In the model of disruptive innovation, we're advised to move down market from incumbent enterprises. Moving up market offers sustaining innovations for the established enterprises who can usually defeat any new entrants. Up market spaces contain valued added services and products that support premium prices. Down market spaces contain products and services for non-consumers who feel overcharged, under-served or even dis-served by the incumbent offerings.
Incumbents view down market opportunities with disdain. They appear "cheap" in the worst sense and very much lacking in specs, quality or features. Think what symphony orchestras must have thought of the first vinyl records or AM radio broadcasts of orchestral performances. Incumbents think it's pointless to compete with market entrants who stoop so low and lower the bar of respectability. This assumption makes it possible for "little guys" to get started and scale over time.
In Free - The Future of a Radical Price, Chris Anderson explored this moving-down-market strategy for newspapers. He contrasted The Village Voice which lost readership when it switched to free circulation with The Onion which has scaled to national distribution and video supplements after starting out with free circulation. In the first instance, an incumbent sought to move down market. In the second example, the upstart innovated disruptively in the down-market space.
In the model of disruptive innovation, we're also advised to completely separate the upstart from any affiliation with an existing enterprise - no separate wholly owned subsidiaries. The incentives, unwritten rules and democratic decision making of a successful enterprise will extinguish any disruptive innovation. Imagine how difficult it would be for a baseball team to play in a stadium with a gridiron and goal posts, but no home plate.
In What Would Google Do?, Jeff Jarvis explored his failed attempt to get local bloggers to contribute to the Newark Star Ledger's online edition. Meanwhile a blogger launched a local news blog for one small city (Montclair) which attracted a flock of contributors and local advertisers. Once again, an incumbent tried to move down-market and an upstart began in the down-market space.
Following both pieces of advice from the model of disruptive innovation, I've concluded that "moving down market" is a set-up to fail. Start there or forget it. Incumbents cannot go down market successfully and they sabotage their own brands when they try.