Jay McBain's Top 5 Channel Trends, Part 3: Hyperspecialization Is the New Verticalization

The VAR Guy is coming to you from Austin, Texas, where this week we’re attending the Channel Partners Evolution conference. Vendors, traditional resellers, managed service providers and all of the “new” types of channel partners are represented and engaging in energetic discussions about how the traditional channel is changing and how to “skate where the puck is going.”

The conference kicked off with a keynote speech from channel guru Jay McBain, who recently joined Forrester as a channel analyst. McBain’s talk encompassed all of the high-level discussions the channel is having today as it navigates the digital transformation and tries to build a successful future. The VAR Guy will be bringing continual coverage of Channel Partners Evolution, but will dedicate a daily article touching on one of the five main discussion points McBain touched on in his keynote: the aging channel, the rise of the line of business buyer, the need to “hyper-specialize” in order to solve for business outcomes, the new types of partners comprising what McBain calls the “shadow channel” and how to navigate the increasing level of complexity partners must figure out in today’s IT landscape.

Look for a new piece of this series each day this week, as well as coverage of the panels, workshops and keynotes from the thought leaders in our industry.

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Yesterday, we dove into the rise of the LOB buyer and the exact numbers as to how much it’s presenting new challenges for the channel sales process. But McBain says there’s a way not only to avoid the hazards lines of business present, but to actually take advantage of them to drive increased revenue.

He calls it “hyperspecialization,” and his numbers are persuasive. There are 27 macro industries at play, such as healthcare, manufacturing and professional service such as accounting. But when you break them down into their individual sub-industries, you get 297 verticals in which a partner can develop a niche specialization.

But wait, there’s more.

To drill down further and truly build your reputation on solving business outcomes for a niche group of customers, you have to consider four other areas that carve out distinctions in business, and then find the “vectors” that lie in the crosshairs of each.

If your macro industry is healthcare, take a look at your existing customers to see if there’s a sub-industry specialization that’s emerging. A hospital or urgent care clinic will have very different needs than a family practice or a dental office.

There are 10 basic lines of business, for example, and a broad array of solutions depending on which LOB you may choose to focus on: Healthcare accounting systems, healthcare human resources solutions, healthcare marketing offerings and so forth.

Healthcare compliance varies greatly from state to state, so maybe you choose to focus on the vector between your industry and the more than 50 geographies in the U.S.

What about business segments? McBain says there are six, all with different needs. You wouldn’t sell the same solutions to a hospital or large practice with 10+ physicians and their support staff as you would to a midsize clinic with eight employees, for instance.

The last, of course, is technologies. The average LOB buyer will layer six pieces of software on top of existing infrastructure. So it’s all well and good to focus on networking, but do you know HubSpot or Pardot? Don’t overlook emerging technology, either. We’ve seen how quickly new tech is adopted, so you might explore predictive data analytics, lead generation or cognitive computing solutions to help your doctors better be able to diagnose their patients.

All of these vectors, when taken together, equal 35 million conversations to be had with customers every day. There’s no vendor, distributor or large channel company that can possibly meet all of these hyperspecialized needs.

This all equals up to big opportunities for the average size channel partner. Once you find your hyperspecialization, it’s far easier to expand into adjacent markets. The future of the vector ecosystem is figuring out where your skills are and the next hyperspecialization it organically leads to. If you work primarily with midsize family clinics in New York, for instance, maybe it’s a natural step to expand into the New Jersey market or midsize dental offices.

When you do land on the adjacent market you want to expand into, you’ll have case studies of partners you’ve already helped to solve for business outcomes that you can point to as part of your sales process—a far easier conversation than cold calling prospects at random.

With 35M conversations, it’s highly unlikely you’ll run into any direct competition. If you find yourself floundering in the market you’ve decided to conquer next, it should be easy to choose another vector.

Fifty-eight percent of business buyers are choosing third-party IT services, and you can bet the “new” channel comprised of fresh-faced millennials will be taking advantage. The array of tech solutions is simply too great for most small and midsize companies to tackle on their own. Find your hyperspecialization, and it’s green fields and blue skies from there.