Where the Work will be: The End of the Middle, the Rise of the Middle

For small, entrepreneurial, creative and passionate business the marketplace has been hit hard to the point of evaporation. To succeed in the downturn many businesses have shifted focus, either through hyper-specialization, or by the opposite, seeking new and larger markets.  The recession has caused a repositioning of businesses to the polar edges of a marketplace scale.

This lines-up with the new communications trends we’re witnessing. Instead of developing products and then pushing them to the marketplace, the new path is to be engaging, seek resonation, and offer products in response to the available markets, altering them organically as these markets change.

This uncovers the current hard truth. There are two, near-term, definable markets to develop or market your products and services to:

1.    Low-cost, scalable, products crafted to be attractive to the largest possible market.
2.    Highly specialized products that can be marketed at the highest possible price to a very small market.

There is no middle market. It’s been plowed away, and most likely been driven over to the low-cost model. There are some pillars of the middle (large appliances, insurance coverage, office computers), but they are few and stand out. This makes for a simple, yet undiversified marketplace.

The question is whether you seek your fortune and livelihood with the known, or seat yourself past the visible horizon at the place where you’ve calculated the market will arrive. What will that market be?

(I envision the marketplace as a landscape washed away by a flood. The middle is vacated into a depression, spotted with pillars, the high and low are mesa’s to the right and left.)

Conservatively, if you were a Wise Elephant client and you asked me what I think you should do I’d say, “If you’re not currently doing either of the above, the sensible first step is to reframe your business to match one of these two paths. Re-angle what you’re doing to cater to either (if not both) of these markets. Plant your flag.”

Aggressively, if you asked me the same question, I’d say, “Keep this framework in mind, know that it is always changing, and be prepared for the long haul. Get aggressive with your communications and listen very closely to what your market is telling you, engage and react. Be fluid with your products, but keep your goals intact. Surf the wave.”

Another way, Platforming
Businesses that could react to these trends have leapt over the empty middle entirely and built platforms to connect the markets. Through mergers and acquisitions, clever branding and product management, and a knack for selling to market anxiety, a handful of companies have prospered. The names should be familiar, Google (Adsense), Apple (iPods to servers), Comcast (service bundles to networks), Volkswagen & Toyota (family cars to luxury cars), ExxonMobil (petroleum to natural gas) these companies straddled the gap, offered products and services to both ends of the spectrum without having to drop down into the depleted middle. The middle reaches up to meet them. You could decide to take this path in your own business, to reach out and build partnerships, to collaborate more, to use this platforming technique to straddle the markets and thrive.

The Well-Shaded Middle
There are many passionate and creative entrepreneurs who believe in the middle. The problem is the middle market now exists on the floor of the gap, a cavern. To the left is the low-market; to the right is the high-market. The walls are steep. It’s an unbalanced landscape of sellers (many) and buyers (few). Metaphorically, the platforms are shading this gap, depriving new businesses from much needed sunlight to grow. These factors create a very demanding environment; the weaker ideas fail quickly.

This “natural” selection is producing solid, slow growth businesses that are built to last and are focusing on the basics. The Slow/Local Food movement is one burgeoning new business model that is rising from the floor. A premium for health and body nourishment (including spiritual, as places of worship are building new models too) is another. They are a renewed form of utilities and will one day be just as important to our mass-market daily lives as electricity, heat, and hot water. (I read recently Walmart is seeking to get into the local food movement.) I define this new shift “The Lace Economy.” (my earlier post here)

(New businesses are being built on the bottom of the middle market.)

It could take decades to rebuild the middle to the levels the low and high markets have attained. Or the wall-banks could erode and re-level the landscape. Either way these new middle-businesses are steered by passionate people, egalitarians and entrepreneurs alike, even in the face of the current uneven odds. To them the joys of their passion trump any short-term gains.  They are in it for the long haul.

(As these businesses grow, the middle marketplace will grow, attracting new participants from the high, low, and pillar markets, evening the field.)

Where to find work/clients in 2010
If you can mitigate the risks, I suggest diving into this gap, and from the dusty bottom build a business. The middle-market is being recreated on the bottom-floor, and by getting in now you will be part of the wave and be carried up with it. You’d be part of a movement that re-creates long-term stability while extending the marketplace to include increasing numbers of participants, both buyers and sellers. Noble, but risky, and insecure.

Building up your business at the middle will be too risky for most, especially if business has been down and reserves have been depleted. In this case there is a deep requirement to focus on the two current markets and the companies building the platforms that straddle the middle. Seek out contacts within these spheres and position (develop) your services to meet their needs. Focus your attention on these known markets, and if time allows investigate new opportunities within the new middle. The middle is vibrant, and seductive, and you should put some attention there, but know it’s a long-term investment.

We at Wise Elephant wish you much success and luck in the New Year. Please feel free to contact us with any questions.