In a tough economic environment, companies are often tempted to be more flexible and venture outside their comfort zones. But that’s not always the best approach, particularly when serving customers efficiently requires specific knowledge, expertise and experience. When should a business abandon the temptation to diversify and instead double-down on its current market and become a “super-specialist?”

When scheduling our roadside visits, we often tried to meet with businesses reflecting the local flavor of a geographic area. For example, on the Gulf Coast in Pensacola, Florida we visited a huge seafood retailer. In northwestern Arizona we dropped in on a dude ranch. On our trip to Kentucky, we sought a company with a connection to horses. We found National Equine Adjusting behind a rolling hill of bluegrass just outside Frankfort. The business specializes in claims-adjusting for insurance policies taken out by owners on their horses.

Fred Whittet, who has (we can’t resist) held the reins as company president for 20 years, introduced us to the nuances of this interesting but very narrow business. Horse owners want to protect their property in the event that injury, illness or premature death compromises its value. The policyholders serviced by National Equine typically own horses that compete in equestrian events like show jumping and dressage. The most talented of these horses may be worth six or seven figures, so insurance is important.

“Horses are live property,” Whittet explained. “So if owners have a problem with a horse or it becomes ill, they are required to notify us immediately.” Effective claims adjusting requires striking a careful balance between providing good customer service and rooting out potentially fraudulent claims. “We have to be available 24-7 to provide any expertise necessary to help them comply with the policy,” said Whittet. “And to make sure they aren’t in too big of a hurry to give up on treating a horse.”

Policyholders must report to National Equine any visit to a veterinarian because, as Whittet pointed out, “little things can become big things.” His adjustors communicate with the vets to understand the horse’s medical issues and determine if a claim should be paid based on the treatment. Those incidents are logged as well, becoming inputs in the underwriting process for policy renewals.

“Probably the biggest conflict that we have with customers is when people misrepresent the health history,” said Whittet. “By interviewing the veterinarian or looking through the medical records, a lot of times we can stop that from happening.”

Just like any other claims adjustors, Whittet’s employees must know the ins-and-outs of the general insurance business. But they also need to know horses. “Some of my better people already had a lot of horse-related experience,” said Whittet. “Being located in Kentucky has worked out well because this area is very equine-savvy.”

Such specialized knowledge is useful in both aspects of the adjustors’ job. Policyholders are horse people, and so Whittet needs employees who speak their language. “There’s a certain lingo and a certain culture for people who keep horses,” he said. “It really helps to have that, where you can chat with them.”

Perhaps more importantly, equine expertise and experience are valuable when communicating with veterinarians about a horse’s health and treatment. It would be difficult for a “generalist” adjustor to be as effective as one of Whittet’s team in identifying potential problems. “A lot of times you’ll pick up something subtle that a veterinarian says,” explained Whittet. “We’ll say, ‘tell us more.’” Whittet has implemented an in-depth training program that keeps employees knowledgeable about the product insured as well as the insurance product.

National Equine Adjusting is the definition of a super-specialist: it has both hired and trained for deep knowledge of a narrow subject. That mastery is a powerful barrier to entry for competitors. Were the company to seek expansion by extending coverage beyond horses, it would have to work long and hard to erect comparable barriers in the new product market. The company delivers more value by being one thing to a few people than by being many things to more.

Instead, National Equine chose to be one thing to more people-;by expanding geographically. Today the company has policyholders in 48 states, with California its largest market. But it still operates out of Kentucky, where Whittet is able to leverage that state’s large pool of horse-smart people and maintain the company’s deep expertise. Geographic expansion hasn’t been easy: 26 states require licensing for adjustors operating out of state, and California only administers the licensing exam in person. Whittet had to travel to San Francisco so his company could operate in its biggest market. But he says the additional expense has been worth it. By expanding nationwide starting in the early 2000s, the company was able to more than double in size. It now employs 15 super specialists who collectively handle an average of 300 claims per month.

The Lesson: If your company serves a narrow market that requires deep knowledge and experience, it can set itself apart by investing to become a “super specialist.” Getting to scale as a super specialist often requires geographic expansion. So invest there rather than add new products or skills to serve other product markets.