Mere company survival is considered success. Customers are receiving the same or worse service as they did decades ago. Instead of having a few companies stagnate because they don’t move upmarket, the entire industry has ended up in stagnation. The poster child here is the commercial aviation industry. It turns out that there are industries where the equivalent of the 1980s personal computer still dominates. Which brings us back to the airline industry. In 2016, we have marvelous computers from companies that did not exist when Dell was founded. After all, in 2015 Nucor recycled 17 million tons of scrap. Far from bad news, this is actually great for revitalizing industries and benefiting consumers. The upmarket mechanism is ruthless: either you engage in moving upmarket or you will stagnate. By contrast, both Nucor and Dell, after gaining a successful market foothold, were very aggressive at moving upmarket and relentlessly continued capturing the next higher margin consumer. They were very successful and profitable for some time, then stagnated, and today are subsidiaries of other companies. In computers, Dell and Gateway were both disruptive to the PC industry by targeting the low end.īut Chaparral and Gateway were happy with the initial success that they found, and chose to colonize their respective niches rather than invest in upmarket growth. Consider that, in the steel industry, Nucor and Chaparral both pioneered making steel using scrap in an electric arc furnace, and both were successful at gaining market foothold in the low end of the steel industry. The upmarket mechanism is also what separates a company from being just another niche player or becoming a serious disruptive threat. This benefits customers – both the high-end customers being chased by incumbents, and the low-end or middle-market consumers being served by disruptors - and the industry at large. Instead of getting into a price war or squabbling over a shrinking market, both disruptors and incumbents find new ways to create value. Chasing the next-higher-margin consumer requires both new firms and incumbents to leverage their resources, processes, and priorities. One of the most powerful corporate growth mechanisms – and at the heart of disruption theory - is moving upmarket. There is an answer, and it has to do with the dynamics of disruption. What frequent flyer has not asked him- or herself this question?
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