Piaggio acquired its way into the differentiated end of the market by buying Aprilia. Chrysler and GM required a government bailout in 2009. The firms in “the middle” have felt or are feeling a severe contraction.Īmerican Airlines recently filed for bankruptcy. The following table gives some examples from various industries. The firm stuck in the middle also probably suffers from a blurred corporate culture and a conflicting set of organizational arrangements and motivation system.” ( Competitive Strategy, p. Yet it also loses high-margin businesses - the cream - to the firms who are focused on high-margin targets or have achieved differentiation overall. It either loses the high-volume customers who demand low prices or must bid away its profits to get this business away from low-cost firms. Porter wrote, “The firm stuck in the middle is almost guaranteed low profitability. He seemed to be saying, “find what you are good at and stick to it.” This focus on competencies is very sound. The problem, Porter said, was in trying to do both and thus doing neither very well. Across most industries you can find firms and products that aim for advantage based on either cost or differentiation. And he argued that competitive advantage derives from one of two strategies: cost leadership or differentiation of products or services. It depends more importantly on the firm’s position and competitive advantage in that industry. Michael Porter of Harvard Business School originally discussed the problem of “stuck in the middle.” He said that the profitability of firms depends not only on the typical rates of return in an industry. How you see the problem has big implications for taking action.Ĭloser to home, a recent article, “Trouble in the Middle,” which appeared recently in The Economist, suggested that time may be running out for business schools that “aren’t quite elite.” The Economist uses its rankings to segment the market (readers of this blog will be familiar with my reservations about rankings.) The author argued that the value proposition of mid-ranked schools has worsened and presages a “shakeout…which could be nasty.” Thus, the problem of the middle is relevant beyond the boundaries of the for-profit sector. I see things slightly differently: the problem is not the middle it is allowing your firm to get stuck at all.
The conventional view is to see the “middle” as the problem. There is ample research on business strategy that suggests the middle is to be avoided for fear of being stuck in it. The “middle” seems to be what every executive wants to avoid these days. “Stuck in the Middle with You” a song by Stealers Wheel
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