How to explore new vertical market?

The ultimate challenge for any business is growth. It’s the driver and the goal. To achieve growth, we will evaluate new products, territories, collaborations, and verticals.

Expanding into a new vertical -- taking your existing product or service into a new market with an untapped customer base -- can be a viable path to increasing revenues and meeting top-line growth objectives.

But when is it the right strategy? What are the primary considerations for deciding whether to enter a new vertical?

The best way to go is to start with evaluating a strategy and answering a series of questions focusing on why, what, when, and how.

Why explore a new vertical market?

Expanding into a new vertical can be harder than starting a new business initially. Why? Typically, businesses looking to expand in this manner have already established themselves, their teams, their products, their business model, their operations, and their vision within a specific domain -- making adaptation unnatural and complex.

Knowing that business expansion is rarely easy, a question will arise: what’s driving the decision to enter a new vertical? Will it allow tapping into a new customer base to drive new revenues or increase market share? Will it help gain an edge over competitors? Or could it be that it helps drive increased diversification? Perhaps it can strengthen overall company positioning or reinvigorate employees and increase retention.

Having clarity around "why" pursuing this path will help determine whether there’s a good, quantifiable reason to justify the resources, time, and effort involved.

What should it offer, and does it meet a market need?

The business expertise and the opportunity to expand into a new vertical will build on core strengths. Does the opportunity leverage experience, and what does the business do best, or does it require a new competency?

Look closely at what you offer today. A product, a service, or both? A single offering, a closely related line, or a broad offering of products and/or services? What technologies do solutions leverage? What problems do they help solve?

What is most viable for the new vertical we intend to serve? Does a single offering make the most sense initially? Or a broad offering of products and/or services? Is our existing product currently feasible, or is a redevelopment effort necessary? What alternative solutions already exist? What is our advantage relative to those, and does our offering have unique points of differentiation?

Does it make sense, & when?

Timing: it is important to understand the opportunities and risks involved. It requires having reliable data to conduct an in-depth market and customer analysis. What is the size of the market? What is the growth rate of the market? What is the revenue and market share potential?

We should also make sure we understand the customer environment. What is the profile of the target customer? How many targets are there? Where do they exist?

Next, we should conduct a deep analysis of the competitive landscape. How competitive is space? Who are the players? Are there any winners? What types of new competitors are likely to emerge? What are the barriers to entry?

Lastly comes the question of whether we are prepared to execute. Have we thought through a resource plan? Have we set priorities, and are our teams set up to enable us to achieve them? Have we identified and secured financial requirements?

How do you go about making a move?

Adapting to new environments and effectively competing relies mainly on a winning go-to-market strategy -- one that’s well-integrated, distinctive, and, most importantly, something our company can execute.

Who is the ideal target customer? What is the value proposition tailored to those customers’ needs and our company’s strengths? How will we acquire customers? How will we build awareness and credibility in the new market? What type of sales model will we use? Are there channels and partners we could leverage to accelerate the close of new customers?

What’s key to a winning go-to-market plan is how well the plan adapts continuously. Gathering real-world experience and fast, reliable customer feedback is essential to refining the strategy continually. Whether it’s enhancing value proposition, evolving business model, fine-tuning sales strategy or modifying actual offering, the key to success is creating a feedback process that perpetuates ongoing testing, learning, and optimizing.

Take a step back and paint a picture of the future state of the business. As entrepreneurs, some of you will find that this path aligns well with your aspirations and passion for pursuing it. For others, it will be too much of a change. The key is knowing what’s right for your business and when, having a strategic plan, and being able to execute with commitment and focus.