The Gorilla Game

Geoffrey Moore, Paul Johnson and Tom Kippola applied the technology adoption framework from Moore's Crossing the Chasm and Inside the Tornado to public market investing in technology stocks.

Their framework identifies a market structure that emerges in discontinuous technology categories with high switching costs and strong network effects. When such a category enters mass adoption, which Moore calls the tornado, one company typically becomes the gorilla, capturing the majority of the market and the great majority of the profits, while others become chimpanzees, holding defensible niches, or monkeys, selling clones at low margin. Their investment prescription follows: identify a category entering the tornado, buy a basket of all plausible gorilla candidates, hold through the volatility, and consolidate the position into the winner as it becomes clear, selling the others.

They are explicit about when the method does not apply: categories without proprietary architecture and high switching costs produce no gorilla, and the strategy fails there. The book was published in 1998, at the height of the technology bubble, and its examples date badly; several of the companies it identifies as gorillas were displaced or destroyed. The framework's underlying observation, that winner-take-most dynamics appear in categories with switching costs and network effects, is sound and the strategy of buying the category rather than the company is a defensible response to uncertainty about which firm wins.

American technology-marketing consultant and venture partner at Mohr Davidow Ventures who wrote Crossing the Chasm.

Crossing the Chasm identifies the gap between early adopters and the pragmatic majority and prescribes the beachhead answer: dominate one narrow segment with a complete product before widening. Inside the Tornado and Living on the Fault Line carry the model into hypergrowth and into managing businesses at different stages of maturity at once.

Mohr Davidow Ventures