In 1980 IBM approached the software start-up MicroSoft about supplying an operating system for the new IBM PC.

Even though IBM was also dealing with the much larger firm (Digital Research) for a version of their CP/M operating system, Bill Gates and Paul Allen believed that they could supply a better product. The teenage programmers secured a $186,000 contract from IBM to design the hardware specifications and supply the operating software for the new P.C.

With this purchase order in hand, Gates and Allen negotiated the purchase of Q-DOS from Seattle Computer for $50,000. Fifteen years later, MicroSoft would be worth over $53 billion.

This example demonstrates a good product market match because Bill Gates and Paul Allen secured a large backlog of purchase orders for the new operating system before they approached Seattle Computer.

Cray Research Inc. was founded in 1972 by Seymour Cray. The company is the world leader in large scale supercomputer systems. In massively parallel processing, the company does not have any competitors.

However, in spite of being a recognized leader for its technology, the company has not been considered a financial success story. Earnings per share have been flat for almost a decade. The problem which Cray faces is the small demand for computers priced from $2 million to $30 million. The high end scientific and technical simulation market has suffered from the end of the Cold War. Cray has the product, but not the market.

In February of 1996, Cray announced a merger with Silicon Graphics: a company which sells high performance computing systems priced at less than $1 million. Silicon Graphics, has identified a large and growing market selling high end computers to business and design users.

Cray Research Inc. is an example of mediocre product market match. The product is superb, but the company had few purchase orders in place. The merger with Silicon Graphics Inc. is a wise strategic decision for this reason.

In 1987, Mitch Kapor, the founder of Lotus Development Corp. and Jerry Kaplan, an artificial intelligence genius created Go. Corp. Their idea was to develop a hand held, pen operated computer, which would serve the needs of professionals when they were away from their desks.

In 1991, the first notepad computer build by IBM with software by Go was demonstrated. It appeared to be a smash hit. Based on the success of this prototype, Go Corp. increased its development staff to 200 employees.

In 1993, Go Corp. was absorbed by AT&T who later shut down the product. The reason given for shutting down the project was explained by CFO Randy Komisar: "GO is like Gone With the Wind, a labor of love with no real possibility of a return"

Go Corp. is an example of a poor product market match. Kapor thought he had a successful product because the critics were wowed by the technology. However, he had no purchase orders when he increased Go Corp.'s development staff.