The tech giants — Google, Apple, Amazon, Microsoft, and Facebook — have advantages that they don’t hesitate to wield against competitors. That doesn’t mean they’re invincible. In fact, they’re more vulnerable than we think.
- Zoom built a $50 billion+ company in the video conferencing market where tech heavyweights have operated for years.
- Spotify built a $50 billion+ company and became a market leader in music streaming as they competed head-on against Apple and Google.
- Dropbox built a $10 billion company even as Apple and Microsoft preinstall their solutions on their operating systems and Google offers massive amounts of storage for free.
- Shopify built a $100 billion+ company in an e-commerce market dominated by Amazon.
Apart from the multi-billion dollar companies, there are smaller, high-growth companies that compete directly with big tech: Zapier (no-code automation), Superhuman (email client), Figma (design collaboration), Notion (note-taking/team wiki software), just to name a few. These companies do tens to hundreds of millions of dollars in annual revenue and employ thousands of people.
Over a decade ago, I started building a task management app as a personal side project. Today it helps over 25 million people stay organized and productive. Todoist is proof that a small startup can become a market leader even as Apple, Google, and Microsoft preinstall free alternatives. Here, seven core principles for successfully competing against the tech Goliaths.
Base your go-to-market strategy on network effects
In The Network Effects Bible James Currier defines “network effects” as follows: “mechanisms in a product and business where every new user makes the product/service/experience more valuable to every other user.”
In other words, when all your friends use Facebook, it creates a far better experience for you. Network effects are hard to copy and are much cheaper than ad-based or sales-based strategies.
According to a report from NFX, network effects were responsible for 70 percent of the value creation in tech from 1994 to 2017 among 336 companies that reached a valuation of over $1 Billion. Companies like Dropbox and Figma have competed and won because of network effects.
It’s not the only way to compete against the tech giants, but it makes the uphill battle much less steep.
Differentiate your product
Competing with the tech giants becomes much easier when you’re not competing directly. Your product, service, or platform needs to be clearly differentiated from your biggest competitors.
For example, Shopify is thriving because they are a selling platform that facilitates the relationship between third party sellers and buyers, whereas Amazon is a product aggregator that controls the relationship. Ben Thompson, a business analyst explains this dichotomy:
“This is how Shopify can both in the long run be the biggest competitor to Amazon even as it is a company that Amazon can’t compete with: Amazon is pursuing customers and bringing suppliers and merchants onto its platform on its own terms; Shopify is giving merchants an opportunity to differentiate themselves while bearing no risk if they fail.”
Similarly, Figma is winning market share from Adobe in the competitive space of design tools. They’ve differentiated their product by building for the browser and supporting teams with hyper-collaborative features.
The best way to compete is to not compete head-on.
If you can’t differentiate, make your product 10x better
When you’re operating in an established market, your product needs to be amazing. You’ll lose if your offering becomes the same or only slightly better than your competitors. Firefox is a cautionary tale in how you can get run over if you lose your product edge. Firefox didn’t lose because Google played dirty; they lost because Google built a better browser.
Similarly, in a time where a global pandemic has led to a mass transition to remote work, Zoom has experienced rapid and unprecedented growth. Why? They’ve built a product that enables seamless video calls compared to their lagging and buggy competitors, Microsoft’s Skype, and Google Meet.
Superhuman, an email application, is building a 10x better email experience for power users that competes against Apple’s Mail, Google’s Gmail, and Microsoft’s Outlook. We’ll continue to see startups build rival products that compete and win against Goliaths through a radically better product.
Differentiate your company structure
Conway’s Law states that you’ll ship your org chart. In other words, the structure of your company will be reflected in the things your company creates. For example, one Harvard Business School study found that
“co-located, focused product teams created software that tended more toward tightly-coupled, monolithic codebases. Whereas the open-source projects resulted in more modular, decomposed code bases.”
As a result, open-source codebases allowed for faster, more autonomous deployment cycles than their more traditional, co-located counterparts.
Look at your biggest competitors and run a company that looks and operates in a radically different way. For example, be remote-first, embrace open-source, or run a non-hierarchical organization. When you look and operate differently, the things you create — from your codebase to your design to your business strategy — will naturally follow suit.
Atlassian, an Australia-based tech company with a $50 Billion valuation, had a radically different go-to-market strategy than the norm: they went bottom-up instead of top-down with a heavy salesforce. They were forced to adopt this business strategy because they were bootstrapped and outside of the tech epicenters.
GitLab, a developer tool, competes directly against Microsoft’s GitHub. However, their company structure and operations are markedly different: they’re a 1000+ person remote-first company that defaults to transparency and shares their entire handbook publicly.
Plan and execute for the long-term
The Goliaths don’t have most things figured out. If you’ve ever worked in or with a Goliath, you’ll understand that they are engines of chaos, politics, and inefficiency. While coordinating partnerships with some big tech companies, it’s common for two people from our team to end up on a call with a room full of project managers on their side. Partnerships also often involve last-minute revisions that create stress for everyone because a higher-ranked executive wants to see changes.
You only have to look at Google’s various messaging products or Microsoft’s four slightly different task management tools to know that sprawling bureaucracy makes a cohesive, long-term product vision hard.
In comparison, smaller startups benefit from a focused vision for their products and services that everyone is working toward.
Love what you do
At Doist, we have a deep passion for creating the best task manager in the world. That’s our focus. For Apple, Microsoft, and Google, their task management apps don’t crack their top 100 priorities. It’s just not where they’re putting their resources and talent. A Goliath won’t go out of business if their task management app fails. We will. That’s why we’re able to create a product that people are willing to pay for over free, preinstalled alternatives from Apple, Google, and Microsoft, even with a fraction of their resources.
In 2017 when we launched Twist, our asynchronous team communication tool, we were similarly driven by a deep need to create the workplace tool of the future. Goliath’s like Microsoft are stuck in the present and simply copying Slack. Instead, we’re betting against real-time communication and building for the focused and balanced workplaces of tomorrow.
Fear the startups you don’t know about yet
As a startup founder, the tech giants are often a distraction from the competition you should actually be worried about. Y Combinator co-founder Paul Graham. put it as follows:
“The people at Google are smart, but no smarter than you; they’re not as motivated, because Google is not going to go out of business if this one product fails; and even at Google they have a lot of bureaucracy to slow them down.
What you should fear, as a startup, is not the established players but other startups you don’t know exist yet. They’re way more dangerous than Google because, like you, they’re cornered animals…You should compete against what someone else could be doing, not just what you can see people doing.”
In the end, competing with one or more tech Goliaths is a good problem to have. If you’ve built something that grabs their full attention, it’s because you’ve found a big opportunity. Microsoft and Google may be cutting into Slack’s market share, but Slack has built a $15 billion+ company with millions of customers and thousands of employees that continue to see strong growth.
This isn’t a zero-sum game, and you don’t have to become a multi-billion dollar company to have a significant impact. The world needs more companies that do this:
Create great jobs where ambition and balance are in check.
Make meaningful things that people love.
Do so in a sustainable way.
If success were defined that way, most of the tech giants would be failing.