Five Rules for Competing with Giants

I’ve spent my career competing, for the most part successfully, against companies from 10 to 1,000 times bigger than my own.  Thus, over the years, I’ve developed some rules that can help maximize your odds of success when competing against giants.

• Concentrate force.  The easiest way to be bigger than your competitor is to focus.  While Oracle was around 100x our size when I joined Business Objects,  our BI team was bigger than theirs; in 1995, we had nearly 300 people who did nothing but BI.  Focus can be about either product or market.  At Mark Logic, I believe that Endeca is around 2-3x our overall size, but by my estimation Mark Logic is 3-4x bigger than they are in our core markets of media and government.  While Autonomy is more than 10x our overall size, I believe that we may be bigger  in media and government (for relevant use-cases), and I’m nearly positive that we’re bigger in the dead center of our markets:  STM in publishing and intelligence in government.  Focus is hard because there are always people who are more obsessed with the opportunities you’re not pursuing than with those you are, so have a clear sense of your growth goals, decide rationally if you can meet them with your chosen focus areas, and then jettison those who can’t get with the focus program.

• Be the best.  I like to say that no sane person wants to buy software from a startup.  Most IT folks sleep much better at night buying from the mega-vendors, even if they feel like they’re getting gouged on price.  People buy from startups not because they want to, but because they have no choice.  How can you give people no choice but to buy from you?  Solve one problem better than anyone else in the world.  Those are easy words to say, but they’re very hard to do.  Ask yourself:  what is the one problem that we can really solve better than anyone else in the world.  That’s what the VC cliché “world class” means.  Most startups aren’t honest with themselves in this department; they tell themselves white lies about where they can realistically be the best.  The result is they overextend and end up with three or more mediocre products instead of one great one.  Sometimes this is driven by greed for more addressable market; sometimes it’s driven by fear and the desire for diversification.  Remember the Andrew Carnegie quote:  put all your eggs in one basket and then watch the basket.

• Split pins.  Most technology strategists are familiar with Geoffrey Moore‘s “bowling alley” model which says that startups should view markets as bowling pins, using one market to knock down the next.  This model encourages startups to skip through markets hastily, like American travelers skipping through countries in Europe (e.g., If this is Tuesday, it must be Belgium).  Instead of skipping pins, startups should split pins.  Without sounding too cosmic:  look for micro-alleys within bowling pins.  When I started at Mark Logic, I thought “publishing” was a pin and that all publishers were basically the same.  When I focused on publishing and looked not just for similarities among publishers but also differences between them, I learned that STM, education, news, market research, credit/financial, legal, trade, and B2B publishers were all different.  I like to say that all beagles look the same unless, of course, you’re a beagle.  By splitting pins instead of skipping them, you learn more about your customer’s needs, can serve them better, and — best of all — typically discover that the market you were about to skip over is about 10-100x bigger than you originally thought.

• Hire stars.  Giant-fighting startups are not places for the weak or mediocre.  You need a team of aggressive, high-energy people who understand the mission and are ready to make the sacrifices required to win.  High-growth startups are lousy places to learn on the job.  That’s why the VC model gives nice chunks of equity to experienced managers with safe jobs in big companies.  They want to lure them into the startup and compensate them for the risk in so doing.  In the end, VC’s are not risk takers; they are risk eliminators.  They try to isolate all risk to the fundamental innovation and do so by setting every other lever of the business to standard. (See Chris Dixon’s recent post, Don’t Be Creative About the Wrong Things, for more.)  That’s why you need to build an A-team and be sure the people on it are scaling with the company.  Rest assured, even if you’re not asking the “can they scale” question about your team, the board is asking it about you.

• Work together.  I’ve seen too many startups with divisive, prima-donna-laden cultures where staff meetings devolve to finger-pointing contests.  “I was the top salesperson at SAP and I can’t sell this stuff unless it works.”  “Well, I was the smartest guy at Harvard and my technology is so wonderful that a monkey could sell it.”  On and on.  This doesn’t work.  When you’re competing with giants you need the extra advantage that comes from brilliant people — working together — to solve problems.  All of us, when working in a functional group, are indeed smarter than one of us.  It took years to get this lesson through my head.  I first got it doing an exercise at a leadership program where each individual rank-ordered a list of items required for wilderness survival.  Then we broke in about 8 groups of 6 and re-did the exercise.  The worst group score beat the best individual’s score, and one of the individuals was a Brigadier General in the US Army.  Years later I discovered The Wisdom of Crowds and learned it again.  While it may sound hokey, teamwork is an amplifier of talent.  That’s why All-Star teams don’t do well in sports:  while each individual may play superbly; they just don’t play together.