Verticalization: specializing in a vertical industry offers the keys to the kingdom

Inside the factory of Transmission specialist Cosworth
Inside the factory of transmission specialist Cosworth.

Verticalization is increasingly becoming a successful business strategy for manufacturers says Larry Korak, industry strategy director, industrial manufacturing at software provider Infor.

Larry Korak, Industry Strategy Director, Industrial Manufacturing, Infor
Larry Korak, Industry Strategy Director, Industrial Manufacturing, Infor

Verticalization is increasingly becoming a successful business strategy for manufacturers. Being the expert in an industry allows you to help define the issues and power meaningful change, setting the pace for innovation and market response. In essence, you have the “keys to the kingdom.”

As the global economy and omni-channel shopping change the way consumers make purchases, it is more and more important for manufacturers to develop a competitive edge. You must stand out from a sea of suppliers competing for the same dollars, producing similar products. Verticalization provides the opportunity to expertly fine-tune product design, target a well-defined audience and be viewed as the authority in a particular niche.

The challenges of Verticalization

There are some obstacles to becoming a vertical-centric manufacturer. First, you must know your audience well. You must be able to harness input from the potential customers in order to deliver a product that meets unique requirements. Your vertical-tailored product should offer distinctive advantages over the “generic” versions your competition offers.

Secondly, when you narrow your focus, you also reduce the size of the audience, making every potential customer extremely important. You must make sure your research and insights into the market’s dynamics are totally accurate, reliable and timely. You cannot afford “near misses” when you put all of your resources into hitting a narrow target.

Data makes a vertical focus possible

With the right technology, verticalization can become easy to achieve—and highly profitable.

Access to detailed historical data provides you with the insights you need to analyze buying characteristics and the predict preferences of a vertical market. Data also lets you delve into the characteristics of your potential buyers so you can have meaningful engagement and a high value proposition. Data is also very important to evaluating the profitability of specialized products, which can involve substantial R&D investments, rigorous certification testing and the acquisition of raw materials, which are hard to obtain and more costly.

Benefits to a vertical approach

Taking a vertical approach allows you the opportunity — and responsibility — of becoming an expert in the nuances of the industry, such as government regulations, operational best practices and common compliance pitfalls.

When you hone in on one industry you can focus greater R&D resources on specialized issues and customer needs. You can be positioned as a trail blazer in technology and the trusted authority in that niche market. Prospects will turn to you for advice and respect your recommendations. Micro-markets are often so small and specialized that you may find you have few—or no—competitors. You can often charge a premium and enjoy higher profit margins.

Actionable advice

As you evaluate new markets and plan strategies for growth, consider vertical markets and the unique opportunities they offer. Build on your current areas of expertise and dive deeper into issues where you can have a meaningful impact on a particular market. If you can bring the right product or solution to the market, you can immediate elevate to a position of power. You can be the expert that controls the keys to a highly profitable kingdom.