B2B business models are often categorized as either vertical or horizontal. A vertical B2B model focuses on a single industry or ‘vertical,’ providing specialized products and services tailored to that sector’s unique needs (e.g., software for dentists). In contrast, a horizontal B2B model offers a product or service that is applicable across multiple industries (e.g., accounting software or office supplies).
Vertical and Horizontal B2B Business Models
The distinction between vertical and horizontal B2B models is fundamental to business strategy and market positioning. Vertical B2B companies aim for deep market penetration within a specific industry. Their strength lies in their expertise, specialized features, and understanding of industry-specific regulations and workflows. This focus allows them to build strong customer relationships and create high barriers to entry for more generalized competitors. Examples include platforms for managing clinical trials in the pharmaceutical industry or supply chain logistics for agriculture. Horizontal B2B companies, on the other hand, seek broad market reach. Their products solve a common problem faced by businesses regardless of their industry. Success in this model depends on scalability, ease of use, and achieving network effects. Examples include Salesforce for CRM, Slack for communication, or Amazon Web Services for cloud computing. The choice between a vertical or horizontal strategy impacts every aspect of the business, from product development and commercialisation messaging to sales channels and customer support structures. Some companies may even employ a hybrid approach, starting horizontally and then developing vertical-specific solutions.
Type
Disruption
Utilisation
Precursors
- concepts of market segmentation from general marketing theory
- the rise of logiciel as a service (saas) delivery models
- development of the internet and e-commerce infrastructure
- porter’s five forces analysis for industry structure
Applications
- development of industry-specific saas platforms
- creation of online marketplaces (e.g., alibaba as horizontal, covisint for automotive as vertical)
- corporate strategy for market entry and expansion
- venture capital investment theses for b2b startups
- product management and feature prioritization
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Historical Context
Vertical and Horizontal B2B Business Models
(if date is unknown or not relevant, e.g. "fluid mechanics", a rounded estimation of its notable emergence is provided)
Related Invention, Innovation & Technical Principles