Choosing the next industry: the filter
Deciding which industry to enter next is the most consequential decision a vertical software team makes, and the most tempting one to make on enthusiasm. We use a filter, mostly to protect ourselves from our own interest in a problem.
2 min readOadbox
One: the existing software is old, expensive or absent
If a sector is well served by modern software at a price its businesses can afford, we have nothing to add. The interesting sectors are the ones running on a desktop application from a decade ago, an international product priced for a different economy, or a set of spreadsheets.
The absence is usually not an accident. It means the market looked too small or too difficult to someone larger, which is precisely the space a smaller team can operate in.
Two: the statutory side is where it breaks
Sectors with real compliance weight — tax, labour, sectoral regulation — are hard to serve from outside the country and hard to serve generically. That difficulty is a moat if you are willing to do the work.
It is also where the customer feels the most pain, which shortens the conversation about whether they need software at all.
Three: somebody has already built a spreadsheet
A business that has constructed an elaborate spreadsheet to cover a gap has done our requirements analysis for us, and proved demand at the same time. Nobody maintains a complicated workbook for a problem they do not have.
- What does the spreadsheet compute that their software cannot?
- Who maintains it, and what happens when they are on leave?
- How many people receive a copy, and what do they do with it?
- What decision is made from it, and how late does it arrive?
Four: we can reach the first ten customers ourselves
A sector we cannot sell into directly is a sector where we will learn slowly, through an intermediary, with the feedback filtered. The first ten implementations teach us the industry, and they have to be ours.
If a market requires a channel from day one, it may still be a good market. It is not a good market for us to enter next.
Written by the Oadbox team. Something here not match how it works in your business? We would genuinely like to hear it — connect@oadbox.com.