Matt goes into the major steps (and missteps) in his specialization journey, including what prompted him to start down that road in the first place.

Episode transcript:

Matt Krause
Alper, I’ve had something on my mind recently, believe it or not, I occasionally think about stuff.

Alper Rozanes
It’s difficult to believe, it’s difficult to believe, yeah.

Matt Krause
The thing that has been on my mind is specialization. And I guess the reason that it’s been on my mind recently is that about a year ago, I became more involved with the slide design community.

Alper Rozanes
Welcome.

Matt Krause
Thank you. Thank you very much.

Matt Krause
So one thing that repeatedly strikes me about that community is the general lack of special specialization. Not that everybody in that industry is not specialized. But there’s a general lack of specialization.

Matt Krause
And I don’t know if it’s true or not, maybe they know something that I don’t. And I’m not an expert on the subject of specialization. So I’ll leave that for someone else to analyze the situation, I’ll leave the analysis to someone else. The most that I can do, I guess, is tell the story of my own experience with specialization over the years.

Alper Rozanes
Sounds good,yeah.

Matt Krause
It started when I came back from the walk across Turkey about 10 years ago, and we’ve talked about that in the podcast before.

Alper Rozanes
Yeah, I was there.

Matt Krause
Yeah. And at that point, I had no specialization whatsoever. I was just a guy who needed some cash. And I looked around at what people were asking for, and they were asking for someone to teach them English. So that’s what I did.

Matt Krause
But pretty soon I realized that I needed to raise my prices, and I couldn’t do it much. They’re…

Alper Rozanes
Teaching English you mean.

Matt Krause
Yeah. Teaching English. I needed to raise my prices.

Alper Rozanes
Yeah, good luck with that.

Matt Krause
Yeah, good luck with that.

Matt Krause
And the there were too many I needed to raise my prices, and I couldn’t do it much. There were too many of what I call backpacker kids and by backpacker kids, I mean, the, you know, the 25 year old kids, they’ve picked up English as a Second Language somewhere, they’ve got a teaching certificate. And now they’re traveling around the world. And they’re passing through Istanbul, they’re on the Bank of Mom and Dad. And they just want to pick up a few extra bucks for beers and weed or something.

Alper Rozanes
The second one wouldn’t be that easy, to the best of my knowledge. But sure, go ahead.

Matt Krause
Okay, so anyway, I was starting a business, however. So I needed to to be able to raise my prices in a way that they did not.

Matt Krause
So I asked myself, what can I do that they can’t, and I looked around, and I noticed that 75% of my clients, about 75%, were either board members, or CEOs of big publicly traded companies. And that group of people wouldn’t touch those backpacker kids, if their lives depended on it. Even if their lives depended on it, they would have nothing to do with those kids.

Matt Krause
So that’s what I specialized in. It wasn’t so much an industry vertical specialization. It was just a specialization in who I was working for. That was about 2014. And I call myself an English teacher at that time. But I wasn’t really teaching English at all like, like with one client, for example, I was mostly discussing TED talks. And with another client, I was mostly looking at Google Earth and discussing dams in Ethiopia. To this day…

Alper Rozanes
Oh, I love that.

Matt Krause
Yeah, to this day, I’m not sure what you would call what I was doing. But whatever you would call it, I had created a moat, or a barrier, that would protect me from price competition.

Matt Krause
So that’s basically Matt’s first phase of specialization, protecting myself from price competition.

Alper Rozanes
That sounds alright, yeah.

Matt Krause
So around this time, around 2015 or so. My business started to morph from teaching English, or whatever that was, whatever I was doing, it started to morph from that, into presentation training.

Matt Krause
And actually, I had been doing presentation training since about 2007. So it wasn’t really, you know, in 2015, I started presentation training, it was more like in 2015 presentation training became my primary source of income.

Matt Krause
And at about that same time, so we’re talking, you know, late 2015 or 2016 or so, I thought, the specialization thing it’s worked very well for me, so I’m going to double down on it and see where it takes me.

Matt Krause
So I started to refine it to focus my vertical specialization. And the reason I did that was to reduce my cost of sales. I looked around and saw that of my existing clients, almost all of them were in finance. And by finance, I mean, like, you know, banking, asset management, insurance, stuff like that. So I decided that that would be my vertical, finance. And, man, it did not..

Alper Rozanes
I’ll have a question on that.

Matt Krause
And no, it did not go well at all. It was a complete disaster. Those people, the finance people, yeah, those people, the finance people they gave me radio silence like I’ve never seen before.

Matt Krause
You know, I tried a gazillion different things. And I was lucky if even one person would say hello to me. I have theories on why the reception was so cold. But it’s highly likely that I misunderstand the situation, and those theories are wrong. So I’m not going to go into those theories here.

Matt Krause
Then it took me it took me a couple years of banging my head on the wall, trying unsuccessfully to make a go of it, before I came to terms with the fact that I just needed to give up on these finance people. It was never going to happen for me.

Matt Krause
And I didn’t know then, and I still don’t know now, why it didn’t work out. It just didn’t.

Alper Rozanes
Yeah, I was going to ask, but you just said that you don’t know. Okay.

Matt Krause
Yeah, I even, even to this day, I don’t understand why it did not work. I have my theories, but God knows how wrong they are. But whatever it is, for whatever reason it was, it just didn’t work out.

Matt Krause
So I looked around again, at the people who, you know, over the years had like talking to me, and who I had liked talking to. In other words, the people that I had electricity with, and some of them were clients. Most of them were not.

Alper Rozanes
So people did say hi to you.

Matt Krause
Yes, I had a much better experience with this group of people. And whether they were clients or not clients, I don’t think it really matters. It’s the main question is just who do you have two-way… not one way, because with the finance people and one way electricity, I was very interested in talking to them. But one way electricity is not good enough. You need two way electricity, who do you have two way electricity with?

Matt Krause
And for me for years, even long before I had my own business, that two way electricity had been with engineers. I don’t know why, it just was.

Matt Krause
Yeah. So so that became my vertical specialty. And it’s gone much better than those years, beating my head against the wall, trying to get finance people to talk to me, it’s gone much, much better than that.

Matt Krause
So that brings me to one of the key lessons of specialization, is that if you don’t like yours, if you don’t like your specialization, just change it. It’s no big deal. One of the most common push backs against specialization…

Alper Rozanes
Yeah, I was going to ask, I was going to say, maybe it’s easier said than done. But I would ask your thoughts about what would be some of the push backs?

Matt Krause
Yeah, one of the most common push backs against specialization is the is fear. It’s the fear of, am I going to get bored of this? You know, what, if I make the wrong choice? Am I going to be stuck doing this for the rest of my life? And the answer is a resounding no. If you don’t like your specialization, just change it. Like I changed mine from finance to engineers.

Matt Krause
The old people probably won’t even notice that you left. I mean, that’s kind of why you’re leaving, because they didn’t even notice that you were there. So the old people probably won’t even notice you left, and…

Alper Rozanes
Matt is not coming into the building anymore. Who?

Matt Krause
Who?

Matt Krause
At the new people, they’re gonna be happy to have you. So besides, you’re gonna get to bring 90% of your old skills anyway. It’s not like you’re gonna have to spend the rest of your life learning a new skill.

Matt Krause
Like in our world, the core skills are PowerPoint and storytelling. And your new specialty is going to need those core skills from you just as much as your old specialty did. You’re gonna get to, you know, 90% of the stuff that you know, you’re gonna get to bring along.

Matt Krause
Another thing that I’ve learned when picking your vertical is look at your Dunbar’s circle. And I don’t know, are you familiar with the Dunbar’s law of 150 people?

Alper Rozanes
I think you had mentioned it to me, but I don’t remember the specific details. So tell me.

Matt Krause
Yeah, the Dunbar’s law or the Dunbar’s law of 150 people is that on average, people are going to have about 150 people that they know the names of and greet on the street, and some people are going to have less, and some people are going to have more. But on average, it’s going to be about 150 people.

Matt Krause
So, so look at your Dunbar’s circle, and see if there’s a group in there that is disproportionately represented. In my case, it was engineers. And if there is a group that is disproportionately represented, that’s your vertical, maybe not those particular 150 people. But what they do, because basically, with that Dunbar’s circle, you have decades of real life evidence that for whatever reason, these people like to hang out with you, and you like to hang out with them, there’s electricity there.

Matt Krause
And you’re in business. So you’re going to need to sell, and it’s a lot easier to sell to someone that you have electricity with.

Matt Krause
So anyway, that’s my specialization journey. Basically, it comes down to two phases. One is build a moat to protect your pricing.

Matt Krause
And then two is find the people you have electricity with, so you can reduce your cost of sales.

Matt Krause
And one other thing that I wanted to mention is that specialization is never done. It’s not a one and done sort of thing. You’ll be refining your specialization for the rest of your life.

Matt Krause
And one of the reasons for that is that after you get into your specialty a bit, you’ll realize that you’re not specialized at all. Like, for me, for example, I do presentation skills for engineers. And that used to sound, some years ago, that used to sound pretty specialized.

Matt Krause
But once I got into that group, I realized that there are software engineers, and there are food safety engineers, and there are construction engineers, there are gazillion different kinds of engineers.

Matt Krause
So I am sure that at some point, I’ll realize that my client list is predominantly made up of one of those types. And I’ll start the specialization process all over again. It’s not a one and done sort of thing.

Alper Rozanes
And you’ll dig deeper.

Matt Krause
Yeah, I’ll dig deeper, I’ll look at the client list, I’ll realize that oh, you know, most of them are food safety engineers, or most of them are software engineers, or most of them are some variety of engineers. And that will become, I’ll further specialize in that particular aspect of being an engineer.

Alper Rozanes
Well, I have a question on that. You talked about some of the telltale signs of the need to specialize further. And I believe one of the biggest signs is, like, people ignoring you or not saying hi or something. Other than the obvious ones, let’s say what could be other signs. I mean, imagine you’re doing business, but you’re not thriving, you’re not suffering, but you’re not thriving either. And you feel like you’re stuck. So in that case, what could be some of the signs that the way out of that state of being stuck would be a vertical specialization?

Matt Krause
Yeah. So are you asking what are some of the signs that you’re stuck in the wrong vertical specialization?

Alper Rozanes
Now, let’s say you feel stuck. I mean, you feel that you need to make a change, but you’re not aware of specialization? So you don’t have the awareness. But from an outside perspective, that’s what you should do.

Alper Rozanes
What could the person who is stuck in that situation look at for signs to see, Okay, I need I need some further specialization.

Matt Krause
Well, the main point of specialization, from my perspective, the main point of specialization, is to build a moat between, to build a barrier between, you and the rest of the world. So if you see your business facing a lot of pricing competition, that’s the that’s the resounding signal that yeah, it is probably time to specialize.

Matt Krause
If there’s a pricing race to the bottom, or whatever they call it, a pricing race to the bottom or the Race to Zero or whatever they call it. If there’s a pricing race to the bottom, then that’s like the first resounding sign that you need to specialize.

Alper Rozanes
Okay, that’s a that’s a great answer. So if we find ourselves dealing with negotiations or price negotiations with aggressive price negotiations, and if we feel that the only way not to miss the opportunity is to lower the price, then you’re saying that we should we might be needing to look at some vertical specialization.

Matt Krause
Yeah, and the… in specialization, there seems to be like a horizontal specialization specialization, and a horizontal specialization would be the skills and the tools you use, like in our example, or in our case, it would be the ability to use PowerPoint. That is a horizontal specialization. A vertical specialization is what industry are using that tool for? Let’s say Finance. Let’s say that you’re using PowerPoint for the, for people in finance.

Matt Krause
And so obviously, the people in the slide design world seem to have the horizontal specialization down completely. Because they know PowerPoint like no one else. And so they’ve got the horizontal part down. Absolutely.

Matt Krause
So the part that I notice is missing is the vertical specialization. And it seems like, yeah, it seems like in my experience, the one of the main reasons for having a vertical specialization is to reduce your cost of sale.

Matt Krause
Because if you are, let’s say that you’ve got the horizontal specialization down. And so you’ve got the PowerPoint skills down, they, people know when you walk into the room, this is the PowerPoint God. We don’t, we don’t get to question that this person is the PowerPoint God. So you’ve got the horizontal specialization down.

Matt Krause
But there are there are a gazillion people who have the PowerPoint specialization down. And so if you’re facing price competition from those other horizontal experts, the PowerPoint experts, then you need the vertical, that’s where the vertical specialization comes in.

Matt Krause
And so by cost of sale, by reducing the cost of sale, I mean, like, for example, reducing the discounts that you have to give. If the if the customer, if the client is saying, Well, you know, you’re asking for X, but you know, everybody else is quoting 0.5x. So, in order to be competitive, you have to do 0.5x. So you have a large, you have a large cost of sale.

Matt Krause
The vertical specialization reduces the number of people who are coming in and pushing you down towards 0.5x. Maybe they’re just pushing you down to 0.8x. That’s what I mean by reducing your cost of sale.

Alper Rozanes
Well, I definitely like what this conversation is headed to, and pricing negotiations in the creative arena. We’re running out of time, but I would definitely want to pick this up with you again, because last week, I believe we talked about sales presentations and some of the push backs that we could get from from the audiences including price push backs, price related push backs. So I would want to dig deeper into this into this theme in the future episodes.

Matt Krause
That sounds like an excellent idea. I’m definitely down for that.

Alper Rozanes
All right.

Matt Krause
Alright, so we’ll talk to you later then.

Alper Rozanes
Alright, see you next week, take care.