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Setting for the Case

In November 1993 Jeff Miller, Documentum's CEO, is faced with the challenge of pursuing either a vertical or horizontal marketing strategy to route Documentum towards profitability.

Situation and Business Issues

Documentum enjoys a leading role in an emerging and potentially lucrative space. But profiting from this opportunity will require overcoming several immediate hurdles including a limited customer base, formidable competitors and unforeseen development costs.

Key Information, Facts, Assumptions

Documentum was founded in June 1990 by Howard Shao and John Newton, seasoned database engineers who aimed to develop a new class of software for automating the management of documents across an enterprise. Following three years of losses, Documentum gains traction by combining an elite management team with $5.8MM of Venture Capitalist funding.


Enterprise document management (EDM) is a new, paradigm-busting product category with few substitutes. The category growth is small, increasing at a rate of 1%-2% year over year . Competition within the EDM category is low, as no other company was developing the "whole elephant" solution. Profitability was extremely low, given the low number of customers and long lead time to develop and deliver the product solution. The combination of these characteristics wholly describes the EDM category as being in the Introduction Stage of the Category Life Cycle .

With regards to the Mode of Innovation analysis , Documentum is a new product in a new category3. No previous EDM category existed, and Documentum had no prior products in other relaunched or repositioned categories in the EDM category.

In analyzing the Competitive Set , Interleaf was the only product of similar form, whilst the product category level was more populated with substitutes from Notes, Oracle, PC DOCS, Saros, and Soft Solutions . Generic level competition included manual and paper processes , desktop and backend systems , and full mainframe systems for document management. Budget level competition consisted of alternatives such as hiring more personnel, purchasing more equipment, and making other investments.

With the EDM category entering only the Introductory Stage of the category lifecycle and Documentum providing a new product in this category, it is important for Documentum to focus on generic and budget level competition as primary threats to success. Documentum must provide greater utility than generic level substitutes in solving the EDM problem, and provide a solution that perceivably yields a greater return than budget level alternatives. Generic level competition is unique to each of the industry applications, and pursuing a horizontal marketing strategy would require Documentum to provide a superior solution to all of these competitive alternatives. For a vertical strategy, Documentum would only need to focus on providing marginal superiority to only the generic level competitor respective to the target vertical industry application.

From the utility analysis across each of the 5 verticals, Pharmaceutical is the best served by Documentum's product and Syntex serves as a successful case study. In the insurance industry, the product could improve productivity by automating repeated clerical process thereby reducing the labor requirement. However Documentum does not have a systems integration partner for this industry. In the aircraft industry, the product would ease load on technical writers and reduce errors, but maintenance costs would potentially offset benefits. In the chemical industry, Documentum could help reduce the number of accidents stemming from inaccurate or ill-timed manuals. In the telecom industry, Documentum can improve productivity by enabling distributed information architecture along with configuration control. But Documentum has yet to establish credibility in the latter industry segments.

From the industry segmentation analysis , Pharmaceutical is identified as the industry with the greatest opportunity for success for Documentum. Pharmaceutical has more than sufficient size, with eleven companies representing $1.484B yielding the largest spending-per-company ratio of all the verticals. The Pharmaceutical industry the most responsive to the EDM solution, as the benefits of time savings Documentum provides can result in returns of millions of dollars a day in profits for the customer. The members of the Pharmaceutical vertical are the most coherent, as FDA regulations require all companies to follow the same schedule, procedures, and processes. The opportunity is also the most stable of all segments, with a continuous need from new product R&D, recalls, and legal support.


From the Category Life Cycle, Mode of Innovation, and Competitive Set analysis, we strongly recommend that Documentum pursue a vertical strategy given the limited resources develop a viable solution against competitors and small window of opportunity to execute in the new product category. Documentum faces a much greater challenge in developing enough capability and utility to address all competitors at the



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