigers and Unicorns” a deep analysis, thoroughly researched journey of how technology led start ups, grow and scale. Its been done before, but never to this degree of research and empirical evidence, and that is a very important distinction.
Since then I’ve read the book and been thinking about the implications ever since. Part of this has been to use some of the tools they produced to help my clients with their journey using coaching as the base. I’ve now used it several times with my clients to help them identify their current situation through the ‘Triple Chasm Model’ and consequently structure, using the ‘vectors,’ to help them focus on the five things they need to be doing out of the million things they feel they should be doing. It’s been invigorating watching the evolution in their thinking and the enlightening way they develop their plans around executing the things that really matter and have impact. Using a coaching approach to develop this has positively changed their businesses and them too.
Increasingly and deliberately I’m working more and more with growing social enterprises and, despite the myth, how they grow isn’t and should not be any different to how other enterprises grow. They too can use the approach to help them meet the challenges and jump the hurdles that inevitably throw themselves at social entrepreneurs.
Its interesting, Phadke and Vyakarnam put customer at the heart of their analysis, being very clear that growth via investment is rather subjective, whilst measuring customer numbers allows tech businesses to evaluate the development of enterprises in a variety of market spaces across the world.
This maybe a contentious point but in reality this is an important metric for start ups and scale ups in the tech world; customers and growth is the key, more objectives, performance indicators, and investment actually just funds the scaling of it.
Like all models, there are strengths and weaknesses but the approach has, on the ground, helped some of my clients to gain a deep understanding of where they need to be concentrating energy, resources and support. I outline below a very abridged version of the model.
The Triple Chasm Model
If you measure customer growth, there are three distinctive points in the growth of the enterprise;
Chasm I – the shift from the idea to a working prototype or minimum viable product
Chasm II – the development of that prototype to a product/service that has a sustainable business model
Chasm III – then the transition to a level where the there is a serious scale in the customer/user numbers.
Interesting the authors called them chasms as they felt they described clearly the scale of the challenge at each of the stages and felt that the usual phraseology ‘valley of death’ was “a singularly unhelpful metaphor.”
What their extensive research unveiled was that enterprises went through Chasm I in the shortest time, with Chasm III not far behind. Chasm II, however, was different and suggests that executing a viable business model that not only adds value to customers but to the enterprise too is the most demanding and perhaps where enterprises have their most challenging difficulties and problems. This is where most tech enterprises fail too. This again is of huge importance.
The next step understands the vectors that are required to cross the three chasms. Twelve vectors are identified as the direction to take as part of what they describe as the ‘commercialisation process.’
1. Market spaces – understanding the target market space for the idea under development. Understanding the landscape, who are the key players and where are the opportunities to add value.
2. Proposition framing and competitive environment – A critical vector for commercialising technology. Framing the customer proposition defined by the market. Understanding the gaps in current provision.
3. Customer definition – Clear and deep understanding of customers, consumers, users, this then leads to refining the customer proposition.
4. Distribution, marketing and sales – how will the proposition be taken to market, including branding. What are the routes to market?
5. Commercialisation strategy – understanding the overall commercial environment and key drivers.
6. Business model development – often ignored by tech enterprises. The need to understand how the product will be sold, managed and customers serviced leading to a sustainable business model after a few iterations usually.
7. IP management – what are the sources of IP value?
8. Manufacturing and assembly – for some tech enterprises this is critical in terms of integrating design, simulation and manufacturing.
9. Product definition and synthesis – a clear product proposition for the customer is clearly defined and the service proposition aligned.
10. Tech development and deployment – technology readiness to go to market and the deployment options.
11. Talent, leadership and culture – understanding what talent is required, core competencies and how leadership needs to evolve as the enterprise scales.
12. Funding and investment – what funding is required at each stage and how to time this effectively based on the chasms.
Their research goes deeper and they have identified what the critical success factors are at each stage.:
Chasm I – focus on proposition framing, tech development and deployment. You have to be able communicate your value proposition and ship your product. Understanding customers/users and defining the product are critical at this stage. Funding needs, at this stage, are limited which is why bootstrapping or seed funding often applies.
Chasm II – needs focus on all the vectors. Funding sources at this point are critical, as you need to build a team full of talent that can help you balance all the demands the vectors bring. How you’re proposition fits into the market space value chain and the need to acquire specialist skills and leadership. Funding and investment is difficult at this stage as it’s the most risky which is why entrepreneurs need to gear themselves up for spending significant time on raising the funds required to move through this stage without failing customers.
Chasm III – focuses on customer segmentation, distribution, marketing and sales. Your key area of focus is scaling the number of customers and or users. The challenge is essentially one of how to scale. I like to think of it like this; if Chasm II is systemising, Chasm III is optimising. Investment isn’t so prominent here as growth in customers funds the business, however, talent, leadership and culture start to manifest as the focus of development and concentration.
It doesn’t take a genius to immediately see that Chasm II is both the most complex and difficult stage – you’re doing everything which is why I often meet entrepreneurs who describe their life as ‘hectic’, ‘spinning too many plates’ and my favourite ‘I’m knackered.’ This is where my coaching practice is often engaged. For obvious reasons, entrepreneurs and their teams are literally going through it, at pace. Using coaching to facilitate solutions, manage challenges and personally grow works well.
What this approach does emphasise and highlight is the different phases of mind-set and skillset change the founder(s) of the enterprise must go through at each stage. There is something here for all of us in the enterprise support eco system to take note of. Simply put, if your business is going through Chasm I don’t go to a culture seminar go to a value proposition one. If you are going through Chasm II, focus on funding, people and marketing, Chasm III, you can go to that culture seminar now!!
I see many enterprises setting goals, dreaming of end results and getting excited by what they can get rather than what they can add. Goals are great but systems must be put in place to realise those goals. The above approach goes some way to explain what those systems should be at each stage of growth in the enterprise journey and what we need to focus on.
My only challenge to this model and approach is around leadership. If we were to take this literally, then we don’t really need to focus on leadership until we are in the Chasm III stage. Leadership is a pre requisite of running an enterprise at every stage. We don’t just lead our people, we lead customers, we lead stakeholders, we lead funders, we lead innovation, and we lead markets.
Dialogue is the backbone of democracy like leadership is the backbone of enterprise and entrepreneurial growth.