One of the biggest concepts in entrepreneurial business I keep coming across lately is the idea of the Vertical.
The idea is that you, and your competitors who are by and large the same as you are – occupy a virtual ladder. Your placement is decided by a number of factors, such as clientelle, pricing, staff, and so on. The idea of a vertical is used very commonly when creating idyllic strategies; in essence, people plan to move up the vertical, and make sure they’re not giving oxygen to those below them.
The trouble is that verticals are almost entirely useless.
Hold on now, hear me out.
Let’s say you’re responding to an RFP (request for proposal) – and you figure you know the competition. There’s your firm, three others providing exactly the same services, and a handful of associated industries. Let’s be specific and say you’re a contractor – you build things – and that’s what the RFP is for. Someone wants something built. It’s right inside your wheelhouse. You know the materials, you know the needs of the occupants – you understand everything about this project.
You lose the RFP. To an architect. What?
An architect, you say? Someone who designs things. Not in your vertical. You thought you had this thing nailed down – and failed to realize the fatal problem of business proposals.
Verticals deny differentiation, and encourage scale over all else.
Take this differently. Imagine you’re in a store. You’re looking at buying a television, and you’ve got a few choices; a 32′ Sony, a 42′ Sony, a 56′ Sony and a 42′ LG. What do you pick? Where do you see the outlier? Comparing the three Sony units is like looking at verticals – the 32′ may just be too small, the 56 too big. Matching the 42″ Sony (your contracting firm) against the 42″ LG (the architect) allows for a direct comparison of features, appearance, and a vision of what’s actually needed.
It’s all well and good if you’re better than the other things in your vertical – but what if your prospects are sold something else entirely? A different vision to address their needs?
In our example, there’s nothing wrong with bringing in an architect – they’ll build the plan, create the vision, and find contractors to serve the need. You, as a contractor, were perhaps too utilitarian. Perhaps your understanding was not communicated. Who knows?
Either way – it’s easier to choose to buy something entirely different, than it is to choose between two identical items competing on price or volume alone.
Differentiate. Verticals are ladders, and ladders fall over some times.