Be Downward Mobile
Updated Friday, January 01, 2010
Upward Mobility: focusing on and developing your current market. Prices, market size and margins move up.
Downward Mobility: Attending the unmet, unsolicited, unseen needs of undeveloped markets. Prices, market size and margins move down
The confusion and reactions that you can solicit from this commandment are plentiful and diverse. That should tell you that we are on to something.
Have you asked yourself why large corporations can’t innovate the way small ones do? Why is it that the passionate penniless come up with the big ideas? The first flight, the automobile assembly line, the iPod, Windows, Walmart, McDonalds. Then, why is it that Microsoft didn’t think of the iPod, Xerox didn’t think of the personal computer, WoolWorth’s didn’t think of Target?
You might be surprised to find that large companies are dutifully held hostage by their loyal customers. The customers give them one option – Give us more of what we like. They want it faster, larger, smarter. It’s called upward mobility. Companies are smart to listen to their customers and provide what they want. It’s just good business.
What is the downside of upward mobility? You can only be innovative in a very small way. Large companies that hand their customers a new and innovative product always get the same reactions. “This is nice, but I don’t really need it”. It’s true, those customers don’t need it because they already have a more powerful, higher quality solution. Yes, it’s tricky, but true. The innovative products generally follow these patterns:
- Less expensive
- Less powerful
- Lower margins
- Smaller market
If Toyota were to have their Prius customers test a new electric car (the next innovative frontier for car manufacturers possibly, or compressed air), what would their reaction be? “My Prius goes farther, it’s nicer all around, so, I just couldn’t see myself purchasing it”. What is management supposed to do with that information? Upward mobility tells us they need to scrap the project, and make a nicer Camary. The data the now hold would tell them their is no market for the electric car.
Toyota, in this example, is breaking the law of downward mobility. It says that you must enter the markets which are a logical step in innovation. Why? Because that very same nonexistent market will become the next mainstream market. It will take a decade, but it will happen. Eventually the electric car will be cheaper to buy and maintain than its gas counter part. It might even have the same distance once the technology matures. Toyota, Ford, Gm , etc. will be 10 years behind the now mainstream market. Manufactures like Tata and Tesla will be the major players because they care about the child market before it reached adulthood.
The gut questions have to be answered to determine the direction the market will move. “Would I purchase a $7k car that lasts 15 years and gets 100 miles per charge?”. Easily, yes. There were more than a dozen computer manufactures before the personal computer. Did they get into the market? Some tried, but none of them made it. They couldn’t answer the basic question, and put proper action behind it; “Would I purchase a personal computer that can store info, calculate and help me in areas I can’t even think of, if it were $1,000?”.
Interestingly, the major car manufacturers are not oblivious to the technology. Probably all of them of have engineers working on a electric car right now. That doesn’t mean that they are downward mobile. It means if the market gave them clear indication of a need for the car, and a five year notice, they would be ready. Yes, generally the new innovative idea comes from the large companies, but fails to bring them to market. And they can’t profitably because that current market is so small.
The story goes like this:
- Innovations are birthed from established companies
- They ignore them because their main customer base is already happy
- A new company is birthed to sell to the new, smaller market
- How can a company maintain downward mobility*? Follow the examples of companies like Dayton Hudson (now Target) and Seagate and others. Invest in the smaller company and let them build it for you. If your processes and culture spill over to the new company, it can quickly spell disaster. It’s the reason WoolWorth’s discount chain, Woolco, couldn’t compete with Target. Not to mention the brand association. Toyota seems to be on the right track with Scion, as it pertains to cheaper simpler cars.
The ideas, and most of the examples presented come from The Innovators Dilemma , a great read.
About the author. I'm Adam Temple. After a degree in religion I ended up in the business world and just love it. Sermonspice.com was my first big splash as it's now a multi-million dollar company (which I love saying!). Bixly.com is the next notable effort. Expert programming seriously low prices. It came about as a last ditch effort to avoid working security detail. Bixly reminds me of adolescence: thriving with health and potential, but still learning.