David vs. Goliath: Your Startup’s Guide to Giant-Killing

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Malcolm Gladwell delivered a keynote at HubSpot’s INBOUND conference in Boston yesterday based around his most recent book, David and Goliath: Underdogs, Misfits, and the Art of Battling Giants. Taking on bigger competitors and finding a way to win is a topic we’re very interested in at OpenView (in fact, we have our own how-to guide on the subject), and one of the things I like about Gladwell’s take is his argument regarding the specific lean startup advantages that underdogs have over their bigger, more established rivals.

Gladwell argues that the real secret weapon successful underdogs have in their arsenal isn’t unique skills or resources or even technology. It’s a true sense of urgency.

Here’s a quick example he uses that illustrates what he means: Steve Jobs wasn’t smarter or wiser than the guys at Xerox Parc when he visited their research space in 1979, and he certainly didn’t have anywhere near the amount of backing or resources. What he did have going for him was that he was in a hurry. That’s it. He knew the future when he saw it, and he had a burning desire to get there first. That’s a true sense of urgency, and that, Gladwell argues, is what enabled Jobs to not just compete in the industry, but to revolutionize it.

I completely agree with Gladwell’s point (in fact, a true sense of urgency is one of our core values), but I also believe there are several additional things that startups, in particular, have going for them when it comes to battling Goliaths, and I want to share those here.

Below are six natural advantages agile entrepreneurs have over larger, entrenched competitors that, when leveraged along with a true sense of urgency, can help you achieve explosive growth. If you want to dive deeper into any of these, please feel free to reach out, or check out our eBook Slaying Goliath: How Small Companies Can Beat Their Large Competitors.

6 Lean Startup Advantages to Leverage Against Giants

1. You’re Closer to Your Customers

As a startup, you have the huge natural advantage of a) having more direct access to input from your customers; and b) having the ability to implement changes based on that input much more quickly and efficiently.

That’s something most big companies would kill for and sorely miss. Here are a few ways you can make the most of closer proximity to your customers.

How to Fully Exploit this Advantage:

  • Expose all of your employees to your customers
  • Establish feedback loops between sales and the rest of your teams
  • Study your customer service interactions
  • Monitor social interactions
  • Get on the phone with your customers (or better yet, meet them in person)
  • Mine your web analytics
  • Incorporate data gathering straight into your product
  • Make customer feedback and input highly visible across the organization

2. You Can Turn on a Dime

Nimbleness and agility aren’t exactly two things big companies are known for. Typically, the larger an organization gets, the more dependent it becomes on established structures and processes. There’s more bureaucracy to deal with, lines of communication become less and less direct, and worst of all, there are more of the biggest productivity-killers of all — meetings. As a result, planning horizons tend to be in years rather than days, weeks, or months.

By contrast, you can pivot and react to market opportunities in the time it takes them to organize a conference call.

How to Fully Exploit this Advantage:

  • Pick a product market that is rapidly evolving or has dynamic needs or tastes
  • Pick a product market that has significant long-term innovation potential
  • Build your market before large companies know what hit them
  • Use new and innovative technologies and business model components
  • Rapidly evolve all aspects of your business
  • Make sure senior management is getting out in the field as much as possible

3. You Can Develop an Intense Focus on a Target Niche Market

Large companies have a difficult time with focus. They generally have to increase their scope to sustain their growth, developing products aimed at numerous customer segments using many distribution approaches. Even though they have more resources, they have to spread those resources across a variety of product markets.

In contrast, you can devote everything you have to developing a laser focus on one very specific target segment. That gives you a powerful advantage. Not only can you develop a rich and in-depth understanding of your customers — their pain points, wants, needs, and buying processes (not to mention how actually they use and realize value from your product) — you can also get incredibly clear and concise with your messaging.

How to Fully Exploit this Advantage:

  • Go after a niche
  • Get everyone in the company focused on that niche
  • Reinforce that focus every chance you get from the top down
  • Keep your teams as small as possible

4. You Can Go After Smaller Opportunities

Large companies need to go after large market opportunities. They often can’t justify going after what they see as small markets (particularly if those markets have special needs). That leaves a significant number of opportunities slipping through the cracks that you can pounce on.

The key for startup entrepreneurs is to identify and attack markets/demographics that may be small now, but are on an upward trajectory and have potential for growth. While this might paint you into a smaller corner to begin with, the upside is that you should be able to establish yourself and grow relatively undisturbed, after which you can look to expand.

How to Fully Exploit this Advantage:

  • Look for markets that are too small for large companies, or simply off their radar
  • Look for customer segments with special needs that aren’t being fully addressed by big companies
  • Pinpoint a small or latent market that other startups are only beginning to attack

5. You Can Innovate Much More Quickly & Effectively

Change is something any large organization with established systems and processes inherently struggles with. The same goes for embracing risk. Not only can it be extremely difficult to coordinate changes and new initiatives simply from a logistical point of view, there can also often be significant resistance to it from employees and management alike.

To top it off, there’s also the tendency that Gladwell highlighted in his keynote at HubSpot’s INBOUND conference. For incumbents, creative thinking and problem solving is often confined to making small tweaks and iterations to existing processes and frameworks. In other words, they get stuck in a “that’s the way we’ve always done it” mindset.

As a startup, you don’t have to be restrained by those types of limitations. In fact, the more innovative and disruptive you can make your business/solution, the harder it will be for bigger companies to copy, catch up, or compete with what you’re doing.

How to Fully Exploit this Advantage:

  • Be bold and take risks
  • Build technology that competitors would have difficulty building into their current platform
  • Execute an approach that would be very disruptive for a larger company to replicate
  • Empower individual teams and employees to test, iterate, and adopt innovative approaches

6. You Can Run on Next to Zero Sales & Marketing Costs

One of the best ways you can battle your Goliath-sized competition is to make it your mission to operate as a high efficiency profit machine. The basic idea is to make everything you do — your product, pricing, customer service, etc. — so compelling that you can convert your target customers with little to no sales and marketing expense on your part.

Note: The trick isn’t to cut out sales and marketing altogether, but to keep pushing for efficiency by keeping costs as low as possible relative to the gross profit generated.

How to Fully Exploit this Advantage:

  • Focus on UX
  • Build social sharing features directly into your product
  • Make your sign up and purchase process as simple and friction-free as possible
  • Constantly improve your product and incorporate customer feedback with rapid development cycles
  • Leverage free beta and trial versions of your product, then price it competitively
  • Keep sales and marketing expenses as low as possible, and put your resources to the previous five things, instead