Since childhood, I had heard David vs Goliath story countless number of times. But few weekends ago, I read the book by Malcolm Gladwell, David vs Goliath — Underdogs, misfits and art of battling giants. While I shall reserve my book review for another post, I would like to talk about how this changed my perception about startups and incumbents.
For those who aren’t really aware of the back story of David vs Goliath, here’s a 3 line summary: David, the small, tiny shepherd boy reaches the battlefield to fight against Goliath, the giant with heavy armor and weapons. After evaluating his opponent’s weakness, David swiftly takes aim on Goliath’s forehead using his slingshot and kills him even before his opponent can make a move. Moral of the story is far deeper than it seems. Here’s what startup founders can learn from this story:
1. Don’t give up the fight even before entering the fight
Israeli king Saul, objects David the shepherd’s voluntary wish to go down the valley of Elah, to fight against Goliath, the six foot nine inch giant from the palestinian army. But David, the shepherd was infinitely confident of his own abilities because he had fought against more ferocious opponents like the lions and bears trying to protect his sheep. Guess what, David won against Goliath.
In startups, you may encounter more naysayers than otherwise.
- Don’t let naysayers own fears and apprehensions subdue your battle-readiness.
- Their notion of opponent strengths and weaknesses might be very different from yours’.
- You know your strengths and weaknesses better than anyone else. Compare them objectively to those of the opponent and size up your realistic chances of success or failure and be prepared.
- Its better to try and fail than regret later for not having tried at all.
- Remember, pioneers and leaders with arrows on their back are more respected in society.
- Google search came after Yahoo
- Facebook launched well later after Friendster did
- Apple iPod launched so many years after many MP3 players.
2. Never fight incumbents in areas they are strongest
Goliath was tall at six foot nine inches. Wore a bronze helmet and body armor. Carried a javelin, spear and sword to fight. David on the other hand was tiny shepherd boy who wore just his clothes, had no body armor and carried nothing except a stick and sling. Guess who won? Yes, David indeed. Goliath was impossible to beat at close range in hand to hand combat due to his size and strength. David refused body armor and sword when king Saul offered because they were not his core strengths. Instead his strength was speed, agility and a super fast sling.
- Startup founders need to first evaluate core strengths and weaknesses of the opponents and clearly map their own core competencies even before beginning to work on the problem.
- Never try to replicate your strongest competitors product/solution. Its hard to beat their advantages (money, resources, customer access etc).
- Instead find your own core strength and make it your strongest USP (Unique selling proposition).
- Make your opponents biggest strength also their biggest weakness in your pitch/product/solution.
- Google Docs didn’t compete with Microsoft Office in desktop application. Google Docs USP was no-software install, no maintenance, browser only usage when online. (Deskptop vs Browser software)
- WhatsApp didn’t create a voice/video calling application to compete against Skype or Facebook. It was messaging only to replace SMS. (Simple messaging vs Complex video)
- Mint.com didn’t create a desktop personal finance application to fight against Intuit Quickbooks. It was online only that automatically pulled data from credit cards and banks to show beautiful visual dashboards, reports and recommendations. (Desktop vs Browser software. Manual data entry vs automatic online data sync)
- Salesforce.com not only eliminated all headaches of buying, installing and maintaining CRM softwares, but also converted upfront capex into opex so that their browser based CRM software is now accessible to even small businesses and teams. (Desktop vs Browser software)
3. To win, change the rules of the game
Feel free to change the rules of the game. David shocked Goliath by showing up to fight with a stick and sling instead of spear and swords. Before Goliath could reassess the opponent’s armor and weapons (or lack there of), David fired his slingshot to knock him down.
- Startup founders shouldn’t always look to play by the rules. Surprise the incumbents with better and more unique USP.
- Pick a better, smarter and faster approach to: innovative business model, customer acquisition, customer USP, growth hacking etc.
- Above models/processes aren’t easy to change for an incumbent. They are almost part of the company DNA. So a faster more nimbler challenger has an advantage.
- Chromebooks by Google didn’t even have a local hard drive or storage. Instead all the storage was on the cloud. This could bring down the price of a productivity notebook drastically.
- Amazon AWS allowed companies to rent every part of the computing engine individually (like CPU, Memory, Disk, Bandwidth etc) without having to buy them upfront.
- Microsoft in the mid nineties gave away the browser free with the operating system when netscape was charging heft money for it. Microsoft killed netscape’s bread & butter. Netscape couldn’t respond and eventually died.
- Google gave away unlimited storage with Gmail when Yahoo mail and Hotmail were charging for additional storage.
- Google gave away office productivity suite (Docs, Spreadsheet and Presentation) free when Microsoft was charging hefty fees for their office suite. Also Google Docs could now be accessed anywhere anytime using any device as opposed to Microsoft’s office software installed on a PC.
4. Substitute power/strength with speed & agility
Goliath was tall, heavy and powerful but was also very slow to move, to his disadvantage. Incumbents have more employees, customers, money and marketshare but don’t often have the speed and agility of a startup.
- Startups should release MVP (minimal viable product) sooner, get feedback quicker and iterate on newer versions faster than incumbents could even react.
- Google launched improved chrome browser versions faster than Internet explorer and Firefox, which helped capture a huge marketshare.
- Amazon launched, tested and iterated on AWS services faster than IBM, HP, Google and others could respond.
- Both Instagram and WhatsApp iterated on performance & stability faster than Facebook could respond.
5. Focus on smaller wins before planning the big kill
David brings down Goliath to his knees before beheading and killing him.
- Startups likewise should focus on smaller wins against larger incumbents so that incumbents feel vulnerable and weaker.
- More vulnerability leads to more mistakes which in turn means more opportunities for startups to gain marketshare.
- Smaller wins also boosts the morale of the startup teams and gets them pumped up.
6. Size of the competitor is simply a false cover
Don’t judge the might/strength of opponents by their size. Look deeper. Goliath, though larger in size and his strong voice was simply a cover for his weakness. When Goliath sees David standing afar, he challenges David to come near so that he could tear him into pieces. But instead this was just a facade to his weak eyesight as he couldn’t see afar. Also Goliath couldn’t maneuver easily due to his unwieldy size and could defeat opponents only in a hand-to-hand combat.
- Startups should not judge the competence of an incumbent by its number of employees or product lineup. They could infact be a cover for its weakness.
- Peeling the metaphorical onion further, could reveal interesting vulnerabilities in competitors business model, customer acquisition strategy, marketing strategy etc.
7. Being an underdog is a good thing
Goliath dismissed David due to his small size and didn’t take the opponent seriously. Startups gain valuable time by being an underdog and flying under the radar, all while gaining valuable customer feedback and building marketshare. Incumbents usually don’t tend to take challengers seriously because their initial scope is so narrow and marketshare so small than spending any significant amount of time is a wasteful.
- Microsoft CEO Steve Balmer, famously dismissed Apple iPhone in 2007 when it launched because it lacked productivity software and any applications.
- Microsoft also dismissed Android’s popularity thinking it is simply patent infringed software.
- Microsoft also dismissed Google Docs because it was browser only with limited editing capabilities.
- Microsoft, IBM and HP dismissed Amazon AWS because it wasn’t as powerful as data center servers.
Like Andy Grove said in his book, only the paranoid survive. Incumbents can’t really rest on their laurels because more nimbler and agile startups are nibbling at their heels.
So what do you think are some of the lessons that could be learnt from this story?
For feedback and comments, please tag Sudhir Mantena on twitter.