How to Make Horizontal Positioning Work

David provides some clear examples of what is required for a firm to be successful at offering one service for many different verticals.

Links

“Strengthening a Weak Horizontal Positioning” by David C. Baker on punctuation.com

Transcript

Blair Enns: David, our topic today is strengthening an otherwise weak horizontal positioning. Is this about sleep? Is this about improving your sleep quality? Because if it is, it's perfect timing. I have not been sleeping well lately.

David: We just bought a bed that you can raise the top waist up part of it, and it really does help. Maybe just subconsciously, because I've been sleeping so much better, this topic came up. I didn't even think about that. No, it's not.

Blair: Did you buy one of those Hästens, the Swedish handmade grand whatever $800,000 beds that Drake has?

David: No. No.

Blair: Okay. So it's about positioning the offer of your firm. We'll get to the strengthening part if there's something weak there. But otherwise, can you explain what you mean by a horizontal positioning if we are not talking about sleep?

David: Yes. There are tens of thousands of potential horizontal positionings, but very few of them are actually articulated clearly. When we talk about vertical positioning, we're talking about an NAICS code, which is sort of the predecessor to SIC code. Then the three big broad ones that for the last 25 years have always been strong are healthcare, tech, and financial services. Those are very broad. We're talking about a very narrow vertical one.

But a horizontal positioning basically stretches across almost all of the vertical ones and does one smaller, more focused thing typically for clients across lots of verticals. A vertically positioned firm is typically doing more things for that very narrow vertical.

Blair: So vertical positioning means you're specializing in a vertical market and you can typically identify that market by the NAIC code, North American Industry Classification Code. The code would have a number associated with it and a horizontal positioning. I think about the crosshairs of positioning as what do you do and for whom do you do it. When the for whom you do it can be identified by verticals, that's what you would characterize as a vertical positioning, correct?

David: Right, exactly.

Blair: But horizontal, your definition of it is it's not just what you do, there's also some description of who is in it.

David: Yes. The way you described it just a second ago really rung true in the sense that you do something for somebody, and who you do it for is identified. Everybody agrees that's this NAICS code. But when you flip that around, it's the same sort of question. A horizontal positioning is really trying to answer the same question, discipline for market. But in this case, the market is not one single market. The market is a lot of things, but you're doing something for them.

I like the discipline for market way to think about positioning, but I would just capitalize one of those if we're talking about vertical and the other one for horizontal. So discipline for market. The emphasis is market, who you do it for if it's vertical, and then the discipline itself for many markets, the markets themselves are not as important. It's more what you do for them that you can carry across all of these verticals.

Blair: You have these two aspects or dimensions of your positioning, what do you do and for whom do you do it. When one tends to be narrower or more emphasized than the other, and when the market for whom you do it is more narrow or more emphasized, and we can all agree on what that is via the NAIC code, then that's when we think about it as a vertical positioning. When it's more about the what do you do and less about who you do it for, then that's when we think about it as a horizontal positioning. Is that right?

David: Yes, exactly. I'll give you some examples. If we're still leaving people confused, this might help. I just got off the phone with a client. It's actually a client you and I've shared. What they do within a particular division is they develop mobile apps for workers in the field. There are workers in the field from all kinds of verticals. There's telephone people, there's plumbers, there's people that maintain heavy equipment, there's surveyors. They're all over the place in terms of the verticals.

But the one thing they have in common is that they have service people out in the field and this client of ours develops mobile apps to serve that need. That's a horizontal focus. They do a very specific thing for lots of verticals. Bringing gamification to engage consumers. You could see how there's, I guess, a core strength that they understand how to build engagement with gamification, but that actually applies to lots of verticals, right? One thing I should mention here before we get too far is that really tightly positioned firms have not only a horizontal but a vertical too. I think of that as a bullseye where they can't miss, but here's some more examples. ABM for expert advisors. Expert advisors would typically be in the 54 classification for that coding. That's a broad vertical, but they're really leading with ABM, that's the core.

Blair: Account-based marketing.

David: Yes, and it applies to all these verticals. When what you do applies to all these verticals, it's typically a horizontal positioning. Now here, I'm going to yell at the moon for a second, but if you think about the classic struggle of a creative firm where it's not just an information, it's more of a courage problem or a business model problem, they're not very tightly positioned.

So the way they try to solve that is, "Okay, how can I preserve working across all of these verticals, but still bring a unique expertise to the table? So I'm going to have a horizontal positioning." But they land on one that just doesn't have an addressable component to it, nor does it tell you when that person's going to need it.

Blair: What do you mean by an addressable component?

David: Rebranding for Fortune 5000s. Okay, that would be a horizontal positioning. We do this very specific thing, and it can be applied across all of them. Okay, how are you going to find the decision maker for a rebranding, because that's at four or five different levels within a company, all high level, but different departments, and then how are you going to find it at the right time? That's the addressability problem. By the time you found out about it, your competitor already got the project.

Blair: The addressable components, the decision-makers, and then also with rebranding, there's a time in the life of an organization when they consider rebranding. Your timing has to be perfect. It's not an ever-present problem.

David: Right. Here's another example of a loose horizontal, and that's helping clients navigate change. I just want to gag when I hear that, because it's like, what? Every company's going through change. Whatever. But what if you said the same sort of thing, but the target was more for publicly traded clients at one of these four intersections, like change of CEO, there's a market regulation problem, you just got sued, there's an activist investor. Whatever it is, right?

Now all of a sudden, "Oh, okay, now I know where to find my clients, and probably I can figure out the clues." That's back to the title of this whole thing, which I thought was brilliant, by the way, and you said nothing about it.

[laughter]

It's like how to strengthen an otherwise weak horizontal positioning. Most of the people listening to this podcast would be drawn to a horizontal positioning because of the variety. But what they're lacking in their proposed positioning is the ability to reach that market very well. That's what I'm trying to do here, is to help people understand. And we haven't even gotten to the answers to that, but how do you take an otherwise weak positioning and buttress it so that it's as strong as a vertical one?

Blair: Are you claiming, or is it your hypothesis, that most agency owners should prioritize one horizontal over vertical, or vice versa? Is that your hypothesis?

David: No, I actually think there are fantastic reasons for either. It's just knowing what those are and making a considered decision. I wouldn't favor vertical over horizontal. The default should be vertical because it's so easy to find your clients, but if that bores you, then go think somewhere else.

Blair: That was my second question. Do agency owners defaulting to one or the other?

David: Oh, yes.

Blair: So it's a broadly positioned firm, you come along and say, "Hey, you've got to narrow your positioning so you're more deeply relevant to the smaller audience." The first thing they think of is, "Well, what vertical am I going to go after? We work across all verticals." You think that's the default, or that's at least the place they start.

David: Right, whether they like it or not. Yes, that is the place they start. I actually had an author send me a book about seven or eight months ago asking me to endorse it. It was a book written for this field by a good guy. The whole premise of the book was that if you're going to focus, you need to pick your vertical, like get with it. The only option for him in the book was to pick a vertical.

I just said, "I cannot endorse this. I think what you're saying about verticals is true, and it's going to be a good book in that regard, but I do not want people to come away from this thinking, 'Oh gosh, a horizontal positioning is so tough, I guess I can't choose it.' No, I think there's some really great ones."

Blair: You say here that there are two different ways to define a horizontal focus. Do you want to walk us through those?

David: Sure, and this is where it gets a little even more interesting to me. In vertical, there's one question, but there's only one possible answer, and that's where you target NAICS code. With horizontal, there's the same question, but there's two viable answers. One of them is that you're focusing on a particular demographic. Maybe it's Hispanic, or maybe it's old, or young, or rich, or poor, or whatever. Or it could be a very tight service offering. Either one of those would be fine. For instance, the one I mentioned as an example, mobile apps for field workers, that actually has both. We're talking about both because they're doing something very specific, but they're also doing it for very specific companies. Anyway, all that works pretty well. Those are the two ways you can define horizontal focus. Either a very tight service offering, often that not many people can do, or a very tight demographic.

Blair: All right, so give us an example of a very viable horizontal positioning.

David: So the ones I've mentioned are good. I'll give you some others here. Digital employee recruitment. Employee recruitment is needed by lots of verticals, but not as many of them have gotten into, and here I really meant to say, more social media sort of digital recruitment. There are certain industries where they have a couple things happening. It's hard to find people, and those people actually happen to read Facebook a lot. Anyway, another would be portals to build engaged communities.

You could see all kinds of communities, like you graduated from this school, you've enrolled in this cancer program, whatever it is, building engaged communities for lots of different verticals. CRO for e-commerce, employer branding. Employer branding is basically helping turn the message inward to recruit people well and to get them on board with whatever the mission of the company is and so on. Design systems for startups.

On the face of it, that sounds very much like a horizontal positioning, but most startups are in the tech space. This could very well be interpreted as a vertical as well. Rapid response SCM for multi-location retail. Making legacy brands relevant again. I don't know about that one, right? It's not quite narrow enough.

Blair: Are these real life examples from your clients and firms you've spoken to?

David: They are, yes.

Blair: I'm referencing your notes here, but you talked about the easily addressable components. In all of these examples, the buyers are easily found, number one, and number two, they generally need a service like this all the time. It's not like one brief moment in the history of the organization where they would have this need. There seems to be a somewhat present need for the services being described.

David: Yes, here's another example of a firm with a creative mentality and this initial assumption, let's come up with something horizontal, so that they feel like they don't have to say no quite as often, right? They land on something that all of that is true about, but it also sounds fun. How about if we work for challenger brands? I hear this one a lot.

Blair: Not as much as 20 years ago, it's still out there.

David: Because of the book?

Blair: Yes.

David: What was that book again?

Blair: Building a Challenger Brand, maybe?

David: I can't remember even who wrote it, but let's do challenger brands because that'll be exciting, right? And this really differentiates us from everybody else. But when you start looking deeper into it, it's like if they're not number one, then everybody else is two or lower. This includes everybody. Somebody told me that one time after a cross-country race that I didn't win. He said, "Just think of it this way, you came in second and he came in next to last," of the two of us running.

[laughter]

Blair: It's like every agency that doesn't win a pitch came in second.

David: Right. [laughs] Anyway, it's like there's a whole lot of challenger brands, but we decided we didn't, and this is a real client too, we really didn't want to leave this idea. What if we took a more scientific approach to it? What I suggested is, "Okay, make specific criteria and even make them public about what a challenger brand is, and then it'll start to sound a little bit more interesting to people, okay?" You're not the brand leader. Don't come to us if you're the brand leader.

We actually don't want to work with you because of very specific things. Second, you must be within the top four. You're anywhere, number two, number three, or four, and I'm just making this up, this is arbitrary. I don't want to give away all their secrets. Third, you're actually climbing in market share. You're not just stalled, you're actually already on a pretty upward trajectory, and you just want to maximize that.

Next, you're willing to spend a greater percentage of your revenue on marketing, and those numbers are readily published every year out of Chicago, it's a public thing. In the middle quartile or the middle two quartiles, they might say, "Okay, in this industry, they spend 2.2% on marketing." You calculate that for this potential client of yours, and if they spend more, then they are a challenger brand. Finally, do they show evidence or a willingness in the future to take more risks? Because market leaders aren't taking risks.

They don't want to do anything to lose market share. Everybody else is taking risks because they have less to lose and what they're doing right now is obviously not working, so something has to change. Anyway, that's how you could take something that sounds like a pretty weak horizontal positioning and be a lot more specific with the description of it. That's another idea.

Blair: Yes, I really like this. Challenger brand on its own. I've heard that a lot and what they really meant is like, "The market leaders don't hire us because we're not good enough for them, so we focus on Challenger brands." But your point is, well, you've put some meaningful criteria around it. In my last agency new business development job, I would go into meetings with this positioning statement that I wrote. I forget the second part of it was, but it was we work with companies at times of growth and transition to benefit.

I forget what the benefit was. It was a sentence and then I had six examples of what I meant by growth and transition. I had this written on a piece of paper and it was a face-to-face meeting and I would say the sentence, I would slide it across the table and very often the client would look at the list of six criteria and go, "Yes, we're all six," and hand it back. I thought I'd pulled off the perfect positioning because it looked narrow, but it was broad because the truth is most companies or most leaders within organizations felt as though they were at these inflection points at all times.

David: It was aspirational in a way for them, right?

Blair: Yes. Was it smoke and mirrors or was there something real there? Answer, it was smoke and mirrors.

David: Yes, and if you'd have given that to me and you were my client, I would have said no.

Blair: You would have fired my ass. "Yes, see you, there's the door."

David: But I do think there's criteria here that can help it, right? Then there's another huge one and that's what I was thinking we might get to at some point. Although, to me, it's like after I sent you these notes, I thought this is just one of many ways you could define your market tighter. What I was going to suggest we talk about a little bit is just research too. What if you had some research that somebody else didn't have?

Blair: Say, back to challenger brands, you had some research around challenger brands and you had a point of view, the research was reflective of a point of view or you uncovered something that other people hadn't understood about it. Is that what you mean?

David: Yes, exactly. It's just not that hard either. You don't even have to do original research. It's already out there. You just have to find it.

Blair: Chat GPT, ladies and gentlemen.

David: Yes.

Blair: Do you have a real world example you want to talk about this where somebody was trying to pull off a broad or weak horizontal positioning and then supported it through research?

David: Yes, my article this week came out too. So if you want to follow any of these links, you can find it at punctuation.com. This is a firm in Fort Wayne, Indiana. I know exactly what you thought when I said that.

Blair: I didn't think anything.

David: What the listeners thought was, "Okay, fashion's out, music is out, great food is out, architecture's out."

Blair: Taste. I'm sorry. Some of my best friends are from Fort Wayne, Indiana. I don't even know where that is.

David: So here they are running a pretty substantial agency in Fort Wayne, Indiana. You look at the options and it's not that there are no vertical options, there's just a lot of them without any great concentration in a particular area. They're thinking, "Okay, well, maybe we need to go horizontal. What is it that we are really unique about?" "Oh, well, we live in middle America. We understand middle America."

So the idea was we'll have a horizontal positioning that's about reaching consumers in middle America. That sounds okay on the surface, right? As long as you don't get angry when people talk about the flyover states. I live in one of these. What they discover with research, and that was the key for them, is that there are certain values that have a bigger role in the products and services they choose.

So they do regular research reports that only their clients get that help them effectively sell to middle America. There's a whole lot of people, a whole lot of money in middle America. That was a weak positioning, but once you buttress it with research, it can work. That was the example.

Blair: The value proposition is we help you reach middle America and your point is that on its own is meaningless, but as soon as you add some research and your point is it doesn't even have to be proprietary, in this firm's example, they understand some values that people in middle America would have higher up in their value stack. Therefore, they understand how to speak to people in middle America. And they can speak to that in a sales conversation with prospective clients by referencing the research and the key values.

David: Yes. I think actually this is, I guess, a side benefit is to them, their location is no longer a potential drag on their positioning. It's actually at the core of it. Which I think is also really smart too. Yes, I remember this engagement very clearly. There's only so much I can say because I don't want to take all their thunder, but the research they do is substantial. Yes, I'm just really proud of somebody who stuck to their guns with a horizontal positioning but then did the hard work to buttress it with either research or a tighter--

You can't get past the door without answering these questions right. There's some other ways to do this too. Process is a big one, like how you solve problems is also part of it. We haven't even talked about the particular service offering that you might do that could be maybe your experience is in IOT. That's a horizontal positioning with a very tight service design. It's fun stuff to think through.

Blair: If this episode was going to be a tweet, it would be strengthen an otherwise weak horizontal positioning with research. Is that right?

David: Yes, except that it's X, not Twitter, but yes. That is correct.

Blair: Oh, yes, yes, yes. You could've saved me 35 minutes.

[laughter]

David: I need a different co-host.

Blair: We get to the end and it's like, "Yes, this is worth spending 30 minutes on." It's too bad we're at the end of the show. That's actually really insightful. When I think of the clients that I've served over the years who are exploring a new positioning, and especially people who are resisting, it's like, "Well, I don't want to just do this for car dealers or whatever the vertical is."

Then you point out, "Well, verticals is only one way to do it. The other way to do it is horizontal." Very often they're in these broad horizontal positionings. You've pointed out some. Your key point here is they can stay somewhat broad as long as you make sure that you're hitting the addressable components, right? You're not time-restricted. There's a pervasive need for this.

It's easy enough for you to identify who the decision-makers are in your client organizations. Then you bring more meat to that positioning through some research, through better understanding what the market is. "We help you understand middle America," that's not a vertical at all, but it is referencing a market.

David: A demographic, that's the demographic. The one of two options when you define a horizontal. Yes, it's not a specific thing they do. We do lots of things for a demographic.

Blair: Oh yes, it's actually your client's market. I'm getting distracted, confused and distracted by that, yes. Okay, I get this. We could almost go deeper into this. Other ways in which you can build a better business and improve your positioning through research because I feel like if we haven't already talked about it, I know the conversations that you and I have had privately and some of the things that you've written, I think there's probably more meat here worth getting into.

You've said before, you see yourself as a data scientist posing as a consultant. You have a research-oriented brain. I think a lot of creative firms run by creative people in particular are not research-oriented. There's probably an episode on the different ways to use research to build a better business.

David: Oh, that's a good idea. Yes, I'm going to make a note of that.

Blair: All right, this was great. Thanks, David.

David: Thanks, Blair.