20 Oct The Penguin Effect
Penguins and Vertical Market Strategy
Penguins are aquatic, flightless birds native to the Southern Hemisphere, living in both warm and cold climates. They are highly social creatures. Many people have seen them in documentaries, movies such as March of the Penguins or Happy Feet, or at zoos. Penguins spend most of their lives in water hunting for food, but when on land, they gather in large colonies. Emperor penguins, for example, may march in single-file lines thousands strong toward breeding grounds. It is very interesting to note that when the first penguin dives into the water, others quickly follow—a chain reaction that is a vivid display of collective behavior 1
The Penguin Parallel in Business
Many companies behave like penguins within their industries. The first sale in a vertical market is often the hardest—typically won from a risk-tolerant “early adopter.” Once that initial customer commits, others tend to follow, creating a ripple effect of adoption. This “herd behavior” transcends geography; companies watch their peers worldwide more closely than firms in unrelated industries nearby. Shared challenges, professional networks, and LinkedIn connections strengthen these ties.
Throughout my sales career, focusing on vertical markets—such as high-tech, financial institutions, insurance, and manufacturing—has been key to success. Companies within a vertical often share a “follow-the-leader” mentality. If a solution performs well for firms like Citibank, Morgan Stanley, or PayPal, others in the same industry are more likely to purchase it. Referencing clients such as Apple, eBay, or Walmart builds instant credibility, as competitors often aspire to mirror market leaders.
The “Bowling Alley” Theory
Marketing expert Geoffrey Moore described this phenomenon in Inside the Tornado, his follow-up to Crossing the Chasm. He argued that companies should first focus on dominating a single market niche, then use that success to expand into adjacent ones. Once momentum builds, growth accelerates—what Moore calls “The Tornado.”2 Moore suggests deploying a marketing and sales approach he calls “the Bowling Alley”3 strategy.
The Bowling Alley Strategy involves targeting a niche market where your product solves a specific problem, then leveraging your success there to enter related markets. By winning one niche at a time, you build credibility and resources needed for broader market adoption—using focused, sequential expansion toward the mainstream.
For example, a company might initially target large pharmaceutical firms such as Johnson & Johnson, Pfizer, and Novartis. After winning several major accounts and establishing a beachhead with references, it can expand to other pharmaceuticals, as well as life sciences firms, and then to healthcare providers.
The German software company SAP entered the U.S. market with a bowling alley strategy, first gaining traction in Europe’s chemical and manufacturing sectors before landing Dow Chemical as a major American customer in 1988. SAP then sold to other chemical firms, expanded into similar industries, and later moved into other vertical markets, maintaining a sales and marketing focus on these segments. Today, SAP is a leading ERP software provider.
Facebook employed a similar approach—first dominating the university market, starting at Harvard University, before expanding to other universities and then to the general population. Yelp followed the same pattern, launching first in the San Francisco Bay Area before scaling nationally.
A Case Study in Vertical Market Focus
One mid-sized financial software firm struggled against larger competitors with superior resources and more advanced products. Its win rate was low despite offering solid, affordable solutions. By rebranding and focusing exclusively on healthcare, the company turned its fortunes around.
It redesigned marketing materials to feature hospitals and healthcare professionals, adopting industry-specific language such as “bed-days” and “outcomes.” Though the product itself changed little, the firm quickly gained credibility and became recognized as the leading financial software provider for healthcare organizations. This success later enabled entry into the pharmaceutical sector.
Why Vertical Market Strategies Work
I am a strong advocate for focused vertical marketing and sales strategies – the “Penguin Effect.”
Effective execution requires:
- Marketing campaigns and collateral tailored to each vertical.
- Product interfaces, terminology, and messaging that reflect the target industry.
- Dedicated sales teams who understand the industry’s language, challenges, and best practices.
Some companies merely rename a product for a market without true customization, which can harm their credibility, as buyers are too savvy to fall for this ill-conceived strategy. In contrast, a genuine vertical approach allows salespeople to become industry experts and thought leaders—able to benchmark clients, share insights, and build trust.
Vertical specialization differentiates products, supports value-based pricing, and shifts perception from commodity to solution. Combining this strategy with the “penguin effect”—where companies follow successful peers—creates powerful sales leverage aligned with Moore’s “bowling alley” framework.
The main challenge is scale. Accurate vertical execution requires critical mass—often 100 or more sales professionals across North America—to achieve the full potential of the approach.
Conclusion
Success in today’s competitive landscape rarely comes from casting a wide net. Instead, it comes from the precision and discipline of vertical focus. Just as penguins rely on collective behavior to survive and thrive, businesses that understand and leverage the “penguin effect” can create momentum within their chosen industries. When combined with Geoffrey Moore’s “bowling alley” strategy, vertical specialization transforms early wins into sustained growth. By tailoring solutions, language, and expertise to the unique needs of each market, companies build credibility, trust, and a defensible position that competitors struggle to match. In short, focusing deeply—rather than broadly—turns ordinary sales strategies into extraordinary market leadership.
1 Alex Waier, Curator of Birds, Milwaukee County Zoo, Milwaukee, WI, May 23, 2018)\
2 Geoffrey Moore, Inside the Tornado, Harper Business (New York, NY, 2005), pp. 27-62.
3 Ibid.