Customer Hypotheses – Customer Categories

During the Uniform Phase of the GUEST Methodology, it was presented the Business Model Canvas by Alexander Osterwalder with a deep dive on the customer segment building block. In a first step the information gathered during the GO phase was formalized though the “Knowing the customer” questionnaire and the Actor ID Cards.

Then, customers were placed in the document through a segmentation based on:

• Their needs and problems to which the value proposition is addressed;

• Behavioural, psychological, social, economic, geographical features;

• The reference market in which they are included: mass market: niche market, segmented market, diversified market, multi-selected market.

During the course “Innovation management and product development” held by the professor Marco Cantamessa, an additional segmentation was presented which inspired an evolution of the Learning Canvas. In 1962, Everett Rogers proposed the technological segmentation represented in figure 42.

113

Figure 42: Rogers' curve⁵⁵

Rogers based its segmentation on the diffusion S-curve suggesting that customers adopt a certain technology in different moments of the product/service lifecycle associated to its technical performances. The Rogers’ curve approximates the diffusion sales curve to a normal distribution split at the midpoint and at -2, +2 and+1 standard deviation. It displays how the different technological segments distribute along the curve through the number of generated sales and the time required to accept the innovative technology. He identified five main customer categories belonging to the product/service lifecycle with detailed descriptions and market coverage percentages:

• Innovators (enthusiasts): they represent 2% of the market addressed by technology.

Customers love technology just for the sake of interest and experience provided by innovation. In the case of the B2B market, customers represent business innovators who pursue innovation for their specific requirements. They represent the initial beachhead market to test the immature technology offered by startup, instead they result to be less interesting from an economic point of view for large companies.

Usually, they act as lead users (von Hippel 1986) proving useful feedbacks and insights to improve the product/service;

• Early Adopters (visionaries): they represent customers who understand the role that the technology will play in the future and decide to gain some experience before obtaining future benefits also through the cost-benefit analysis that suggest waiting.

They represent the 14% of the market and for this reason it may result financially and temporally attractive to impose the emergent brand;

• Early majority (pragmatists): customers who decide to adopt a certain technology only when the cost-benefit analysis results to be profitable. They avoid immature, too costly or difficult to use technology postponing its adoption. They represent 34% of the market and result to be an attractive segment to address;

55 M. Cantamessa, F. Montagna (2018)

114

• Late majority (conservatives): they represent that customer segments who decide to adopt a certain technology based on the cost-benefit analysis with additional hesitation due to the perception of risk and the causes of change. They represent 34

% percent of the market and result to be very appealing also for the reduction of uncertainty present in the market at this time of the product/service lifecycle.

• Laggards (sceptics): customers which adopt the technology very late because of their specific needs or reluctance to change. The interest generated by this segment is low due to the size, 16%, and the delay.

The segmentation proposed by Rogers was enriched by Goeffrey A. Moore in 1991 with his book called “Crossing the Chasm” in which he discusses the homonymous principle.

The American theorist suggests the existence of a deep gap between the early adopters and the early majority segments, the so-called chasm. The difference consists in the attitude characterizing the two segments toward maturity of product/service. Indeed, early adopters looks to the future and accept immature technology for the reasons illustrated previously, while the early majority pretends a product/service which perfectly matches their needs and requirements. The product/service offered to the early adopters and early majority cannot be the same. This evolution phase of product/service development will determine the crossing of the chasm with the consequence adoption of a large market and the success of the proposed technology.

The segmentation with the relative principle presented is focused on the innovative changes which the product/service brings to its customers through a specific technology.

The innovation is developed at the product/service level and driven by the reference technology and the relationships between the components, as presented in the taxonomy by Henderson and Clark discussed in the initial chapter of the thesis.

Even if the segmentation follows this framework, it is possible to adapt it at a more generic innovation concept concerning the entire business model built by the startup, and not only the product/service technology. Indeed, the five segments described not only have different attitudes and peculiarities towards the technological features characterizing the core product/service but also to all the elements needed to compose the business model of the organization, collected and summarized in the Business Model Canvas. The strategic objective, the value proposition, the customer relationships, the partnerships, the direct and indirect channels to reach the segments vary in a wide range. The communication and marketing required to attract early adopters or early majority is completely different, the channels accepted to receive the product/service by the innovators and the late majority is not the same, and so on.

I decided to introduce this adaptation of the segmentation proposed by Rogers in the Learning Canvas for four main reasons:

1. Supporting a more detailed customer segmentation associating each customer segment identified in the previous phases of the GUEST Methodology to a specific segment spotted by Rogers in the development of his model. In this way, each customer segment is inserted in a specific iterative step of the business lifecycle;

115 2. Design customized qualitative and quantitative hypothesis around the customer segment belonging to a certain step based on additional information towards its innovation attitude;

3. Evaluate the metrics selected to represent the customer segment performances based on reliable forecast of the market share belonging to these customers;

4. Represent clearly the protagonists involved in each iteration, such as changes over time and the role being fulfilled in the business lifecycle, supporting the business evolution.

Each block belonging to the Customer Hypothesis column presents a starting row that collectsg information about the customer segment, identified in the Business Model Canvas, on which the split-test is implemented and its association with one of the five customer segments described in the Rogers’ curve, which are called “categories” in the Learning Canvas to avoid confusion.