Horizontal progress is about creating a better mousetrap while vertical progress is about making a better way to trap a mouse. While this may appear to be a simple play on words, it is an important distinction when it comes to obtaining investors, talent, and assessing risk and profit potential.
To demonstrate the difference, I was researching residential wind turbines. Everyone is familiar with the three bladed turbines on the huge towers that use lift to turn a shaft and generate electricity. Many manufacturers even make smaller versions for home use based on the same basic principles. In fact, many companies in this market claim to have a revolutionary new wing shape or claim to use a special material. Most wind turbines have either three, five or seven blades that rotate a horizontal shaft. Others may even rotate a vertical shaft, however, in the end, they all use blades and lift to turn a shaft and therefore are all about the same.
Then there is the wind energy manufacture that devised a product based on a completely different technology. Humdinger Wind Energy used the physics involved in an aero flutter to develop wind belts that use a thin membrane that oscillates between two wire coils to generate electricity.
Wind belts, unlike all the other wind generators, do not rely on rotation or lift to convert wind speed into energy. Rather they rely on a completely different set of physics laws and this innovation represents vertical progress.
When your solution is based on making incremental or horizontal progress, it means that you have competition. With competition, your competitors can pressure you on margins, which results in much of your profits being competed or whittled away.
On the other hand, vertical progress is about creating something new. Either through patents or first mover advantage, you have the ability to capture value through high margins and achieve capital accumulation to accelerate your market dominance.
Google, Amazon, eBay, and Facebook were essentially businesses that made vertical progress and captured large margins to dominate their market. Investors and quality talent flock to companies designed around vertical progress solutions because these companies offer the greatest chance of success. However, because these companies represent something quite new, their potential customers need to be made aware that the solution even exists.
So how can you as the product developer for your small business change your perspective from differentiating your offering with minor horizontal innovations to finding a whole new uncontested Blue Ocean product offering using vertical progress? You could ask your customers and consumers, however, they are often not the best source of new product or service inspirations. As Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” A better source to find a new uncontested Blue Ocean product or service is to look at the customer’s journey from purchase to disposal with the Buyers Utility Map as we discussed in How to Create a Leap in Customer Value.
For vertical progress companies, their business model will rely heavily on a successful marketing campaign to educate prospective customers that a completely new solution is available to an old problem with entrenched offerings.
Companies that focus on horizontal progress solutions can take advantage of existing customer awareness of the solution, but margins will be small and returns will be achieved only through scale. As such, they do not attract the same level of excitement from investors and world-class talent as the companies that focus on vertical progress.
Is your product or service idea focused on vertical or horizontal progress?
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