Vertical Specialization “Mindset” Often Stifles Innovation

Written by James Proctor | Oct 2, 2012 6:29:00 PM

There is much discussion at industry trade association conferences regarding the value of increased specialization to create value in increasingly narrow niches.

However, based on my experience in working with the spectrum of organizations around the world, success favors organizations that are innovative, agile and scalable – rather than vertically entrenched.

Today’s business environment is rapidly changing, increasingly regulated and globally competitive. Meeting this challenge requires continual change and on-going improvement in an organization’s business processes, culture and supporting technologies.

Organizations that have a myopic mindset that narrowly defines their market space and that develop rigid business process and supporting systems to support this narrow vision have difficulty recognizing and embracing new opportunities and responding to emerging threats.

What’s the industry? Where’s the vertical?

Is Google a search engine? Does anyone remember the Alta Vista? It was once the number one search engine. Is Amazon an on-line retailer? There were other on-line bookstores in the early days of the internet. Where are they now?

Both of these organizations have evolved well beyond their initial product lines. Google developed the Android operating system and is now a major player in the mobile communications space. Amazon developed an ecommerce platform and product fulfillment processes that are used by organizations around the world.

Examples that blur industry boundaries abound -

• Manufacturers now provide complete “solutions” by bundling their traditional core manufactured products with services to assist with product configuration and implementation as well as provide ongoing service and support agreements and product financing.

• Telecoms (phone companies, cable companies, ISP’s) now provide a wide range of bundled services (voice, data, Internet) combined with access to a wide range of entertainment content and on-demand services.

• News media (news papers, magazines, network news organizations, etc.) are morphing into content developers/aggregators and monetizing original and value-added content across multiple product lines – online access to segmented content, aggregation of value-added data as well as traditional newspaper delivery.

• Government agencies are utilizing private sector techniques such as market segmentation to better define the needs of their “customers” and campaign management to more effectively conduct outreach.

• Universities are increasing self funding and are extending their reach into non-degree private sector products such as continuing and professional education, events and conferences and professional services.

Successful organizations are innovative, agile and scalable. These organizations continually refine and redefine their market space, push across traditional industry boundaries and provide innovative products and services.

The Business Problem

Business processes and supporting application software solutions often have an industry vertical orientation that imposes significant artificial constraints on innovation, agility and scalability.

The problem is that the line among and between vertical industry segments has become very blurry if not altogether irrelevant.

Traditional enterprise application software is typically designed (internally or via a vendor product) from a vertical industry solution perspective such as Financial Services, Manufacturing or Telecommunications and delivered as monolithic modules packaged into stereotypical business functions - such as CRM, Supply Chain Management or Customer Billing.

The problem with traditional enterprise application software is that organizations need to change and evolve significantly faster than the software can adapt to support the organization’s changing business requirements.

The result is a widening gap between business requirements - what the business needs to do, and what the application software can support.

Unfortunately, organizations typically respond to this widening gap with short-term in-the-moment tactical “fixes” (business process, procedure and IT workarounds) that drain productivity, restrict change, stifle innovation and result in on-going daily firefights to complete the day’s work that leaves little if any time to “get it right.”

Successful organizations, however, proactively transform business processes, organization culture and supporting technologies to break the tactical “fix” and endless firefight cycle. Once they “get it right” these organizations continually improve, refine and innovate to drive organizational effectiveness and operational efficiency to maintain market space edge.

Your organization?

What’s your traditional vertical industry sector? What are the opportunities for profitable growth by extending your product lines and service offerings across your industry sector and across industry sector vertical boundaries?

Are your business processes and supporting business systems sufficiently agile and scalable to enable you to embrace these opportunities?

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