Startups who are keen to adopt the traditional (also popularly touted to be safer) vertical growth approach might still face budgetary issues.
However, vertical growth has been the popular choice for decades because it is easier to implement, especially in challenging times. After all, it is far easier to scale up products and services in an existing market where one already has a foothold. Additionally, there may be a supply gap left by some pandemic-affected player.
Startups that are keen to opt for the vertical growth approach in the “new normal” must ask themselves:
1. Do they have the bandwidth - in terms of human resources and production/ procurement resources - to propel this growth?
2. Do they have the budgets to undertake this sort of product or service offering expansion at the moment?
3. Do they have the financial might to keep their existing product or service offering underway should the new project not succeed?
4. Has the present situation contributed to some lacuna or opportunity that they are hoping to bridge or exploit by expanding their product and/or service offering?
While tapping into existing markets (or the vertical approach) seems like the most commendable card to play, when you look at the growth game through the lens of a shrinking population, tapping new geographies and new markets by leveraging existing assets might seem like a befitting option.
Is the choice wholly black or white?
This is where it gets tricky. Once you’ve made the distinction between the horizontal and vertical lines, there comes the choice of opting between the lesser of two evils - what if prospects look dicey on both fronts?
In all likelihood - given the difficult times we’re in - that is indeed the case. You could choose to stay still and not chase new business. Alternatively, you could evaluate which of the two approaches presents you with a more comfortable risk-reward ratio. This is where you ask yourself practical questions like:
1. How much capital do you stand to risk by tapping into a new geography or a new market with existing assets? How much do you stand to gain?
2. How much capital do you stand to risk by developing and launching a new product/service in the market? How much might you gain if all goes well?
Remember to be brutally honest while answering such questions. Hold these ratios up against each other for a valid apples-to-apples comparison. Whatever you do, don’t act on ‘a hunch’ or any advice that is not tailored for your specific business and industry.
As you can see, whether you should opt for the vertical or horizontal approach depends mainly on your business and the industrial sector your startup operates in.
The bottom line is - the choice between the horizontal and vertical lines of growth essentially depends on the answers you craft to the questions suggested above. The debate is highly subjective, and it depends on your startup’s unique needs and, of course, your visions and goals.
Raman Pathak is the co-founder & CEO of Jeebly,
His core expertise lies in efficiency optimization by leveraging latest advancements in technology especially artificial intelligence and machine learning. He has made inroads into performance acceleration via cross-utilization of resources amongst different business verticals using proprietary technology.