I’m here to set the record straight. We are finally going to define what a vertical company is.
But before we do that, let’s talk about how business professionals will recognize the word vertical.
The most widely used version in business is vertical integration which describes how a company is structured along its supply chain.
Vertically integrated companies aim to control every part of the supply chain from sourcing to manufacturing to retail. So one example of this could be Apple creating its own processors for its own iPad.
A horizontally integrated company focuses just on a part of the production process and aims to corner the entire market for that process. An example of this would be Intel creating processors for anything that needs a processor.
So does a vertical company need to be vertically integrated?
There are some, such as Andy Dunn (CEO of Bonobos), who will say a vertical company is a completely vertically integrated company that is also crazy about the customer experience.
He even coined the term Digitally Native Vertical Brand or DNVBs to describe these types of companies which adds to the confusion.
The other type of vertical that a business professional will recognize is in marketing.
In marketing, a vertical is a customer segment.
So if you think about the marketplace as a pie, selling one type of product that’s meant for everyone takes a horizontal slice of the pie.
Horizontal markets are product-focused.
But if you sell more than one type of product that caters to a certain niche, then you’re capturing a vertical slice of the pie.
Vertical markets are customer-focused.
So while there may be some confusion on what a vertical company is, I’m here to set the record straight.
A vertical company is a company that is hyper-focused on delivering value to a specific niche.
To be able to give this customer segment the best experience possible, vertical integration is a plus, but not necessary.
What’s most necessary for vertical companies is their direct-to-consumer relationship and the customer experience they deliver.
If you liked this article then you will probably like our article about the Top 100 Digitally Native Vertical Brands.