Two: From Vertical to Horizontal

Imagine the global value chain of the industry you’re in. This long line consists of many steps: upstream, reaching to your company, and downstream, touching your customers, consumers, and end-of-lifeentities. This line is also many layers deep, with different industries feeding and interacting with each other. Growing up in business, we are taught to look downstream, paying attention to our customers and consumers. We are asked to pay attention to our immediate suppliers—to make sure that we have secured prices and quantities. But even more so, we are asked to pay utmost attention to the vertical cut in this chain—our competitors.

Surely, mainstream strategic thought invites us to pay attention to the whole of five forces in business (competitors, consumers, suppliers, new entrants, and substitutes), but in reality, most dig into the competition, positioning their businesses uniquely in that narrow vertical cut of a global value chain. Yet in the world of rapidly declining resources, this choice might just be the one that kills you—along with the entire competitive space. Surely, you might have the best price or the most unique set of product features, but failure to notice changes far away at the left or the right of the value chain might cause elimination of the entire product line, company, and even industry. We must learn to move from a vertical to a horizontal orientation, going beyond the boundaries of our company to the risks—and opportunities—hiding within the entire system.