{"id":16927,"date":"2020-10-30T11:20:00","date_gmt":"2020-10-30T15:20:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=16927"},"modified":"2020-11-07T13:57:36","modified_gmt":"2020-11-07T17:57:36","slug":"downward-mobility","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/downward-mobility\/","title":{"rendered":"Downward Mobility Is Essential for Taking Risks"},"content":{"rendered":"\n<p>What is downward mobility? How is it a good thing?<\/p>\n\n\n\n<p>Downward mobility is a company&#8217;s ability to move to smaller or lower-price markets. It is the counterpart to the growth that comes with upward mobility.<\/p>\n\n\n\n<p>Read on to understand downward mobility and the risks that come with downward immobility.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">Upward Mobility and Downward Mobility<\/h2>\n\n\n\n<p>Successful companies typically focus on growing and moving upmarket with higher-priced products, higher-tier customers, and larger profits. However, this <strong>upward mobility makes firms downwardly immobile\u2014it impedes them from adopting disruptive innovations, which always start downmarket.&nbsp;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Risks of Downward Immobility<\/strong><\/h3>\n\n\n\n<p>Established companies face three key barriers to downward mobility:&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li>Cost structures that favor seeking higher profit margins upmarket over cutting costs to remain profitable downmarket<\/li><li>Organizational cultures that pull efforts toward upmarket projects<\/li><li>The upmarket drift of a company\u2019s customers and competitors<\/li><\/ol>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Barrier #1: Cost Structure<\/strong><\/h4>\n\n\n\n<p>As discussed in Chapter 2, organizations develop cost structures that fit their value networks\u2014value networks for higher-priced products require larger gross profit margins to cover higher overhead costs than <a href=\"https:\/\/www.shortform.com\/blog\/value-networks-innovators-dilemma\/\">value networks<\/a> for lower-priced goods. These cost structures force companies to maintain profit margins to simply stay afloat.&nbsp;<\/p>\n\n\n\n<p>In fact, <strong>most companies aim to move to progressively higher-value markets<\/strong>, which is the opposite of downward mobility. This is especially true when disruptive technologies invade their markets, because the <a href=\"https:\/\/www.shortform.com\/blog\/disruptive-products\/\">disruptive products<\/a> generally enter the low end of the market and gradually climb to higher tiers. For example, when 3.5-inch disk drives ascended from the laptop to the desktop market, Seagate didn\u2019t try to compete\u2014instead, the company increased efforts to improve 5.25-inch drives enough to enter the market for minicomputers.<\/p>\n\n\n\n<p>If an established company wants to invest its limited resources in the small, low-profit market for a disruptive product, company leaders would have to find a way to somehow cut costs. However, a company\u2019s overhead costs include market research, product development, and marketing that\u2019s critical to remaining competitive in its existing market. <strong>Most companies find it impossible to bring in enough profits from existing products while also trimming overhead enough to invest in disruptive ones.<\/strong>&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Barrier #2: Organizational Culture<\/strong><\/h4>\n\n\n\n<p>A company\u2019s upward or downward mobility is determined by the projects it chooses to invest in, and most companies have processes that steer them toward high-profit projects. Although it may appear that senior managers are responsible for choosing the projects that a company invests in, middle managers actually play a more significant role in this process as gatekeepers.&nbsp;<\/p>\n\n\n\n<p>Middle managers filter the ideas that come from engineers and other employees, carefully deciding which projects they\u2019ll pitch to senior managers. <strong>Middle managers want to pitch only projects with a high likelihood of success and profitability<\/strong>\u2014otherwise, they risk taking a hit to their credibilities and careers\u2014<strong>and upmarket projects are the surest way to achieve that.&nbsp;<\/strong><\/p>\n\n\n\n<p>Under normal circumstances, a company\u2019s success depends on having processes like this (formal or de facto) that weed out low-profit projects\u2014otherwise, the company would waste too many resources on projects that don\u2019t provide a return on investment. But these same processes steer companies away from disruptive technologies, making the firms vulnerable to being overtaken by the disruption.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Barrier #3: Upmarket Drift&nbsp;<\/strong><\/h4>\n\n\n\n<p>Often, companies can drift upmarket without making a conscious effort to ascend to the next value network. <strong>Companies drift upmarket when their customers are pursuing higher markets, and when their competitors are similarly leaning upmarket to meet customers\u2019 needs.<\/strong>&nbsp;This makes downward mobility more challenging.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is downward mobility? How is it a good thing? Downward mobility is a company&#8217;s ability to move to smaller or lower-price markets. It is the counterpart to the growth that comes with upward mobility. Read on to understand downward mobility and the risks that come with downward immobility.<\/p>\n","protected":false},"author":6,"featured_media":14446,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[45,81,104],"tags":[141],"class_list":["post-16927","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-economics","category-marketing","tag-the-innovators-dilemma","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Downward Mobility Is Essential for Taking Risks - Shortform Books<\/title>\n<meta name=\"description\" content=\"When is downward mobility a good thing? For an innovative product, the market may not be that big. Read how scaling down can help.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.shortform.com\/blog\/downward-mobility\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Downward Mobility Is Essential for Taking Risks\" \/>\n<meta property=\"og:description\" content=\"When is downward mobility a good thing? For an innovative product, the market may not be that big. Read how scaling down can help.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.shortform.com\/blog\/downward-mobility\/\" \/>\n<meta property=\"og:site_name\" content=\"Shortform Books\" \/>\n<meta property=\"article:published_time\" content=\"2020-10-30T15:20:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-11-07T17:57:36+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/s3.amazonaws.com\/wordpress.shortform.com\/blog\/wp-content\/uploads\/2020\/09\/juniors-sister-true-diary-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1920\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Rina Shah\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rina Shah\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/\"},\"author\":{\"name\":\"Rina Shah\",\"@id\":\"https:\/\/www.shortform.com\/blog\/#\/schema\/person\/d07435826f13a8f422d5d333dceac287\"},\"headline\":\"Downward Mobility Is Essential for Taking Risks\",\"datePublished\":\"2020-10-30T15:20:00+00:00\",\"dateModified\":\"2020-11-07T17:57:36+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/\"},\"wordCount\":591,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2020\/09\/juniors-sister-true-diary-scaled.jpg\",\"keywords\":[\"The Innovator's Dilemma\"],\"articleSection\":[\"Business\",\"Economics\",\"Marketing\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.shortform.com\/blog\/downward-mobility\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/\",\"url\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/\",\"name\":\"Downward Mobility Is Essential for Taking Risks - Shortform Books\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/downward-mobility\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2020\/09\/juniors-sister-true-diary-scaled.jpg\",\"datePublished\":\"2020-10-30T15:20:00+00:00\",\"dateModified\":\"2020-11-07T17:57:36+00:00\",\"description\":\"When is downward mobility a good thing? 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