Middle mismanagement

In this week's New Yorker, there's a great article about a topic that I've already talked about. In it they demonstrate how people are willing to pay a premium for exceptional quality (i.e. Apple, Mercedes-Benz, and Hermes) or very little for, as they put it, "well-priced adequacy" (i.e. Acer, Hyundai, and H&M)

This isn't a new phenomenon. In fact it's how the market has always acted. The true innovators come into a market, set the standard, and once the demand starts to build a slew of new companies rush in to provide the minimum amount of features and quality necessary at a very low price. It's what Clay Christensen wrote about in his book "The Innovators Solution."

Basically, what this means is you can be priced at the top of the market if you're constantly innovating to stay ahead of the imitators offering new features, experiences, benefits that justify your price premium. Or you can offer acceptable quality at the lowest possible price as long as you have something that makes you interesting.

What you can't be, is in the middle, which is why classic American brands designed to serve the middle class like GM, Sears, Holiday Inn continue to struggle.

Funny it's so hard for them to see the light. Gerry Rafferty gave them this warning back in '72.