Now AND later

Philip Morgan

I've got to circle back to this chart from that Hinge Marketing study:

The green bars describe high growth firms (>= 20% growth), the red ones describe no growth firms. The chart is from this source:

The Hinge Marketing study sure makes it seem like vertical specialization is the best way to prevent growth in your business.

A list member sent me a very thoughtful email outlining their thinking on vertical vs. horizontal specialization.

They could see multiple advantages to vertical specialization for a marketer, but only one for a software developer.

The one advantage that was apparent to them is knowing the language of the client, because as you specialize vertically you start spending most of your time working with similar clients and therefore come up to speed on their lingo and worldview.

This got me thinking. I can see a few more benefits of vertical specialization for any kind of services business, not just developers.

This is not an exhaustive list:

  1. Word of mouth spreads more readily within a vertical, so it's easier to cultivate a reputation by focusing on a vertical.
  2. You get practice doing proactive business development. If someone has moved from generalist to some kind of focus--even if it's a vertical focus--they often start to experience success with their marketing for the first time in their self employment career. This can become a virtuous cycle where those early successes encourage deeper investment in marketing which leads to better clients and more profitability which leads to more/better marketing.
  3. It makes it easier to spot patterns that can lead you to higher-value service offerings that solve "expensive problems", simply because you're dealing with a more homogenous body of experience within which to look for those patterns.
  4. Related to #2, it can drive down your cost of sale.
  5. Related to #2 and #4, it can make it easier to find what some people call strategic partners--other businesses that you trade leads with or cooperate on projects with. This can happen with a more horizontal focus as well.
  6. You may gain some predictability by working repeatedly with clients that have similar business models. This may help with risk mitigation, efficiency, or innovation. This is related to #3.

I stopped there, but I could keep going into more obscure benefits.

Now all that said, if someone comes to me with the pre-requisites for a horizontal market position, the apparent risk tolerance to pursue it, and most importantly the desire to pursue it, I absolutely encourage them to do so. So I try to be objective in my recommendations.

How will you choose between vertical and horizontal specialization?

Will you look at the benefits of vertical vs. horizontal specialization and choose based on the benefits you want the most?

Probably not.

Every strategy decision happens in the context of your current body of experience (credibility & current expertise), your tolerance for uncertainty (risk), the context of the market, and your goals for your business.

Those factors will constrain your choice, making it a choice of what would be best now while also setting you up to move into an even better position later.

Think about it like chess or pool. The way you play things now has an immediate effect, but it also has implications for later stages of the game.

Want a "career chess coach"? /private-coaching/