Pros and Cons of Business Specialization


Should Tornado specialize in a specific industry? I’m not sure why I ask because I’ve suggested specialization to customers. I’ve known a lot of people who have done this very thing. It’s a very powerful statement to be able to say “we specialize in x industry.”

One reason is it is much easier to get deals signed when you’re the one with experience in that industry. It’s sort of like icing on the cake. “They know our industry.”

Imagine for a minute if you owned a small web development shop and you were looking for a PR agency. Would you hire the company that does PR for everyone or would you hire the PR agency that specializes in the creative / web field? See? Or if you owned a construction firm. Would you hire the web development studio that worked exclusively with commercial and residential builders? Does it matter?

I don’t see many design firms and web firms specializing. When I do, they tell me it is one of the best things they ever did.

The obvious first step to any specialization effort is informing the existing clients. Before you do that however you need to decide how you’re going to go about that. What will clients say when they realize you’re suddenly “outside” of their specialization? Should you drop clients that don’t fit your new mold?

There is a design firm in Utah called modern8 that sends out an email newsletter. They just decided to specialize in the construction industry. They decided to keep every existing client and just focus sales efforts on the construction industry. Here’s how they phrased it in their email:

Our new specialization has no effect on current clients, no matter what the industry, inasmuch as this is a marketing initiative, it influences only what work we seek, not what we accept.

That works really well.

Now I’m not saying Tornado has no focus. I’m just pointing out that we could be far more specialized than we are. I’m thinking of the grocery store that decides to go upscale (AJ’s Fine Foods here in Phoenix for example) or the auto maker that decides to spin off the Lexus line of vehicles.

Let’s think for a moment about web applications. Consider Blinksale. It’s the easiest way to send invoices online. That’s awesome. They own that category at this point in time. What would happen if they were to spin off a side product specifically for the lawncare industry that automated invoice delivery for lawncare over the web. BAM! They’d own a very specific category that could prove far more lucrative in the long run than a generic service.

I think there are multiple ways to look at the simple phenominon we’re seeing today. Basecamp came along and proved that with less of a product it can be more popular. Why is it? It’s because more people are likely to adopt and use it because there are less features to get in the way.

37s could easily break Basecamp into industry specific uses. They’ve got the web industry down like a down pillow. But imagine a solution for law offices or accountants? The trick is to promote those products independently and with their own marketing angles.

In concluding. I didn’t mean to pick on any specific companies but I have to ask: All this talk about specialization makes me weary. I want to know if I should specialize and if so I guess that means I need to pick something. The question then becomes: does it mean picking an industry (healthcare, sports, etc.) or a sub specialization (ecommerce, blogs, design and not development, etc.).

What do you think? Have you specialized? Are you a jack of all trades, and master of none?

5 responses to “Pros and Cons of Business Specialization”

  1. We don’t “specialize” per se – we are, however, working on strengthening our vertical sectors or markets. As a developing firm made up of several partners, we each bring different focus (specialties, knowledge, depth of experience…) to the broader picture of what we do. Hence, we are able to do all kinds of things, in all types of industries, while remaining focused and not appearing as though we’re all over the place.

  2. Let me know how this works out for you. I’m trying to move my own business towards the web illustration/icon design niche this year and away from full site design. We shall see how it goes.

  3. As an individual freelancer trying to get a small business off the ground, I can say that the biggest mistake I made last year was not starting off specialized. It seems counterintuitive at first. Especially since most of us working full time as web designers have already done several sites for a wide variety of markets. I didn’t want to prevent potential new clients by not being open to their market.

    This year I have decided to turn my attention exclusively to the small non-profit sector. Things seem so much clearer already. I can focus on marketing towards specific trade journals and conferences. I can make my marketing language sharper and less like the 150 million other web designers offering basically the same product.

    Great post.

  4. Well, as Chris knows, we specialize in web solutions exclusively for healthcare, and even then we specialize primarily in physician practices.

    On the downside, our target market has some quirks with their buying cycle — sometimes they’re very price-conscious and sometimes the sales process can be dragged out for months on a project of relatively low value. And of course we have more direct competition (which isn’t necessarily a bad thing, though).

    On the upside, we get to leverage our experience with previous clients with every single new client, and, to Chris’s point, we beat out the generic web firm every time. We’re also able to package our services into a product and sell the product, which means we can set budgets and quotas with more predictability than a general web design job.

    In the end, there are definite benefits to specializing, especially when you’re selling to a client. But I think there’s definitely something to be said for exactly which industry you choose to specialize in in the first place!

  5. This summer I released a book called “the St. Bernard Principle. Why Specialists are the Alpha Dogs in Business.” and it makes a compelling case for specialization. Short of being a full bred St. Bernard, you might consider what I call the Litter Twin strategy where you launch a second specialist business if the potential looks strong.

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