A startup can beat a large, successful incumbent, if it does things the incumbent can not or will not do. Here are those things.
Note to Reader here is an excerpt to wet your curiosity
It doesn’t seem possible for a startup to beat an incumbent.
An incumbent has everything: money, brand, customers, a sales team, marketing that generates thousands of leads every month, product and engineering teams that constantly ship. They mine their big existing customer base for ideas, and then build exactly the right features, and then charge for it. Their 24/7 support team provides faster and better service than someone working in their pajamas at home. They don’t have to build the basics or ask Twitter how to manage international sales tax. They can just focus on innovating.
Of course if you’ve ever worked at a big company, you know that while those things seem true, it often doesn’t feel like it. Big companies are rarely well-oiled innovation machines, and it certainly doesn’t feel like you’re constantly outpacing the competition.
When we analyze how incumbents are vulnerable, we uncover opportunities that startups can exploit to win, where there’s often nothing the incumbent can do about it, despite their advantages:
Taking risks that cannot be quantified
Addressing a profitable niche
Doing delightful, valuable things that don’t scale
Unsurpassed customer service
Leveraging new technology
Having an opinionated personality
Doing things that aren’t zero-sum
Being worse-but-acceptable in most dimensions
Being low-cost against a profit center
The pattern: Every big-company advantage creates exploitable weakness.
The reason big companies don’t function as well as described above is that things at scale are super-linearly more difficult.
It’s an advantage to have 100,000 customers when you’re figuring out what the next feature should be, or when you’re launching a second product, or when you get free growth from word-of-mouth.
But it’s a disadvantage to have a lot of customers when you want to innovate with your product, because no customer wakes up in the morning and says: Gee, I hope the software I’m accustomed to dramatically changes today. Customers don’t want to learn new UIs. Customers have workflows that you have to accommodate. Old technology that powers those 100,000 customers doesn’t support the latest technology. You have to update documentation and videos and the people in support and sales who need to be retrained. Even a simple change can be difficult and expensive, and certainly low-ROI.
Besides “scale,” a big company must accommodate things startups can ignore………
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