Personas, Use Cases & Verticals — Part 1

Introductory Synopsis

Traditionally, industry verticals are defined by the SIC and its industry codes. These codes are several decades old and are used to categorize companies into verticals based on what they sell. If this categorization is blindly applied, it can create problems for product managers and product marketers alike when building and marketing products.

Instead, I argue product organizations should categorize companies into verticals based on how these companies use the product to operate their business. For example, for digital marketing software, verticals should be based on how companies take their products and services to market, as opposed to what they sell. Verticalizing in this new manner has great benefits such as cleaner roadmaps, as well as more useful best practices that customers can implement.

Personas, Use Cases & Verticals are the Lifeblood of PMs

Originally I was going to write about how important it is for product organizations of enterprise software to be very specific and knowledgeable about the personas and use cases they build products for, and how most underestimate the complexity on the customer side. Some PMs generically describe use cases with personas such as “the user”, “the marketer”, or “IT” in vague terms. In the process of writing an article on personas and use cases, I realized that there is an even bigger challenge for PMs, so I will cover use cases and personas at a different time.

Even more important than the personas and their use cases is the context companies operate in — their vertical. This information will provide the necessary semantics that will allow you to create very precise personas and use cases. It all comes down to whether the customer will be able to use your product in order to achieve a specific business result. If you do not know the industry specific context in great detail, then chances are high the product you build will fail. Without the context, your personas and use cases will be muddled, because you will end up mixing requirements that you hear from different companies, and each may belong to a different industry. Similar but still different.

Unfortunately, I don’t see many conversations taking place that promote industry specific thinking. While most conversations are about getting a product off the ground at a startup, this type of thinking only makes sense once your product hits a certain size. Whether offline or online, you will find it hard to find insightful information. What you do find are concepts that are outdated. For example, verticalization is commonly based on categories that are many decades old and have hardly changed.

Verticalization

One of the few undisputed truths of doing business at scale is to verticalize the market you are in (again, once the product hits a certain size), and subsequently align your product, its GTM, and customer success with each vertical.

While it is a proven method to verticalize a market, you have to pick the right dimension by which you will differentiate companies. This is where most product organizations trip up.

It seems like most product teams take SIC codes as guidance for their first cut at verticalization. A legacy of the last several decades, SIC codes were created by the US government for primarily regulatory reasons such as consumer protection laws. I propose it is wrong to always go by SIC codes. When you verticalize the market based on these codes, then you classify the market by what products or services companies sell, which may not be the deciding characteristic for how these companies should use your product.

Classic Verticalization Has Its Limits

For example, if you build or market digital marketing software and list all the different companies that use your software, along with their pain points, then you will realize that two companies in the same vertical (ex. Automotive) may have completely different challenges, while two companies from two different verticals may have the exact same challenges (ex. Automotive and FSI).

One such SIC code represents Automotive, which would put Daimler and Tesla in the same vertical. I’m a huge fan of both brands, however, it does not make sense to put these two companies into the same vertical, because they have little in common in terms of how they use digital marketing software. The “only” commonality is that both companies produce cars.

How is this possible?

Well, the answer is that you should verticalize the market not by SIC codes, but instead by the Go-to-Market (GTM) strategies companies employ. Now, every company in the same vertical has the same challenges and requirements.

So when building digital marketing software, verticalizing the market by what companies sell does not help much, but rather by how they sell their products and services.

Once verticalized by how your customers take their products to market, it is much easier to develop and organize the product roadmap. Furthermore, you can now create laser-focused enablement material for the field, come up with truly applicable best practices for your customers, and benchmark these companies in a meaningful way.

Caution!

One thing I want to make clear is that depending on the product you build, you need to figure out which dimension to select to verticalize the market. For digital marketing software, I argue you should pick GTM strategy as that dimension. For other software, you may need to choose a different one.

For example, if you build HR software, it may make sense to verticalize the market by how companies organize themselves. My point is that you should not blindly adopt someone else’s way of verticalizing the market. The only way to find out the best fit is to talk to a sufficient number of customers and to develop an idea of the dimension to verticalize by.

Improved Verticalization

This approach will help you tremendously in discussions with customers. Instead of sticking to the classic SIC codes based mental model, you will compare companies outside their traditional boundaries, which increases the impact of your suggestions to your customers on how to get more value out of your products and how to best use them.

The following are steps for PMs, who are interested in incorporating this approach into their process:

• Read quarterly earning reports: These reveal significant information on how companies operate and what pain points they experience. Read a couple each day, because you will only become proficient once you know a lot of companies yourself, over an extended period of time.
• Ask MORE questions during customer meetings: Do not only talk about your particular product area and their requirements, but ask questions that reveal the context they operate in. (Caution: every employee on the customer side may not be aware of all aspects of their company, so you may receive conflicting answers.)
• Leverage peers and colleagues: Talk to customer success managers and sales reps to help you understand how the team on the customer side has evolved over time. This will reveal a lot of information, and can give you ideas on who to speak with on the customer side.
• Stay inquisitive: Be generally curious and try to explore how companies operate outside the area that your product is being used. For example, if you are a PM for Digital Marketing, look into what use cases there are around Finance, or vice versa.

Reality Check

I want to caution everyone not to force the new model onto your team or organization. Most people have gotten used to the classic mental model, so it will be futile to work against that. Also, the classic model comes with its own advantages, such as the fact that it makes it easy for account executives to move from one employer to another without having to readjust, so I expect the SIC based model to stay the golden standard for verticalization. Instead, use this industry specific model to become precise at defining personas and use cases. This will allow you to provide the SIC based model with more useful content.