December 21st, 2011 0
Punching above your weight: Tips for small startups taking on the big guys
This month I wrote an article for VentureBeat about how small companies can fight their big competitors.
The original article is located here: http://venturebeat.com/2011/12/02/punching-above-your-weight-tips-for-small-startups-taking-on-the-big-guys
Here’s the re-post:
Boxing, mixed martial arts and wrestling employ weight classes to ensure the competition is fair and you’re tested on skill, not size. In business, weight classes don’t exist, so if your company is a young, skinny 95-pounder, while your industry is filled with 300lb giants, you’re going to need to tighten up your laces and punch way above your weight. If you want to survive these mis-matched fights in today’s saturated marketplace, you need to get comfortable.
Here are tips to help you, the little guy, use your small size and agility to your advantage.
Your competition is juggling thousands of employees, sweating quarterly shareholder expectations, and managing disconnected systems from acquisitions. They are simultaneously watching out for the challengers next to them, in front of them, and behind them. They are moving at a slower speed.
All you need to worry about is building a product or service that drives revenue.
To be fast, and to stay agile as you grow, you have to hire great people and then get out of their way. When we’re hiring new employees I respect experience, but it’s one of the least important traits on our list. Our hiring priorities are, in order: person (character and enthusiasm), skills, and then experience. This isn’t an industry-specific mantra, it can be successful in all types of companies. In his famous book Setting the Table, restaurateur Danny Myer explains how he went from opening one little café in New York City in the 80s (with little previous restaurant experience) to becoming one of the best-known entrepreneurs in the industry. His secret? Hire great people.
After reading a competitors’ quarterly shareholder update recently, I noticed that they hired 400 people in three months. It’s not hard to imagine that their priorities are in the exact opposite order as ours, making their beefiness a lot less scary. Your heavyweight competition is hiring at a scale to “fill seats.” If you attempt to follow them and hire only for experience, a whole multitude of potential issues will arise, like silo’d thinking and an entitled work ethic, which result in higher turnover.
The larger your competitor is, the more red tape and “processes” they have, and the slower they move. Here’s where your pace can work a little to your benefit. Because you’re hiring on a much smaller scale, every single person on your team can really move the needle up and down and affect the company. Take the extra time during the interview process to find people who fit, not just people with skill-sets that fit. Then get the heck out of their way. A great example of an enterprise that has grown smart and avoided this common pitfall is Zappo’s. Why? It’s a people-centric business.
Hire well and empower your team to get in the fight, then they’ll move as fast as you need them to in order to get the job done. They won’t be hamstrung by reviews, memos, and layers upon layers of approvals. While you’re competitors are going through the motions, your people are throwing punches at them they didn’t expect and are too slow to block.
There’s an immense amount of material on how the Internet and social media have brought the “share of voice” cost down to pennies on the dollar. Meaning, a small company can captivate an audience just as well as a goliath when it comes to the social sphere. Regardless of what it costs to be heard in the market, what’s important is what happens when once you get prospects off of your Twitter page and onto your website, or better, in a room with you.
Social media hype has companies hyper-focused on being heard, but they are disregarding the importance of when they’re seen. Positioning is the single most important aspect to your company’s success. In other words, your power lies very heavily in your brand.
Presumably, if you’re fighting in a class above your weight you’ve taken the steps to properly identify your market, and this has to be crystal clear to your audience.
For example, the hosting market is highly competitive. We have so many rivals, including several very large companies, that our market is safely what one would call “saturated.” When FireHost entered the hosting market, we offered security and secure hosting in many forms. As we continued to grow, we recognized that cloud hosting was the next important step and security was the biggest issue within the cloud. We decided to invest and focus tighter on security and offer only cloud hosting.
This required us to shed all of our other hosting offerings (dedicated servers, email hosting, file backup, etc.). We then re-built our technology stack and systems from the ground up around this sole focus. Our choice to position against our rivals on one strong, focused, and specific type of hosting has left them vulnerable.
Our company lives and breathes Secure Cloud Hosting. When we are head to head on a deal against the competition, our product offering is deeper on cloud, our sales staff is better educated on security, and our prospects can see this. Our close rate is over 50 percent.
Your bigger competition is likely fighting with the power of a multitude of product offerings. They have to in order to stay big. If you focus on one front with a strong core (service or product) and give it everything you’ve got, you can beat them by simply exposing a vulnerability.
Your competition quite possibly has weekly marketing budgets that exceed your yearly revenue, but they’re advertising in areas you don’t need to be in. As a smaller company you cannot afford to educate everyone that your category is needed and important. Your competition is spending millions a week educating the market already – let them.
Spend your marketing dollars on differentiating your offering to the buyers your competition educated. This has tremendous effects on your customer acquisition costs because your marketing team’s energy is focused on tighter campaigns and your sales staff is engaged with educated buyers. While competitors are burning a huge amount of energy just to keep the lights on, you’ll be burning it slow and steady and have energy to spare. It won’t take a whole lot to give your small company a burst of extra stamina when you need it (cash), but it takes a lot more juice for a heavyweight just to maintain a certain level of energy.
Once your core includes great talent who can quickly innovate (speed), a focused position in the market (power) and an attractive customer acquisition cost (stamina); you will be ready to head into the ring with a winning fighter. With this package, a small burst of stamina could position you for a knock out. There are plenty of companies out there that will place bets and invest in you for the long haul once you’ve proven you’re a worthy opponent. You know what they say, it’s not the size of the dog in the fight…In Business | PERMALINK | | Comments