A meaningful percentage of my startup clients have no respect for their competition. Too many first-time founders have bought the story that big existing companies in their space are too slow to be a competitive threat. Or that “existing competitors aren’t as nimble as we’re able to be.” Nimble? Oh, got it. Nimble. What? You think you can buy a pretty damn fast pair of sneakers with that $48.87 of available cash, do ‘ya?
Over the weekend, I read the following quote from a client (with specifics removed) which is what got me to thinking about this subject. The quote was in response to a challenge to how they’ll compete against entrenched players in their space.
“We had a conversation with one of our competitors and one of their managers. One of their biggest challenges is all the formal processes they have in place. This prevents them from innovating quick enough to keep up with their client’s [sic] needs. Every suggestion has to be planned out in detail and go through multiple committees before coding even begins. We feel this type of workflow for software development is outdated and can prevent company from keeping up with the wishes of their user base.”
This is hogwash, but I don’t include this quote to ridicule the client. This is fairly routine thinking among many first time founders. There is an unwritten rule that many have come to believe about entrepreneurial ventures: small = fast and big = slow. This generally holds true in the animal kingdom, though not always. One reason why this is a poor assumption to start with in the business kingdom is that “small” is roughly equivalent to “woefully lacking in resources”. I’ve noticed that none of my clients ever say, “Well, our competitor is big, but slow. Since we are small and woefully lacking in resources, we’ll win in this industry”.
What this founder, a first-timer, does not understand is that any and all businesses that begin to have success beyond $1-2 million in sales, must put these types of bureaucratic processes in place. You, the founder, begin to run out of capacity to make EVERY decision that needs to be made. So, if you’re smart, you start to delegate to another person. That person has capacity constraints as well as the business grows and brings a 3rd person into key decision making. But, person #3 makes a couple of poor decisions and now person #1 wants to review some of those decisions going forward. And maybe a board of directors demands input on certain issues. And R&D has grown so much that there is a whole team in place that starts to have creative differences and so a new “Feature Development Priorty” team is put in place. Frankly, what most first-time founders don’t get is that the ability to construct an effective organizational decision making ability is often the reason for success. And that is because speed (or, acceleration) is only part of the equation for winning.
The other part of the equation is Mass, as in Newton’s Second Law of Physics, in which Force = Mass x Acceleration. I don’t know if I can take this metaphor a lot further but to suggest that being able to make decisions fast only matters if the number of decisions that are capable of being made is also large. A startup with $48.87 in the bank can make a couple of decisions fast…eg, Wendy’s or McDonald’s Dollar menu for lunch today? But those larger, slower competitors can make dozens of decisions, reasonably fast. And believe it or not, there are those larger and fast competitors that can make scores of decisions very fast. Your ability to become a FORCE in your industry depends on both.
My point to all this… is this: Being small is not a strategy.
If the best answer you can come up with as to how you’ll compete against your competitors is the fast v. slow irrationalization, I immediately assume that you 1) do not have sufficient understanding of your competition and therefore 2) you do not have a sufficient strategy for how to use your speed to out-maneuver your competitors. What I want is for my clients to say that their competitors are serious, more resource-rich and experienced warriors in the battle for jungle supremacy. I want to hear about specific examples of ways in which their competitors are vulnerable in specific segments of the target markets and “we think customers will respond well if we do X”. And, I want to hear that because the competitors already have the customers you want…you won’t be able to sleep until every last one of them is slain by your force.