by Richard Dale, Managing Director at Big Data Boston Ventures
Gartner Group developed the Hype Cycle in 1995. In line with the quote “All models are wrong but some are useful” (George E. P. Box), the Hype Cycle neatly captures and simplifies how new technology is adopted in both consumer and commercial settings. Knowing where your business (and its underlying technology) is located on the Hype Cycle curve can help you plan better, especially with regard to go-to-market, sales and financing strategies.
- 3D Printing is somewhere between the Technology Trigger and the Peak of Inflated Expectations. (The press loves it, but it is still mostly used by hobbyists and very early adopters—and the technology is immature.)
- Big Data could be seen to be at the Peak of Inflated Expectations. (Everyone is talking about it; there are lots of stories about it, but most companies have no clue what to do about it.)
- Internet TV is probably in the Trough of Disillusionment. (A recent New Yorker article notes that very few viewers are cutting the cable and relying on Internet for premium TV.)
- Web Sentiment Analysis could be on the Slope of Enlightenment. (Big corporations are starting to reap benefits.)
- Smart phones have reached the Plateau of Productivity both for personal and corporate use.
One simplification of the Hype Cycle is that some technologies never make it out of the Trough of Disillusionment. In many ways, the Trough parallels the Chasm of Geoffrey Moore’s Crossing the Chasm, and he illustrates the dangers of the Chasm more than adequately in that book. Perhaps we should imagine a very small hole in the bottom of the Trough and know that some companies or technologies fall through, never to be heard from again (the Segway?).
Let’s turn to how to gain insight from this model in relation to your startup. The first step is to understand where you are on the Hype Cycle. Are you bringing a new technology to market that is unproven (still near the Trigger stage)? Is your business built on something that is in the news every day (Peak of Hype)? Or is it based on something that many think has failed (in or past the Trough) but in which you still have deep confidence? Being honest with yourself about this can be key to positioning your business for success.
If you are on the first section of the Hype curve between the Technology Trigger and the Peak of Hype, you can harness that hype to hire employees, garner press, grow sales, and find investment. The hype factor will surely tempt you to have confidence with attitude! However, you need to plan for lean times ahead. The hype will surely break, and your company—built on such exciting technology—will slide into the Trough of Disillusionment. The press will ignore you, sales growth will slow (or reverse), and new investors will shun you. Even worse, your existing customers may abandon you, employees may leave for the next hot thing, and your current investors may have a hard time continuing to support you.
Confidence without attitude during the upswing in hype allows you to remind employees, investors, and even customers that there may be tough times ahead. Build relationships so that stakeholders are prepared for those lean times and willing to stick with you. Just as important, understand that the status quo of exuberant hype for your business will change, and ensure you have a cash cushion and supportive investors to help you get through the Trough. When the hype breaks, be prepared to switch gears quickly enough to stay ahead of the changes, and position yourself to move your business (and your customers) along the Slope of Enlightenment. You need to be ready to talk about the real value you can provide your customers and the ROI associated with your product. You can no longer rely on the hype to carry you along, and you have to be aware it may take an extended period of time for the market to fully understand the value you can bring, finally reaching the Plateau of Productivity.
Similarly, if you are starting your business after the hype has broken, then you must indeed be confident to even be in the market, and you will need all the confidence you can get because attitude will certainly not be helpful! Working out where your technology sits on the Slope of Enlightenment will inform you how cautious your sales and marketing spending needs to be, depending on how soon the market will turn back to you when the Productivity Plateau comes into sight.
In summary, strategic situational awareness needs to include understanding the location of your technology on the Hype curve. Ensuring your team, your investors, and even your customers are well aware of this cycle prepares them to be supportive when you need them and clarifies the opportunities that still lie ahead.
Richard Dale is Managing Director of Big Data Boston Ventures, a new VC fund that invests in early stage big data companies. Richard’s proven leadership abilities combined with deep technical and operational expertise provide a platform to advise entrepreneurs in building solid technology companies. Richard is a well-regarded mentor to founders of early stage startups in the Big Data Boston and Sigma portfolios, as well as other startups including many from TechStars Boston, MassChallenge, and HealthBox Boston.
Previously Richard was a Principal at Sigma Partners and before that was a co-founder at Phase Forward, a provider of software services for pharmaceutical clinical trials, which went public and later was sold to Oracle. Prior to that Richard worked in a series of management and technical roles at leading technology startups in the Boston area.
Richard blogs at http://venturecyclist.blogspot.com