Making the shift from horizontal products to industry solutions boils down to differentiation…not just the marketing and messaging variety but adding product capabilities specific to key industry segments that deliver exponentially more value than generic one-size-fits-all products or services.
In B2B, horizontal products and services address the needs of many markets in a generic fashion. They offer similar benefits to everyone but nothing overly compelling for any specific type of organization.
For example, many cloud computing providers espouse IT cost savings and data security benefits while attempting to differentiate on technical superiority and service levels. The result: no significant difference from one provider to another on the actual impact to the customer!
Industry solutions, however, address needs that are specific to one or more industry segments. For example, cloud computing services for brokerage firms might offer a solution that accelerates global expansion initiatives by reducing the time, cost and complexities of establishing trading infrastructures in foreign countries. To a brokerage firm, the benefit of this solution is a no-brainer because it offers significant value over a generic offering in a way that’s highly strategic to organizations in this market segment.
Here are three of the most compelling reasons to make the shift…all in the interest of solving bigger problems that advance the strategic agenda of your target customers. As in the examples above, value and differentiation are intuitively obvious.
1. Competition / Commoditization
If the market is saturated with competitors in your product or service category, it’s difficult for your target customers to understand the differences at a level that matters to them. It doesn’t matter that you attack the same problems from a different angle than your competition if the net benefit to the customer is anything less than a big WOW.
2. Technology Shift
Mobile devices are wreaking havoc on manufacturers of specialty handheld devices in much the same way that PCs did to mini computers. If your situation is analogous to the mobile paradigm shift, you probably need to buy some time.
Focus on solving high-impact problems for specific markets that recognize and need your expertise most. Adding incremental features and improving cross-product integration to solve bigger problems in key market segments can buy the necessary time required to make the technology transition without sacrificing growth or profitability. Leverage that vertical market expertise as part of the technology transition to ensure high-value differentiation in a product category that may already be a commodity by the time your new offerings land in the market.
3. Hot Products & Hot Markets Cool Off
Many organizations have experienced long growth runs because they’ve had one or two hot products that carry the others. But when the market shifts and hot products become less relevant, it can throw organizations into an endless loop of shiny object syndrome in search of the next silver bullet. History proves the odds aren’t in your favor.
Sustainable growth is more easily achieved by leveraging the value of multiple products to solve exponentially bigger problems. Eliminate the management and marketing of products in silos and adopt a big picture view of key vertical markets to understand what’s driving their top-down agendas. Align the investments in your portfolio accordingly so you’re constantly solving the biggest and most complex problems that fall within the realm of your core competencies. A constant stream of silver bullets will result.
The decision to move from a horizontal product focus to a vertical market solutions focus is challenging for many B2B organizations for two primary reasons:
- There’s a perception that focusing on specific vertical markets limits sales to those chosen segments, ultimately reducing revenue potential. Reality proves the exact opposite. They’ll sell more in their chosen markets because it’s easier to differentiate.
- The culture has been built around product revenue and profitability and finance struggles with shifting the financial reporting structure to a vertical market view.
It’s not so challenging when you consider the reality. For most organizations, 80% of revenue and profitability comes from a handful of market segments. If product teams, marketing and sales focused on solving bigger problems for those markets and communicate that differentiation in plain simple English, it would more than make up for the other 20% they’re not focused on.
As for that other 20%, you’re not marketing to them by name today and they’re still buying from you. That won’t change!