What does “the Tornado” mean and why is it so important?
A Tornado is a brief period of hyper-growth when markets accelerate to triple-digit growth rates and new product categories spread like wildfire.
When a new trend is becoming popular, a new category is created and this category needs a leader. Inside the Tornado is about becoming that leader.
This is the moment when the technology world is changing rapidly and big companies are created. Only some companies are able to take advantage of this discontinuous innovation phenomenon. The majority of companies don’t. There is not enough space and margin for everyone. There is a winner, some hugely successful-followers, and then just a red ocean of small competing companies that missed their opportunity.
You might know Crossing the Chasm, a book by Geoffrey A. Moore’s. If not.. please just read it. It will change your life. These two books are connected so it’s a good idea to know them both. Inside The Tornado is simply much less popular.
In Crossing the Chasm Moore writes about the famous technology adoption life cycle.
- Innovators - technology enthusiasts, they love to play with new things. This group is unfortunately small and has no budget.
- The Early Adopters - this is the first group of users which is big enough to buy something substantial. Still - they focus on new shiny things.
- The Early Majority - this group is looking for technologies that help their organizations to be more productive. They look for a product which is working and delivering business values. Usually, they want to buy from the market leader.
- The Late Majority - they buy technology when they see that everyone else already bought it. Large group.
- Laggards - small group, not interested in technology.
As you remember from reading Crossing The Chasm, there is a chasm between Early Adopters and Early Majority. This chasm is very hard to overcome. The Early Majority expect a whole product which is fully functional. This is a tectonic shift from the Early Adopters who are just happy to experiment with the tech, because it’s new. To build a complete product, the company usually must focus on a small subset of the market. This is not so easy (picking the right group of clients and business challenges that we will solve with our tech). This is how you build your beachhead.
Now, moving from Crossing The Chasm to Inside The Tornado. This second book is entirely about winning the Early Majority. Why? Because winning this group means winning the market. This is the single most important phase of every new market.
The Bowling Alley
This is how Moore describes the first phase of the Mass Market (Early Majority + Late Majority) that opens after the company has established a whole product for the selected beachhead.
During The Bowling Alley phase, the company must use the initial beachhead customer as the head bowling pin to win further market opportunities. Only after that, the technology will be standardized enough to be bought by the Mass Market.
At the right time suddenly magic happens. Straight from the Bowling Alley the Leader of this phase is entering the phase called the Tornado. Why? Because at some point pragmatic buyers (Early Majority) see that the market is changing and they need to buy new technology to stay relevant. Usually a lot of them will see this in this same period, creating a massive shift on the market.
At some point, Early Majority Clients are voting (by buying) who the winner is. As the winner is chosen almost all other players will buy from this single company.
During The Tornado there is one clear winner. Usually, there is also another company winning second place and then there are a lot of small players. Winning companies win the biggest margins.
The strategy for winning the Tornado phase is unintuitive if you think about it for the first time. Everything you care about during the Bowling Alley phase (focus on the client, change the product for the client, niche positioning) will block you from winning the Tornado Phase.
For the Tornado phase, you focus on mass-market clients, you focus on distribution and you standardize your product as much as possible. You need to be able to ship as many products as the market is able to accommodate. This is brutal.
This phase ends the Tornado. Now the market is divided and stable again. If you win the Tornado you are safe for many years and you will have secured substantial revenue as a leader for a long time.
During this phase, you need to change your strategy again, start to differentiate and protect your position.
The book describes how to navigate through the Tornado phase of the market. You will read a lot about strategic partnerships, fighting against competitors, market positioning, sales strategies.
This book is a strong TOP10 of the most important books about business I’ve ever read. Understanding and implementing strategies from this book can significantly increase your chances of winning.