When making a decision about how to specialize, normally you are:
- Reducing uncertainty as much as you can before you…
- Take a small, necessary risk of deciding to specialize and when you do that you are…
- Making a reversible decision and…
- Working to execute well on that decision for 6 to 12 months before you re-assess/iterate/pivot/continue on
What has the coronavirus pandemic changed about this? Several things, but not everything.
Primarily, the uncertainty profile has changed — #1 on the list above — which trickes down to #2 on the list above.
Specialization has always involved the following uncertainties:
- Will specialization help me increase clarity about who my prospects are and where/how to become visible to them? (Clarity)
- Is there sufficient marketplace demand for specialized services of the kind I’m thinking about offering? (Latent demand)
- Will I have sufficient access to buyers, or can I earn sufficient visibility from buyers, to bootstrap the specialized version of my services? (Access)
- Can I earn sufficient trust from buyers to sell my specialized services? (Credibility)
Anyone who specializes has to address that uncertainty profile, and the main task of validation is reducing as many of those uncertainties as possible. You can’t eliminate them, but you can reduce them.
In a simplistic but useful way, we can think of risk as uncertainty multiplied by the potential for loss or harm: R = U * H
Reducing either the uncertainty or potential for loss/harm reduces the total risk. Again, this is a simplistic model of risk, but a useful one.
The current coronavirus pandemic has made reducing some of the uncertainties related to the specialization decision impossible, and that does drive up the risk of specializing relative to a world where those uncertainties can be reduced more than they can in our current world.
In the pre-pandemic world, you could reduce the uncertainty about latent demand by documenting evidence of that demand: the existence of competitors in the market and other useful proxies like the existence of gatherings or “watering holes” like conferences.
Example: Is there latent demand in the market for a dev shop to specialize in the higher education vertical? Documenting evidence of that demand involves finding competitors and seeing if there are conferences or other watering holes that map reasonably closely to the shape your specialized services would take.
In the current world, the presence of those proxies does little to reduce uncertainty about demand because we just don’t freaking know how far demand for many specialized services will drop (this is caused more by the so-called secular reduction in demand rather than a localized reduction in demand, with the obvious exception of certain verticals like travel, hospitality, etc.). Frankly, I don’t know how far demand for my specialized services will drop! And if anyone tries to answer the question of “how far will demand drop?” with anything other than a huge range of possible scenarios, they’re guessing or bluffing.
Will demand for specialized services drop more than demand for generalist services? I don’t know, but I doubt it. I believe many specialists will weather this storm better than most generalists (unless the generalist has a de-facto specialization in “we’re huge and do a bunch of critical stuff for you so you’re dependent on us in a very illiquid way”). Being already-specialized should be an advantage, but if you’re considering specializing now during the coronavirus pandemic, the uncertainty about latent demand remains quite high, and I don’t think we can rely on the proxies we used to rely on to reduce uncertainty here. Just because there’s currently a few competitors specialized in a certain way doesn’t mean there’s enough demand for one more such company (yours) to join the marketplace.
This drop in the value of the usual proxies (the presence of competition, conferences, etc) as a measurement of latent marketplace demand is happening because those proxies are lagging indicators of that demand. They might be in trouble already but we won’t see this from the outside for 3 to 6 months at the earliest. This suggests we should switch our efforts to understanding the leading indicators of demand. This is the domain of entreprenurial risk-taking. It’s more work, requires more research expertise, and is more risky. There are three relevant generalizations here:
- If you were pondering a specialization decision and about to pull the trigger, I can’t tell you what to do in this email, but I can suggest how to think about it. The risk has now increased because R = U * H is using a higher number for U (Uncertainty). The proxy measures you might have been using to validate your thinking are now less valid, and that’s the main source of increased uncertainty. But if the H (Potential loss/harm) number has not changed for you, the overall risk might still be acceptable to you.
- If you’re already specialized and feeling scared about the viability of your specialization, I would suggest first exploring changes to your service offerings before you explore changing how you’re specialized/positioned in the market. It takes energy to change things. I think the better use of that energy is to quickly explore changing your service offerings to see if you can connect with latent or changed demand in your existing market. If that fails to yield enough fruit, then consider the change that is more disruptive and requires more energy — the wholesale specialization/positioning change. This new episode of Offline explores “building out the middle” and is relevant here: https://www.offlinepodcast.rocks/episodes/should-you-turn-your-services-into-products
- If you were already pursing an entrepreneurial thesis, by which I mean a specialization that is so new that there will naturally be no lagging indicators of demand, then keep going with your pursuit of that opportunity, with an obvious eye to how the short term changes in the marketplace might effect your thesis.
I believe but can’t prove: there are “steady as she goes” segments of almost every market. These are the companies that are in a better position (more cash/resources, leadership with more composure during volatility) to keep investing in what’s important, even during times of high volatility or downturns. These companies will likely trim spending, but they won’t cut it off completely, and if what you do has always been important to them, there’s a chance it will remain important even as the world has changed. Who are these companies? I don’t know, but if you’re vertically specialized and have invested in understanding your market, you probably have a sense of who they are.
The other uncertainty about specializing that might get a bit more difficult to solve for is the credibility piece. Do prospects become more selective about this criteria in our current pandemic-dominated world? Do they raise their standards? They almost certainly become more risk averse, and that might cause them to more closely scrutinize your claim of expertise. As with trees, the best time to have planted your visible expertise tree so you can enjoy some shade from the withering rays of the pandemic sun is years ago. The second best time is now.
The rest of the uncertainties are going to be unchanged, especially the clarity one. Specializing always gives you increased clarity about who you are trying to reach and how to earn the visibility you need. And maybe, just maybe, that’s enough reason to do it now? To give you a sense of focus in the midst of real chaos? Again, you have to weigh the risks in light of your personal context.
The last form of uncertainty related to specialization is whether you have sufficient access to buyers, or can earn sufficient visibility from buyers, to bootstrap the specialized version of your services. Do you have enough access to the market to get started with the specialization? This has always been a relatively easy place to reduce uncertainty, and continues to be so even in the current pandemic world.
This is my current thinking on specialization in light of the coronavirus pandemic.
If you’ve read or skimmed this far, an offer that might be for you.
This is an offer with conditions. The conditions are derived from my desire to see folks take more healthy risks as they cultivate self-made expertise.
Here’s the deal. If one of the following two things is true, I’d like to offer you a free 1h phone or video call consultation on your business strategy, primarily on the specialization and lead generation parts of that strategy:
- You’ve lost your job and have said some version of “screw it, I’m going indie” to yourself.
- You’re a self-employed generalist, have lost revenue as a result of the coronavirus, and have said some version of “screw it, I’m going to specialize now” to yourself
In other words, the fallout from the coronavirus pandemic has triggered something that was latent in you, and now you’re ready to start down the risky road of the indie self-made expert because you’ve realized it’s not actually more risky than what you were doing.
If that’s true, I’d like to help you either make a plan, or I’d like to serve as a sounding board for your thinking.
I have limited time to do this because I’m busy building workshop content for upcoming workshops, getting the update to The Positioning Manual finished, and so on. So I’ll offer 2 such calls per week for the next few weeks, and then re-assess.
If you’ve lost your job or revenue and want to specialize and want my brain in the mix on that, hit reply and we’ll set up a time to talk for no cost to you.
Keep building; keep investing y’all,