Some time ago one guy requested my reply in Quora for a question regarding how to beat a bigger and stronger competitor when you’re just starting up your own business.
Naturally, as someone who is passionate about strategy, I couldn’t help myself but to reply.
So, today, I wanted to share with you what I told him. As it turns out, it might be extremely valuable for you to know what type of strategy you can implement to find your own spot in a market dominated by a large corporation that is already installed or can even be the incumbent.
Often we’re stopped by this internal excuse that tells us that there’s already one big corporation selling in this market, so how can I possibly expect “to beat it”, right?
Well, here’s the point: you’re not supposed to beat it! You’re not supposed to fight fire with fire.
You’re supposed to capitalize on its weaknesses and benefit from the fact that the market already exists – so you don’t have to validate your idea – and you can easily learn how to develop an outstanding product and strategy, along with its right positioning.
Let’s get on with it.
Our agenda for today is:
- The bigger, the slower
- You should know better
- Don’t fight fire with fire: here’s the strategy
#1 THE BIGGER, THE SLOWER
The first thing we will address is that the larger one organization gets, the slower it will usually become.
There’s no other way to scale up a company rather than standardizing processes, micro-segmenting roles, and creating a hierarchical structure.
As this is absolutely crucial for you to grow an organization, it inevitably also turns it slower every passing day.
But why does that happen? At a first glimpse, it shouldn’t necessarily be like that.
Note: I’m sure that what I’ll share with you now is trivial stuff for anyone who has worked in a large corporation.
You see, when you grow from 50 employees to 2000, all of a sudden, you don’t know everyone in the company anymore.
Bureaucracy gains form through the processes, the reports, the daily meetings after lunch from 2 to 6pm, the political mindset, the aroused importance of the fancy corporate stairs and promotions, etc.
This is absolutely standard stuff, and it adds more and more weight, every day, to the organization.
I usually compare a large corporation to a big ship. It has strength, power, and volume. But it isn’t agile; it cannot adapt like it used before, and is now way slower in reacting to market changes.
#2 YOU SHOULD KNOW BETTER
Let’s imagine that your product is still slightly unknown, especially when compared with your competitor’s offer.
What you can clearly do is reaching out to the target market and ask these fellows directly for the points they hate about your competitor’s offer through offline or online surveys. Does it make sense?
You see, it is quite easy to find the target market customers because:
- You already know the market exists and who people buy from;
- And your competitor is big enough which helps you identifying its customers.
Usually, when you’re creating a disruptive solution that can possibly originate a new market it can be quite hard to find your target market – this is the case of tech startups.
Often these brand new companies won’t even know who is their target customer. And this is precisely why they’re considered “startups”, in the first place. As Steve Blank says, the difference between a startup and a corporation is that the first is looking for a business model, while the latter is executing a business model.
But because you’re going to compete in an industry that already exists and has some heavy weight players, you don’t have this issue; you can easily reach out to their customers and ask them what they love and hate about your competitor’s product.
Side note: if you already have an offer, I’d also ask your customers precisely the same about your product.
Here’s what you’re looking for:
You want to quickly pinpoint the market pains. The 1 / 2 burning pains that will tell you exactly what to focus on.
Oh, and you know what?
It is very likely that the large organization doesn’t even know of these pains. And, even if it does, the reaction will be so slow that you can easily outrun them. Never forget that for your competitor to launch a new version, a new feature, a new support process, or anything for that matter, it’ll need to go through 47 internal processes and hierarchical validations.
Which it the same as saying that you’ll be the niche leader even before they launch a counter offer.
#3 DON’T FIGHT FIRE WITH FIRE: HERE’S THE STRATEGY
Yes, we’ve now arrived at strategy.
And as Ramit Sethi says: if the others zig, you zag.
The trick is not the beat them within the same game, with the same rules. You don’t want to play their game. You don’t want to head-butt someone who is much bigger than you.
Who would do that? Nobody.
So, why doing it in the business world?
Ok, so this is the most important thing I could ever teach you:
Strategy is all about being unique.
The major question here is:
HOW CAN YOU FOCUS ON YOUR OPPONENTS WEAKNESSES AND CREATE A UNIQUE POSITIONING FOR YOUR COMPANY?
Here’s what I love and would always recommend:
Picking up a differentiation top-notch quality strategy – it is a mere example of good and unique positioning.
Apart from the examples like Apple, most companies that sell a premium product will have fewer customers.
Oh wait, yes, this is also what happens to Apple. They have like 15% market share with the iPhone if I’m not mistaken.
But, well, they have more than 90% of the overall smartphone profits. Crazy, right?
So, what’s a top-notch quality differentiating strategy?
First, let’s go back to the surveys we’ve mentioned in the second point – the surveys you should ask to your target audience.
So, you now should know what your competitor’s customers love and hate about its products.
Group up those main pains, and create a product that provides a premium and high-value response specifically to those needs.
Now, why would I recommend a premium approach instead of a regular, standard approach?
If you develop a strategy to focus on your competitor’s weaknesses with an average quality product, you will make it easy and affordable for your competitor to follow up your move.
While if you create something your competition feels is completely out of its league, something that it’ll never be able to follow up with such a heavy structure, they won’t even feel tempted to try to catch up with you.
Let me explain this a little better:
A large corporation has to spend a huge amount of capital each time it decides to set a new course. We’re talking about millions in investment. So, they want to make sure that the market they’re addressing is big enough to provide a return on the investment.
Well, guess what, because you’re small and agile, you don’t need a billion-dollar size market. All you need is a specific niche in which you want to be so damn good and specialized at, that your competitors WILL KNOW that they would need to apply a tremendous effort in resources allocation to competing with you, and it wouldn’t pay; it wouldn’t provide them with a return on the investment.
Besides, it probably isn’t their business. If you really narrow down to a premium niche, usually it won’t be appealing enough for a large organization, as it tends to focus essentially on volume.
So, yes, my humble advice is that you create a leading edge product and price it high, much higher than your big and heavy competitor.
By the way, pricing is one of the best ways to psychologically impact the customers. Did you know there’s something called the placebo effect? Basically, it means the higher the pricing, the more quality is perceived.
For example, there are tests that prove that people paying 99$ or 5$ for the same wine actually mention the first tastes much better. Wines are exchanged, and the result is always the same. Cool, huh?
Finally, I’d like to share a key psychological ingredient that you should be aware of:
After you create and launch a top-notch product, with a really high price so you position your company as entirely unique and out of your competitor’s league, your adoption goal will be to win a small fraction of your addressable audience – more precisely 18% of your target market.
What happens is, when this 18% early adopters try your product, they’ll share its experience with the rest of the market. And that’s the trigger that forces the masses to follow the early adopters.
In other words: Simon Sinek presents in Start with Why a fascinating phenomenon that shows that when you achieve 18% of your target market, the mass will have an urge to follow.
You see, we all do that. Sometimes we are the early adopters, sometimes we follow the masses. It depends on the product and on the circumstance.
But the important is that you understand this is the reason why everyone nowadays has an iPhone – exaggerating a bit. It is an expensive product, namely out of the US, and definitely much more expensive than the average of the industry, but we still buy it.
Because the 18% of Apple’s target market was already surpassed long time ago.
I hope this article was insightful to you. I’d like to leave you with Simon Sinek’s Start With Why video. I would really recommend you watch it, as it can change your whole marketing perspective.
In this video, Simon explains why you should always start with the “Why”, way before you even know what product you’ll be launching. Here, he also details why so many organizations over the world fail and become frozen in time.
And finally, Simon will exemplify the importance of the leaders: the 18% early adopters, as I’ve addressed in this post, so you can easily understand how to penetrate and conquer any market.
Enjoy it! But most importantly, I hope you do something with it.
Thanks for reading,