“Progress comes in two flavors: horizontal/extensive and vertical/intensive. Horizontal or extensive progress basically means copying things that work. In one word, it means simply “globalization.” Consider what China will be like in 50 years. The safe bet is it will be a lot like the United States is now. Cities will be copied, cars will be copied, and rail systems will be copied. Maybe some steps will be skipped. But it’s copying all the same. Vertical or intensive progress, by contrast, means doing new things. The single word for this is “technology.” Intensive progress involves going from 0 to 1 (not simply the 1 to n of globalization). We see much of our vertical progress come from places like California, and specifically Silicon Valley. But there is every reason to question whether we have enough of it.”
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From Blake Masters’ excellent notes on Peter Thiel’s Entrepreneurship class
This was one of the most powerful notions I learned about in my earlier innovation and futurism classes. Reading up about it reminded me of the strong concepts vertical vs horizontal thinking bring with it. Here are some VC/Entrepreneurship oriented examples:
1) Think about the decrying of the Samwers and their copying of existing business models – it is simply horizontal expansion of vertical innovation. What makes it so difficult? The tight margins and operational difficulties that other globalisation and “horizontalization” efforts bring with themselves.
2) Think about Venture Capital in emerging markets: funds in developing VC usually take bigger stakes, give less money, provide less value add than established firms can. Bringing the VC model to new places still carries tons of risks like market, growth, and exit uncertainties (not to mention legal issues).
3) The fact that lean startups focus on innovating very vertically around a minimum viable product is another good analogy. Find one feature that sticks, and build the neighbouring features to scale the product and company to wider appeal.
During a conversation today, Sander also made a very good point: the underlying technology, namely programming, is also divided into horizontal and vertical advances. Scaling is structured in either one of these concepts. And so on…
What’s the point? The point is, you should read all the class notes on Blake’s blog, because they are very insightful.