The “hidden” industries that you should pay more attention to

In an earlier piece, I described business as “an organ of society” set up to fulfill a need which is significant enough that a group of people is willing to pay for it. I mentioned various examples in passing of products and services and the needs they fulfill: smartphones, robotic surgery, cars without tailpipe emissions, patient-centric health plans, and self-programming thermostats. In another piece, I explained why “what you read is mostly wrong” and promised to cover the more “hidden” industries systematically along with the needs they address.

In the investment and investment advisory world, some common ways have been developed for organizing companies into categories based on the customers or markets they serve and the needs they address or value they offer. Some commonly used are the Industry Classification Benchmark, the Global Industry Classification Standard, the Thomson Reuters Business Classification, and the Morningstar Global Equity Classification Structure.[1]

Specialized firms have more refined proprietary classifications, for example Hidden Levers (founded by my friend Praveen Ghanta). You also find similar categories in the practices of executive search firms (for reasons I’ll discuss in more depth later), such as Heidrick Struggles, Korn Ferry, Russell Reynolds, and Spencer Stuart.

The following illustrative list synthesizes all these sources into an accessible form:

  • Industrials
    • Natural resources and materials: water, food, energy, and basic materials
    • Manufacturing: industrial machinery, automotive, aerospace
    • Construction: infrastructure for energy, water, transportation; buildings; homes
    • Logistics and transportation: rail, ocean carriers, airlines, air cargo
    • Industrial services: waste management, environmental services
  • Consumer
    • Staples: food and drinks, personal and household
    • Discretionary: retail and apparel, media and entertainment, publishing, digital media and e-commerce, travel and leisure
  • Health
    • Life sciences: pharmaceuticals, biotechnology, devices, diagnostics
    • Healthcare services: health plans, hospitals and health systems, physician groups
  • Information and Communication Technology
    • Software
    • Hardware systems & devices
    • Telecommunications
    • IT services
  • Financials[2]
  • Professional services[2]
  • Public interest[3]
    • Charities
    • Government
    • Military
    • K-12 education
    • Higher education

Which of these are familiar and which feel more hidden? Which of these do you know folks in or know of inspiring companies in? Does the list feel incomplete in some way? Fire away in the comments or in email.

[1] Each of these industry classifications is market-based rather than production or activity based. An example of that is NAICS used in government and in certain kinds of academic research that require longer time series. To quote a Cornell study comparing GICS with NAICS: “Our results show that GICS classifications are significantly better at explaining [trends like] stock return co-movements, as well as cross-sectional variations in valuation-multiples, forecasted and realized growth rates, R&D expenditures, and various key financial ratios.”

[2] I haven’t fleshed these out here, in part because the needs these sectors address and the value they create are more indirect and abstract.

[3] Most (but not all) of the organizations in the public-interest category are not set up as businesses and as a result have different dynamics.



  1. Pingback: Want to be successful? Learn to help others. | Vivek Mohta
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