Start with why

Refusing to Consider the Law of Diffusion Will Cost You
In 1997, TiVo was racing to market with a remarkable new device. Few would
debate that from the time the product was introduced to the present day, TiVo
has had the single highest-quality product in its category. The company’s PR has
been extraordinary. They have achieved an unaided awareness that most brands
can only dream of. They have become more than generic terms, like Kleenex,
Band-Aids and Q-tips. In fact, they have been able to achieve more than generic
status; they are a verb in the English language, “to TiVo.”
They were well funded with venture capital and had a technology that could
truly reinvent how we consume television. The problem was, they marketed their
technology directly to the middle of the bell curve. Seeing the mass-market
appeal of the product, they ignored the principles of the Law of Diffusion and
targeted the masses. Compounding that bad aim, they attempted to appeal to the
cynical majority by explaining WHAT the product did instead of stating WHY
the company or the product existed in the first place. They attempted to convince
with features and benefits.
They basically said to the mass market:
We’ve got a new product.
It pauses live TV.
Skips commercials.
Rewinds live TV.
Memorizes your viewing habits and records shows on your behalf without your
needing to set it.
Analysts were intrigued by the prospects of TiVo as well as its competitor,
Replay, a well-funded start-up backed by venture capital. One market researcher
estimated that these so-called personal TV receivers would reach 760,000
subscribers by the end of the first year.
TiVo finally shipped in 1999. Mike Ramsay and Jim Barton, two former
colleagues who had founded TiVo, were certain the TV-VIEWING public was
ready. And they may have been if only TiVo knew how to talk to them. But
despite the excitement among analysts and technophiles, sales were hugely
disappointing. TiVo sold about 48,000 units the first year. Meanwhile, Replay,
whose backers included the founders of Netscape, failed to gain a following and
instead became embroiled in a dispute with the television networks over the way

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it allowed viewers to skip ads. In 2000, the company adopted a new strategy and
a few months later was sold to SonicBlue, which later filed for bankruptcy.
Analysts were stumped as to why the TiVo machines weren’t selling better.
The company seemed to have everything going for it. After all, they had the
recipe for success: a great-quality product, money and ideal market conditions.
In 2002, after TiVo had been on the market nearly three years, a headline in
Advertising Age
summed it up best: “More U.S. Homes Have Outhouses than
TiVos.” (At the time, there were 671,000 homes with outhouses in the United
States, compared with 504,000 to 514,000 homes with TiVo.) Not only were
sales poor, but the company has not fared well for its shareholders either. At the
time of the initial public offering in the fall of 1999, TiVo stock traded at slightly
over $40 per share. A few months later it hit its high at just over $50. The stock
declined steadily for the rest of the year, and except for three short periods since
2001, it has never since traded over $10.
If you apply the principles of The Golden Circle, the answer is clear—people
don’t buy WHAT you do, they buy WHY you do it, and TiVo attempted to
convince consumers to buy by telling them only WHAT the product did.
Features and rational benefits. The practical-minded, technophobic mass
market’s response was predictable. “I don’t understand it. I don’t need it. I don’t
like it. You’re scaring me.” There were a small number of TiVo loyalists,
probably about 10 percent, those who just “got it,” who didn’t need an explicit
articulation of WHY. They exist to this day, but there were not enough of them
to create the tipping point that TiVo needed and predicted.
What TiVo should have done is talked about what they believed. They should
have talked about WHY the product was invented in the first place, and then
ventured out to share their invention with the innovators and early adopters who
believed what they believed. If they had started their sales pitch with WHY the
product existed in the first place, the product itself would have become the proof
of the higher cause—proof of WHY. If their Golden Circle was in balance, the
outcome might have been quite different. Compare the original list of features
and benefits with a revised version that starts with WHY:
If you’re the kind of person who likes to have total control of every aspect of
your life, boy do we have a product for you.
It pauses live TV.
Skips commercials.
Rewinds live TV.
Memorizes your viewing habits and records shows on your behalf without you
needing to set it.

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In this version, all the features and rational benefits serve as tangible proof of
WHY the product exists in the first place, not the reasons to buy, per se. The
WHY is the belief that drives the decision, and WHAT it does provides us a way
to rationalize the appeal of the product.
Confirming their failure to tap the right segment of the market, TiVo offered a
very rational explanation of what was happening. “Until people get their hands
on it,” Rebecca Baer, a spokeswoman for TiVo, told the 
New York Times
in
2000, “they don’t understand why they need this.” If this line of logic was true,
then no new technology would ever take hold. A fact that is patently untrue.
Though Ms. Baer was correct about the mass market’s failure to understand the
value, it was TiVo’s failure to properly communicate and rally the left side of
the bell curve to educate and encourage the adoption that was the reason so few
people “got their hands on it.” TiVo did not start with WHY. They ignored the
left side of the curve and completely failed to find the tipping point. And for
those reasons, “people didn’t get their hands on it,” and the mass market didn’t
buy it.
Fast-forward almost a decade. TiVo continues to have the best digital video-
recording product on the market. Its unaided awareness continues to be through
the roof. Nearly everyone knows now what the product is and what it does, yet
the company’s future is by no means secure.
While millions of viewers may say they “TiVo” things all the time,
unfortunately for TiVo, they aren’t using a TiVo system. Rather, they “TiVo”
shows using a digital video recorder provided by the cable or satellite company.
Many try to make the argument that TiVo’s failure was due to the cable
companies’ superior distribution. But we know that people often go out of their
way, pay a premium or suffer an inconvenience to buy a product that resonates
on a visceral level with them. Until recently, people who wanted a custom
Harley-Davidson motorcycle waited upwards of six months to a year to take
delivery of their product. By any standard, that’s just bad service. Consumers
could have just walked into a Kawasaki dealership and walked right out with a
brand-new bike. They could have found a very similar model with similar power
and maybe even for less money. But they suffered the inconvenience willingly,
not because they were in the market for a motorcycle, but because they wanted a
Harley.
TiVo is not the first to ignore these sound principles and won’t be the last. The
meager success of satellite radio technology like Sirius or XM Radio has
followed a similar path. They offered a well-publicized, well-funded new
technology that attempted to convince users with a promise of rational features
and benefits—no commercials and more channels than the competition. Throw

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in an impressive array of celebrity endorsements, including rap star Snoop Dogg
and 1970s pop icon David Bowie, and the technology still didn’t stick. When
you start with WHY, those who believe what you believe are drawn to you for
very personal reasons. It is those who share your values and beliefs, not the
quality of your products, that will cause the system to tip. Your role in the
process is to be crystal clear about what purpose, cause or belief you exist to
champion, and to show how your products and services help advance that cause.
Absent a WHY, new ideas and technologies quickly find themselves playing the
price-and-feature game—a sure sign of an absence of WHY and a slide into
commodity status. It is not the technology that failed, it was how the companies
tried to sell it. Satellite radio has not displaced commercial radio in any
meaningful way. Even when Sirius and XM merged, hoping the joined force of
their companies would help change their luck, shares for the combined company
sold for less than 50 cents apiece. And, last time I checked, XM was offering a
discount, a promotion, free shipping and a claim of being “America’s #1 satellite
radio service with over 170 channels” to push their product.

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