Documentum was founded in the summer of 1990 by database engineers Howard Shao and John Newton. Documentum leveraged Shao and Newton’s relational database knowledge with software systems dedicated to enterprise document management. Documentum software has the capacity to interface with many operating platforms and manages unstructured content such as technical procedure documents, medical records, financial, and inventory data.
During the timeframe examined during the Harvard Business School case “Documentum, Inc.”, Documentum was in “Stage One – Growth” as they were a new industry that offered a superior buyer surplus compared with the available substitutes. This surplus was founded on innovative product features through the management of unstructured document information.
Documentum was focused on automating the business processes of large enterprises. As a startup, they were required to ...view middle of the document...
While working on the New Drug Application processing system, Documentum was forced to extend its products core functionality and their system integrator spent several hundred hours customizing the Documentum software in order for it to meet the customer demands. While the differences between the applications developed for Boeing and the New Drug Applications seem obvious, Shao believed them to be functionally identical. Through generalization of “a common set of requirements across applications in different industries”, Documentum was then able to develop a software package whose breadth would cover the needs of every large company. The development of this large document management system would require significant up-front investment in the application, but the capabilities of the system would be highly adaptable. Following development of this initial broad capability system, Documentum could then tailor it to specific needs and reduce future costs, maximizing profits.
Documentum, as a young company, is faced with the opportunity to develop of vertical or horizontal marketing strategy. All of Documentum’s competitors were practicing the standard Oracle horizontal selling approach, focusing on sales to corporate IT departments, but Documentum had the capability to take a new path. Documentum has developed five succinct choices for their target vertical application: Insurance Policy Documentation, Aircraft Maintenance Documentation, Pharmaceutical NDA, Chemical Regulation Management, and Telecom Manufacturing. These scenarios were developed by Geoffrey Moore’s Silicon Valley marketing group, Chasm in conjunction with the Documentum staff.
The vertical solution permitted Documentum to deploy their resources against a single market opportunity and gain dominance of that market. This would permit a higher average sales price, lower cost of sales, and permit product investment at a rate unmatched by the competition. Understanding the potential rewards described above, Documentum must push the envelope and develop a vertical business application.