A Playbook for Moving Down Market
My last post talked about Microsoft's predictable struggles to move down market into the Web-delivered application market. Predictable struggles must be solvable, right?
Indeed, some companies have successfully managed to make the down-market move. One good example is leading silicone provider Dow Corning. Earlier this decade, the company (a multibillion dollar joint venture between Dow Chemical and Corning that was formed in the 1940s) recognized that it was struggling to compete in the commodity end of its business. It formed a separate unit dubbed Xiameter to target that segment.
Xiameter developed a distinct business model. While Dow Corning prides itself on high-end service and customizable orders, Xiameter offers basic, standardized silicones that can be ordered over the Web at market-competitive prices.
Xiameter has been a blockbuster success. As we note in the introduction to The Innovator's Guide to Growth: "In six short months, Xiameter went from ideation to test market. Three months later it launched in full. Three months after that, Dow Corning's entire investment had been paid back. In a year, Dow Corning went from an idea to a successfully launched business."
Other examples of companies that have managed this move include Charles Schwab (online stock trading), Dayton Hudson (discount retailing), Teradyne (CMOS and Windows based semiconductor test equipment) and Cisco (Linksys routers). While each example is unique, there is enough of a pattern to suggest that the down-market playbook has four critical elements.