Vertical Guts - Is the Chasm Too Scary To Cross?
Do you have the guts to place a vertical bet?
Years ago when I was working at a startup we were having a difficult time getting revenue traction. We had a phenomenal product that had won all kinds of awards and had a very high level of customer satisfaction. Yet we couldn't get the sales engine going.
At one point we realized that might have a "Crossing the Chasm" problem. Crossing the chasm is a famous book by Geoffrey Moore. The basic theory of the book is that in order to go from early adopter to mass adoption of a product you need to find a vertical niche. Focus on that vertical, make all of your product and marketing efforts target solving a pain point for them and then the market will create "buzz" and a viral effect and the product will take off. Moore gives great examples and it is easy to see how the theory can work. In theory that is.
We decided to bring Geoffrey in to consult with us. We went through the full Crossing the Chasm exercise, including identifying key markets that our product would fit in, ranking and prioritizing them and then developing a plan about what would need to be done for the most likely market. We talked about law firms, accountants, real estate firms, consulting firms, ad firms and a few others (our product was focused on the small business.)
In the end we decided on one that was most likely (I can't remember which one it was). We tried to envision the company betting on this one vertical. That meant hiring sales people who had connections in the vertical and hiring marketing and product management staff that would understand the vertical's unique terminology and needs. We would have to make specific change to the product to meet their needs and would have to create brand new marketing programs aimed directly at that vertical and no others.
As this happened the debate about which vertical was best heated up again. We went around and around. We wasted countless hours arguing and discussing and prioritizing and trying to think things through. People proposed going after just two or three of the markets (which goes against the chasm‐crossing theory). Others proposed doing a "Trial" campaign, but we knew that unless we made real changes to the product and committed to a specific market with sustained effort that a trial would not work. We wasted a huge amount of time that could have been spent on something else more productive.
But this wasn't the real problem.
The real problem was the same one that we see in our consulting practice with dozens of startups (and big companies) that are our clients. The problem is that when you limit yourself to one target market (at least for the short‐term) there appears to be too much opportunity left on the table. Ask a startup who their target customers is and oftentimes they'll describe several different groups of people. And many of these groups may not even have anything in common. Yet they are convinced that they MUST NOT give up ANY of the target markets because their product has to be horizontal and has to be a billion dollar opportunity. They don't have the guts to bet on one vertical.
I don't blame them. I understand - it is very difficult to force yourself to have to place a bet on one market. In the end with the situation I described in my former company I ended up having to stand up in front of the executive staff and say "Let's all get real. We do not have the guts to bet on one vertical. We have wasted too much time going in circles. Kill the idea - we are a horizontal play." Everyone grudgingly agreed -at least we were able to admit that we couldn't do it.
Was this the right thing to do? I believe that we could have found the magic Chasm‐crossing market. However, the company did not have the mentality and DNA needed to make this bet. It was better to continue full‐ bore on the horizontal play and see how things played out. We never did get the revenue engine going, though we were acquired for a very nice multiple and all turned out okay.
The question I have for you as the reader is "Do you have the guts to place a vertical bet?"
Answer this question first before you spin your wheels and to find a magic bullet.
Brian Lawley is the CEO and founder of the 280 Group (www.280group.com), and has shipped more than fifty successful products. He is the former President of the Silicon Valley Product Management Association, won the 2008 AIPMM award for Excellence in Thought Leadership for Product Management and is the author of the best-selling books, Expert Product Management and The Phenomenal Product Manager.