Verticalization 201

Investigating the ‘Where’ and ‘When’

Verticalization 201

Every B2B product or services company must eventually tackle this question: Should we ‘verticalize’ our salesforce and go-to-market? I’ve spent the past 15 years helping startups and established high-tech companies like Cognos, IBM and Qlik tackle this challenge.

This blog is the second of a 3-part series where I’ll cover ‘where’ and ‘when’ to verticalize. The prior verticalization blog can be found here and focuses on the ‘what’ and ‘why’. The final blog will focus on the ‘who’ and ‘how’.

WHERE to ‘verticalize’?

This question can be answered by combining qualitative and quantitative data inputs. Qualitative data can be gathered via observations, interviews or evaluations. A simple example: if you are selling into the US Government, qualitative data would suggest the primary region to focus on is Washington, DC and the surrounding areas where government contractors are located. Similarly, if you are selling into the Capital Markets industry, focusing on concentrated financial markets such as New York City, London and Singapore would make the most sense.

From a quantitative perspective, this is where data analytics can help aid in the decision-making process. I always recommend using quantitative data to help guide and reinforce investment decisions since it takes the emotion out of the process. Here’s a data-driven approach to deciding which location or business area to verticalize in:

  1. Gather market sizing, spend and CAGR data from 3rd party sources such as IDC, Gartner or an industry specific source which analyzes your general market
  2. Gather internal metrics including things like: historical $ revenue, current $ pipeline, # of people resources, # of accounts, # of solutions, etc.
  3. Combine the multiple sources (using Qlik Sense of course!) and consume it via visual analytics

#Qlik’s Mike Saliter reviews the ‘where’ and ‘when’ regarding go-to-market specialization:

See below for a few sample outputs built in Qlik Sense using fictitious data:

Example 1: Shows “Region B” having the highest overall aggregated rating based on a cumulated scoring algorithm:

The above scores are derived by adding a weighted total for each of the below metrics then aggregating them into an overall total.

Example 2: Germany is the best market to go after followed by Sweden and the UK. But using multiple metrics plotted on this geographical view, we can see people resources are not necessarily living in the right location to capitalize on that potential:

Image key:

  • Color represents the calculated market potential (darker the color means more potential)
  • Grey bubble size indicates the # of accounts within the country
  • Green bubble size represents the location and # of people resources

WHEN to ‘verticalize’?

This is a trickier question to answer since it largely depends on what types of products and services you are selling. If you are already focused on a target market which is limited to a small number of industry verticals, then the decision to align your sales and marketing to those verticals is straightforward. But if you sell a platform or capability which applies to almost every industry vertical (such as Qlik or others in the BI industry), then the decision becomes much more challenging.

Assuming you are like Qlik and your product or service can be used by ANY industry vertical, you can use several different approaches to help answer the ‘when’ question:

  • Ask your customers via roundtables or advisory groups
  • Apply A/B testing where you compare a small sample size
  • Gather feedback from ‘feet on the street’ as well as senior executives
  • Consult 3rd party expert consultants for guidance

Based on my personal experience, software companies typically don’t reach critical mass to verticalize until the reach the $100-$250 million in annual revenue range. Before that, they are typically spread too wide but they reach a critical mass in the $100-$250M range where it starts making more sense.

Check back in next month when I’ll what up the verticalization topic with the ‘who’ and ‘how’.

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