If you think you are too small to make a difference, try sleeping with a mosquito.
I recently gave a speech at a conference and after the conference, I was asked by an attendee, to talk about what a small company should do to survive, while competing against much bigger and much better capitalized companies. The most apt response that came to mind was: “when a mosquito lands on your testicle, you realize violence is not the only way to solve a problem.”
Violence here, is being well-capitalized and resourced, which big companies generally are assumed to be — in this context. That is what we implicitly are referring to when we wonder if and how small companies can compete against big companies. Being well-resourced is helpful, but it is by far not everything.
Counter-intuitively, departments in bigger companies do struggle to get access to these same resources that they are assumed to have in abundance, unless the executive focus of the company is on that particular thing the department needs resources for. Executive focus can only be on so many things at the same time: most likely 1, in rare cases 2, max 3.
Smaller companies have their own advantages too - focus and nimbleness.
Focus is very underrated and wrongly so. A focused company gets to understand the customer’s problem better and creates a solution custom-made to solve it. Small companies tend to be more focused because of limited resources. With less money to hire people to focus on different things, and less legacy products to try selling to potential customers, small companies, by default, are kamikazes — they have one bullet, they either hit their target when they shoot it, or they may as well be dead. So they don’t spray and pray — they focus.
In a big company, the customer’s problem is likely to be seen from the perspective of the companies current offering: “how can we position what we already have as a solution to the customer’s pain”? Alternatively they create and throw many solutions at the customer, hoping one sticks. Without focus, even the ones that show initial promise do not get the attention to explore and grow them to win. That’s not quite the same as a small company saying: “what exactly is the customers problem, what is the best solution to the problem, let’s build exactly that.” Over time, the customer will use their spend to reward the company who solves their problem best.
Being nimble is also underrated. When a small company decides to build a certain solution, they fully dedicate all the little resources they have to that quest. If the department in the big company competing with the small company decides to do something, they then have to start a long process of lobbying for resources and when they finally get some resources, they will have to compromise a lot and leverage already existing things that have been done, even if not the best solution to the problem.
Take grocery delivery for example. Theoretically, anyone can deliver groceries, but practically few will succeed in doing so. For a traditional online retailer to do grocery delivery, they need to start thinking about investing in a separate warehouse just for groceries (since the warehouse you use to warehouse clothes and mobile phones, will not be the one you use to warehouse your fresh produce or even cornflakes).
Similarly, the fleet used to deliver clothes and mobile phones are not quite the fleet with cooling compartments and in-transit temperature preservation, that one needs to use to do grocery delivery. In theory, a big, well capitalized company can buy those assets easily. In practice though, the managers of grocery delivery play will be asked to make do with the warehouse and fleet already in existence. This is for good reason, because the company will for a long time want to leverage its already existing assets in order to minimize costs and optimize margins.
This example is quite the same when it comes to supermarkets doing grocery delivery themselves. Again the storage area, the checkout systems, the pickers, the marketing team, the operations team, the training the teams get, the executives that manage it etc, will they be dedicated or shared? Ideally, they should be dedicated, practically, they will be shared. And the rest follows from there.
It makes sense for these resources to be shared, because often times, that’s the justification for going on this new adventure to begin with. Like any venture, it will take time to yield its returns, and it comes with costs. For an organization to start afresh and build a new team, new office, new fleet, new inventory pool, and other such, it won’t make much sense; it only makes sense when the company believes it has an unfair advantage, like leveraging already exisiting asset, such as team, technology, marketing channels etc to justify going into this new venture. What initially seemed like an advantage is now an apparent disadvantage.
For that reason, one of the worst things a startup/small business can do, is to pivot too quickly or to start layering on more business models/revenue streams in order to accelerate growth. It’s much better to focus and crack one problem and scale that solution, rather than to chase rabbits. That is similar to opening oneself to the problems of big companies but without the resources.
Focus and Nimbleness are the reasons why history is full of small companies who came and solved problems better than larger incumbents. Before Yahoo, there was AOL building an Internet Portal as a side business, but Yahoo came and won the Internet Portal play. Before Google there was Yahoo building Search as a side business but Google came and won the Search play. Before Facebook there was Google and MySpace building the Social Network play but Facebook came with a singular focus on social networks and has obviously won.
And when Google realized what was happening, they threw a lot of money at it making everyone use Google+ but they didn’t win. Google+ was clunky, lacked focus, was a mishmash of many different applications, each useful in their own right but not good enough collectively to get us to switch. After a good fight, they gave in. They threw money at the problem and learnt that like the case of the mosquito on a sensitive place, this problem is not solved by violence.
The biggest companies in the world were once upon a time small companies themselves. But as they get bigger, they get less nimble — it’s just the way it is; the inability to focus and be nimble becomes their achilles heel. There is only so many things that a CEO can focus on at the same time. And if the CEO is not focused on it, it doesn’t matter how well resourced the company is, that niche will not get enough resources.
So if you are a small company, focus. That’s how you become the proverbial mosquito. If you focus on a small niche and keep understanding the customers core problem and solving it, after a while violence (money and resources) won’t be a good enough way to outcompete you. Till then, be in your lane, focus, understand your customers’ problem and solve it. I can’t guarantee you you won’t die, I can only guarantee you that you won’t die because a big company killed you. Lack of interest from customers kills startups way more than bi..gger and better resourced companies do.
If you think you are too small to make a difference try sleeping with a mosquito.