From Towers to Layers: How Industries Are Being Rebuilt

Imagine an industry as a towering skyscraper, with each floor tightly controlled by a single company. This vertical integration meant owning everything from raw materials to final sales. But today, many industries have flattened into horizontal layers, where companies specialize in one segment, such as hardware, software, or services.

The computing industry exemplifies this shift. Earlier, companies built proprietary stacks controlling chips, operating systems, and applications. Now, components are modular and interchangeable, allowing specialized firms to excel in their niches.

This horizontal model fosters innovation and competition, lowering costs and accelerating development. However, it also means legacy companies must adapt or risk obsolescence.

Understanding whether your industry is vertical or horizontal—and how it’s evolving—is crucial for strategic planning. It affects partnerships, investment, and product development decisions.

For instance, a company that once thrived by controlling all layers may need to embrace collaboration with complementors and focus on core competencies to stay relevant.

This transformation is not limited to technology; it’s reshaping retail, manufacturing, and more, signaling a new era where agility and specialization reign.