Horizontal vs. Vertical: Two Approaches To Expanding Your Consultancy Services
There are two ways to expand our consultancy services depending on whether you are more interested in the industry or the discipline. But choose carefully.
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Two Strategies To Expand Your Consultancy Services
Are you going to change verticals or change horizontals?
If you want to expand your consulting services, you probably don’t want to create an entirely new product in a new industry.
Caterpillar can get away with jumping from construction equipment to a fashion line, but you probably can’t.
Instead, you have two options.
You can either sell what you’re selling to new industries (new verticals).
You can offer more services to your existing vertical (new horizontals).
You can see this shown in the diagram below:
Let’s do a deeper dive into each.
Horizontal Expansion
When should you offer your services to new verticals?
Expanding to similar niches
As you can see in this diagram, one expansion method is to move to the right.
This is where you identify and sell the same service to similar niches. For example, a recruitment consultant for tech B2B startups might move to the right and sell recruitment consulting to finance, pharma, and other industries which are a little ‘techy’.
Expanding to similar niches makes sense when the discipline doesn’t change by industry and you have a strong reputation within that discipline.
Some specialisation might be involved, but not so much that your past expertise isn't relevant.
Expanding to parent industries
Alternatively, the recruitment consultant can expand to parent industries (or just larger industries).
In this case, they might offer recruitment consulting to all tech companies or Fortune 500 companies etc…
Expanding to broader niches makes sense when you have an excellent reputation for that discipline and strong sales skills.
This again makes sense when recruiting is the skill, and the consultant has the best approach or distinct method that other firms could utilise.
Vertical Expansion
When should you offer new services to your industry?
Alternatively, the consultant might expand by offering new services to their existing industry, which allows them to move up or down the value chain.
Going up the value chain
A recruitment consultant, for example, might use their unique knowledge of an industry and relationships with clients to develop new services they know their audience needs.
This might first target services at the unit level (i.e., the same team they’re working with). An excellent example of this might be employee onboarding. Then, they might expand to department-wide support (change management strategy) and, finally, organisation-wide support (talent strategy).
This approach makes sense when the consultant is a great networker, builds a strong reputation within an industry, and has incredible expertise within their niche. The higher up the value chain you go, the better your consulting skills have to be. Things like stakeholder engagement, the design of deliverables, interpersonal skills, and strategic thinking become far more critical.
Going up the value chain makes sense when you want to earn more revenue and have excellent stakeholder engagement, design, and a remarkable industry reputation.
Going down the value chain
Alternatively, the consultant might expand by moving down the value chain.
This typically means you move into implementing your recommendations in some form. A typical example of this is technology. A consultant who recommends a particular technology for recruitment might also help set up that technology for the client (or partner with a firm that can).
Likewise, the consultant might offer training and development support to help the people implement their recommendations.
Another increasingly popular option is to do the work themselves (or hire a team to do the work). In this scenario, the consultant would recruit employees or manage the project.
Going down the value chain makes sense when you want to build an agency. This is when you want to hire staff and create an asset you might one day be able to sell.
Do You Need To Expand At All?
Another consideration is whether you need to expand at all.
Until recently, my consultancy, FeverBee, stayed on the horizontal. We deliberately focused on delivering a narrow range of community strategy and training services to (largely) tech companies. Occasionally, we would work with other organisations, but our focus has broadly stayed within organisations with a technology slant and that’s worked well for us.
Expanding entails risk and stress. Why bother with any of it?
You can often stay within the niche you’ve always been in and optimise your current work. You can keep delivering services to the same audiences and generate more revenue. You can embrace market penetration and optimise what you’re doing.
This is the most straightforward approach to some extent - but it’s also limited to playing in the same sandpit forever. But if the sandpit is big enough, that’s fine.
My advice is that if you expand, do it deliberately. Run a deliberate marketing campaign. Don’t dabble in a new area or dip your toe in the water. That’s a surefire way to fail. Commit to the process for a year and then evaluate the results. The results won’t be instantaneous, it will take time to build the connections and trust you need to thrive.
Good luck!
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