In the 1990s, I worked for a company whose tag line was: “We build digital businesses.” What many entrepreneurs quickly realize is that building the business is often the easy part. Growing and maintaining the business can be much tougher and figuring out how to appeal to new consumers is no small feat.
One reason is that consumers are far from homogeneous. Different segments have different risk tolerances, ways of making decisions, and — perhaps most challenging for growing businesses — preferences for when and how they adopt innovations.
After Everett Rogers famously made the distinction between early and late adopters, academics in marketing and technology identified a number of differences between those who take quickly to innovations and those who don’t. Early adopters are typically younger, more willing to take risks, more eager to try new things, more affluent, and substantially less numerous.
For digital businesses looking to grow, these distinctions lead to two important consequences. First, what worked with early adopters isn’t likely to work with later adopters. In launching new products or services, start-ups tend to accumulate deep knowledge about customers at the leading edge of a technology. But that knowledge doesn’t necessarily apply to other consumer groups; that’s one reason so many new firms struggle to create second rounds of offerings. To be successful, companies need to innovate for the consumers they want, not the ones they have.
Take Snapchat, for example. The company built its current market and reputation on photo- and video-sharing technology that was intended to be temporary — pictures and messages disappear within 10 seconds of being viewed. While the app is notoriously viewed as a medium for sexting, most users seem to use it simply for entertainment, taking pictures of silly and amusing things to share with friends. But now Snapchat is looking to move beyond its early adopters — many of whom are students with minimal purchasing power — and get into a broader and more lucrative demographic. This has meant offering fundamentally different types of content, including mini-TV series (see the announcement from Sofia Vergara) and news (see the hiring of ex-CNN correspondent Peter Hamby).
Second, early adopters often view later adopters with disdain, especially if the offering can be seen as a status symbol or there are opportunities for different user groups to interact. Remember that sinking feeling you had when your mother joined Facebook? That’s what I’m talking about.
In extreme cases, an inflow of late adopters can prompt early adopters to abandon a business entirely. There are many reasons why MySpace failed, but early users’ frustration with the invasion of businesses and unsophisticated consumer groups undoubtedly played a significant role.
Given the relatively small size of the early-adopter pool, sacrificing a few first-generation users may seem like a minor loss and a worthwhile trade-off. But original users confer a certain legitimacy to a business. Moreover, these risk-seeking, innovative, exploratory consumers pose a potential competitive threat if they become disenchanted and leave. They may wind up leading the charge for — or even founding — a competing business that they feel is truer to your business’s original purpose. While there is no way to know for sure, it is likely that the early adopters of Google’s search, the iPhone, and Facebook included many disenchanted early adopters of Yahoo!, Blackberry, and MySpace.
If that happens, you may find yourself in the midst of a competition between user generations or in a fad cycle where start-ups’ short-term popularity is followed by saturation and then by the birth of new start-ups, and so on. Twitter or even Facebook may be vulnerable to this type of cycle.
What to do?
Make sure your innovation efforts are aimed at the expectations and needs of the next wave of adopters, not just those on the leading edge. Firms often have much more data on current users than prospective customers, and in organizations that put a lot of emphasis on data, the consequence is that projects targeting existing users tend to win resources while those targeting new ones don’t. Firms need something other than beta testing with existing users to figure out how late adopters might respond to a given innovation. Identify the demographics and characteristics of specific potential adopter groups, then use classic tools like focus groups (online or offline) to gain a better understanding of the needs and wants of the next wave of adopters.
At the same time, actively engage early adopters to ensure that they remain connected to and happy with the business. Even after these early adopters have served their purpose as tastemakers who helped to bring in new consumers, they are still important to the business. Making sure you don’t lose them can reduce long-term risk. Amazon’s continuous innovation through its Prime program has played a significant role in giving heavy-using early adopters a reason to remain connected to the brand and the company.
By being aware of the differences between adopter groups and taking those differences into account for strategic decisions, you can help your digital business move past “build” and into “grow.”