There are several ways you can translate this shortlist into a decision and then into action:
- Blind pivot
- Deep market research
- Live market test
With the blind pivot, you choose a specialization option based on what makes sense to you and then you start implementing that decision. Any validation that you get is post-facto validation in the form of the market’s response to your new specialization. There’s nothing wrong with the blind pivot, but it is more risky than other validation options.
With the guardrail-and-go approach, you apply some sensible guardrails – best practices really – and use that to inform your decision about specializing. This approach doesn’t have you interacting with the market to obtain validation. Rather, it attempts to de-risk the decision by applying best practices about market size and so on.
With the deep market research approach, you conduct interview-based research (JTBD or customer development style) or apply the ideas of ethnography (studying clients in their “natural habitat” with your observation being as non-intrusive as possible) to validate or invalidate your specialization hypothesis. This approach can be excellent – and in some cases it’s the only one that sufficiently de-risks a hypothesis – but it’s generally labor intensive, which makes it slow for solo or tiny businesses like ours.
With a live market test, you build a free gift of knowledge for the market, directly distribute it (1:1 emails or LinkedIn messages, posts on intimate forums or Slack/Discord channels), and ask for feedback on the gift. There are other ways you could run a live market test (run ads pointing to a landing page, etc.) but for indie consultants, directly distributing a free gift of knowledge and pointedly asking for feedback on it is the best approach.
The Leanest, Safest Combination
If you want to maximize risk mitigation and minimize effort/cost, then the best combination of those 4 validation approaches is to apply the guardrails of the guardrail-and-go approach and to follow that up with a live market test.
Next, you are going to apply “guardrails” to the specialization options on your shortlist. This part of the process is full of judgement calls and a need for your creativity and problem-solving ability.
For every vertical specialization option on your shortlist, use LinkedIn Sales Navigator to find accounts (that’s LinkedIn’s term for companies. You’re not looking for people at this stage of things, you’re looking for companies). You’re looking for accounts that match the vertical you’re investigating.
For example, perhaps you have the Manufacturing vertical listed on your inventory. Annoyingly, LinkedIn does not have that vertical listed in the Industries search field. LinkedIn does, however, have many of the sub-verticals within Manufacturing listed in its Industries search field. This is where your creativity and problem-solving ability is required to construct a decent search. This list of LinkedIn’s industry categories may be helpful: https://developer.linkedin.com/docs/reference/industry-codes
Use a column on your inventory sheet to document the number of prospects (companies that are probably big enough to afford you and small enough to take you seriously) in each vertical on your shortlist.
It has always been difficult to validate a horizontal specialization, because the market demand that drives these kinds of specializations is somewhere between difficult to measure and outright invisible. The best reasonably easy proxy measurements are forms of documentable interest. If there’s existing competition, that’s evidence of interest in this area of specialization. And if there are existing ecosystems of support (conferences, forums, online watering holes, etc.), that’s another form of evidence that you might be able to make a horizontal specialization work.
Use a column in your inventory sheet to document any evidence of interest you can find.
To discover competition, you’ll want to use a combination of web search (Google, etc.), directories (Clutch.co, etc.), and LinkedIn Sales Navigator.
To discover ecosystems of support, you’ll want to use web search and any other tricks you can make use of (asking in an online group you’re already part of, etc.).
This is challenging work! That’s why we’ve saved it until towards the end of the process: to make sure you deploy this high-effort work only on shortlist items that are interesting to you.
Here are the guardrail criteria I’d suggest you use:
- If a potential vertical specialization has fewer than 1,000 prospects or more than 10,000 prospects, re-define the vertical or remove it from your shortlist of options. Re-defining the vertical might mean finding a sub-vertical with fewer than 10k prospects or finding a broader version of a tiny vertical that has fewer than 1k prospects. These numbers are based on David C. Baker’s well-researched numbers with his lower bound of 2k tweaked downward to reflect the fact that many of you are soloists: https://www.davidcbaker.com/how-man-competitors-and-prospects-should-you-have
- If a potential specialization of any kind has fewer than 10 competitors or more than 100 competitors, it’s a risky option because the presence of too little competition (< 10 competitors) is a proxy for too little market demand and the presence of too much competition (> 100 competitors) signals a “red ocean” full of excessive competition. If you’re pursuing an entrepreneurial thesis, it’s normal for there to be little or no competition, but if you want a low-risk specialization, eliminate or re-define shortlist options that have the wrong amount of competition in the market.
- If a horizontal specialization has no ecosystems of support, remove it from your shortlist of options. Yes, you can make a horizontal specialization work even if there are no ecosystems of support, but it’s harder, so this guardrailing criteria suggests that you remove these more difficult options from your shortlist.
After you do this step, you will end up with a “shorterlist” of specialization options. Specialization hypotheses, if you will.
From there, the next step is to execute a live market test. That’s what we spend most of our time on in the specialization workshop, starting next week (October 8 is the first meeting): https://philipmorganconsulting.com/core-skills-workshops/pmc-csw-specialization/
If you’d like support and guidance in making the specialization decision, join us!