An Unfair Advantage All Startups Have Against Big Companies

competitive positioning

It’s not innovation or company culture or a determination to win.  Those are all important but successful big companies have at least some of those things too.  Startups often have great fear of these mega-companies with national or global brand recognition.  What they’re not realizing is there’s one thing that’s inherent to the startup operating system that big companies don’t have and it’s something that provides a guaranteed unfair advantage for the startups.  That doesn’t guarantee startup success but it’s certainly better than having no unfair advantage at all.

Much of the theme of this article relates to reaction time, nimbleness and agility.  If we described startups as being able to run the 40 yard dash in under 5 seconds, we would have to say that really big companies take long than three minutes.  And if we referred to a startup’s “turning radius” as being measured in inches we would have to say that really big companies can barely turn around in a football stadium.  With those basic analogies in place, let’s explore this phenomenon 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 optimal destination.  I wrote an article titled “Why Use a GPS When a Compass Will Do?”  It describes the differences in needed precision for various things associated with your business and suggests using the right tool for the job at the right time.  To continue with the compass analogy, let’s Book cover - Lean Startupsay 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 but broadly in the direction of North.

The significance of this is that 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 certain it would consume time and most startups learn that time is actually their most valuable resource (see related article titled “Your Most Valuable Resource“).

If you did spend the extra research time, 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 than the original assessment.  But more importantly, conducting the extra research delays your start and ignores your unfair advantage of being nimble and flexible.  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 very quickly.

In the real world, these changes could relate to the product (form, fit, function), the market (target segment or buyer persona refinement), the business model (pricing) or just about any other aspect of your 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 competitors that are also startups or early stage companies will probably be using their nimbleness too, so you better get good at it.

A Moving Target

startup unfair advantageIf 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 as the ideal target moves.  With amazing agility, the astute startup is able to remain on an optimal path.  And the more disruptive your chosen market is, the more often the ideal destination will move.  This only amplifies the startup’s unfair advantage versus really big companies and this should become really apparent after reading the next section.

The Big Company’s Burden

Most people intuitively understand that big companies can’t move or adapt at the speed of a startup.  After all, they have thousands or even tens of thousands of employees to coordinate, they have a list of regulatory and compliance burdens a mile long, and they have their brand image and public stock price to keep in mind.  However, even though all of this is well known, I find that most startups way underestimate the extent to which big companies struggle with moving fast and adjusting course.

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 months analyzing as much data as possible.  Then they spend 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 committed to 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”.  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).

Are you absorbing what I’m saying?  The big company competitor you are so worried about has a decent chance of continuing on the wrong path!  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.

Bottom Line

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.

Wait, there’s much more!!!

If you enjoyed this article, you’ll love what I cover in my video library called Founders Academy, which includes all of the key concepts and insights to help you dramatically increase your odds of success using topic-specific streaming video modules.  Click Here to Learn More

“Founders Academy is a must!  Gordon unlocked new value in concepts I thought I was already familiar with.” (startup founder)

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