An Unfair Advantage All Startups Have Against Big Companies
It’s not innovation or company culture or a desire to win. Those are important but successful big companies have at least some of those things too. It’s nimbleness (aka – agility). Startups have a “turning radius” measured in inches whereas really big companies can barely turn around in a football stadium. Tucked away in this glaring contrast is a unfair advantage for the startups. Let’s explore further.
Quickly Get Down a Path
The best startups get down a directionally-correct path as quickly as possible. What does “directionally-correct” mean? It means that in the general direction of the ideal destination. I previously wrote a blog post titled “Why Use a GPS When a Compass Will Do?” It described the differences in needed precision for various things associated with your business and suggested to use the right tool for the job. To continue with the compass analogy, let’s say true North is the ideal destination. In this case, directionally-correct might mean anything in the range of Northwest to Northeast. That’s a 90 degree range on the compass. The significance of this is you only need to do enough research and validated learning (in the context of the Lean Startup Methodology – order book here) to start on a course plus or minus 45 degrees of a true Northward direction. Spending extra research time might gain you additional precision but it might not. For example, you might get lucky and figure out the ideal destination is actually between North-Northwest and North-Northeast, which is a narrower 45 degree range on the compass. But most importantly, you’ve delayed your start and would be ignoring your unfair advantage of being nimble and we’ll see how that comes into play next.
Adjust Course as Needed
So you’ve set off on a course generally in the Northward direction. Now you’re going to use all of your sensory inputs (think continued validated learning) to figure out when, where and how to adjust course. Your inherent nimbleness will allow you to communicate the needed change to others in your company and together implement the directional change. In the real world, these changes could relate to the product (form, fit, function), the market (target segment refinement), the business model (pricing) or some other aspect of your overall original business plan. What’s important is that you don’t wait around to get everything perfect before moving down a directionally-correct path. Instead, you use your unfair advantage of nimbleness to adjust course as needed. But realize this unfair advantage only works against big company competitors. Your startup and early stage competitors will probably be using their nimbleness too, so you better get good at it.
A Moving Target
If there were such a thing as an ideal destination, it wouldn’t stay in the same place forever. Markets regularly change for a variety of reasons, resulting in a moving target. So the double benefit of quickly getting down a directionally-correct path and using your nimbleness advantage is that you will also be able to adjust course when the target moves. And the truth is that a course adjustment due to precision refinement on the original ideal destination versus due to a moving target have precisely the same effect. With amazing agility, the astute startup is able to remain on the optimal path. And the more disruptive your chosen market is, the more often the ideal destination will move. This can be ideal for a startup.
The Big Company’s Burden
Most people intuitively understand that big companies can’t move or adapt at the speed of a startup. But the extent to which big companies struggle with levels of precision and concepts like course adjustments are way underestimated by most startups. It is true that big companies have seemingly unlimited resources of human capital, brand recognition, global reach and war chests full of money. But those really only come into play when the big company understands where the ideal destination is and can get all of their human resources pointed in that direction. To do this they spend weeks or months analyzing as much data as possible. Then they spend weeks or months arguing in internal debate. Eventually, they set off on a course. By that time, the astute startup is not only already well down the directionally-correct path but has probably already adjusted course multiple times and headed towards true North.
What about the dreaded moving target? Whereas the startup uses their sensory inputs to realize the target moved and simply performs another course adjustment, the big company is so politically bought into their original analysis and decision that they continue on the original path. They may or may not have even detected that the target moved. But it doesn’t matter because a recommended course adjustment in a big company is often viewed as having set on the wrong course to begin with. This results in finger pointing and the “blame game”. And they also know that a course adjustment will require additional weeks/months of analysis, weeks/months of debate and weeks/months getting the employees pointed in the new direction. So instead, the big company remains on the original course or just makes minor tweaks that won’t have much internal impact but also don’t really change the course by more than a few degrees (using the compass analogy).
I have worked for three Fortune 500 companies throughout my career and have seen this play out numerous times. So even if I’m exaggerating a little to make a point, it’s not by much.
Many startups struggle to identify an unfair advantage. If you’re in a fairly disruptive and changing market with big competitors, I’ve just given you one. Now see if you can find additional ones that relate to other aspects of your business model.
- An Unfair Advantage All Startups Have Against Big Companies (stephendaroriinzion.wordpress.com)
- An Unfair Advantage All Startups Have Against Big Companies (replytolosersoflinkedin.wordpress.com)
- More Than 500 Big Companies Have Flocked To Exitround To Acquire Dying Startups (businessinsider.com)
- More Than 500 Big Companies Have Flocked To Exitround To Acquire Dying Startups (embargozone.com)
- Startup Thursdays: Ten top tips for startups raising money (onefinestay.com)
- 6 startup ‘types’ that may inform how you pitch investors (thehartford.com)
- Why Startups Fail (projecteve.com)
- Having a Startup Mentality and What You Think You Know About Success (redbricksmedia.com)
- Alex Payne’s Advice to Young Programmers Considering Startups (globalnerdy.com)
- CHINESE STARTUPS ARE NOT SILICON VALLEY STARTUPS: Open criticism is Silicon Valley’s unfair advantage (nesheimgroup.typepad.com)