This is McKinsey's analysis of "The Vanishing Middle"—here, the phenomenon across 25 product categories ranging from mobile phones to banking, appliances to apparel, that both premium and no-frills products grow at the expense of middle-of-the-road offerings. 

This works itself out in different ways in different industries. 

In some cases—think cellphones, banking, apparel, beer—there is growth both at the high- and the low- ends, as the middle empties out (the "hourglass" model).  In other industries—airlines, PC desktops and servers, groceries at retail—there is primarily a move to the no-frills/value end (the "pear" model).   And in yet a third sector there's general migration to the high end—coffee machines, MP3 players [read: the iPod], digital cameras, razors, wine (the "palm tree" model).

Each syndrome comes with its own set of, as McKinsey might well put it, threats and opportunities.  In hourglass-land, you need a well-defined value brand, or a  premium brand, or both.  Nokia, notably, does both in the cellphone/handset market.   In pear-land, you need to ruthlessly wring costs out as fast as you can—and it better be faster than your competition.  Think Dell, Wal-Mart. 

Finally, in palm-tree-land, you can justify a premium only through relentless innovation (I, too, am looking at Gillette's new 5-blade "Fusion" razor, having already been led down the path of the Atra, Sensor, and Mach3) or through an emotional connection (back to the iPod).

Of note is McKinsey's observation that there are "significant variations" in how the polarization phenomenon plays itself out from category to category, and that "the pattern of polarization does not lie in a category's DNA," but rather is a dynamic process profoundly affected by how service providers stretch what they offer to take advantage of the perceived evolution of customer demand.  (And of course, what's offered feeds back into demand:  Would I imagine I needed a five-blade razor if the Fusion had never gone on sale?)

There are two points here:

• "Polarized," or "vanishing middle," markets are widespread; indeed, they may well be more common than the classically conceived ski slope model.
• They do not arise, nor do they evolve, in a vacuum.  Firms can have an impact, and the strategies and approaches firms adopt to both respond to, and educate and entice, their customers can be the difference between Dell and Tandy, Toyota and GM, or Wal-Mart and Sears.

Is your firm truly catering to your clientele's sweet spot? 

How well do you understand their concept of "compelling value for the money?"  Are you trying to be a Dell and a Lexus at the same time? 

And lastly, assuming you want to live at the top left of McKinsey's "polarization" chart, are you providing the intellectual innovation, the emotional connection to your clients, and the level of service above reproach, that it takes to command a seat at that table?