Taking Down the Giant: 3 Ways Startups Can Win Against Big Competitors

November 4, 2011

We’ve all heard the story of David and Goliath. If you’re a sports fan, you’ll hear it referenced any time the Red Sox or Yankees play a small market team. Or when Ohio State plays Middle Tennessee State. It’s a classic metaphor for big versus small. Smarts and strategy versus power and resources.

It’s an allegory that promotes hope for the little guy. When bigger competitors appear too large to attack, it’s a reminder that there’s vulnerability somewhere – you just have to identify it and attack it.

Of course, that’s easier said than done. David never had to go up against the likes of IBM, Computer Associates, BMC or Microsoft.

Some expansion stage technology companies, on the other hand, wage that war every day. And it’s not one that most of them win. Most investors, in fact, tend to shy away from early stage businesses in markets that are seemingly dominated by massive corporations because their risk just doesn’t justify the reward.

But that doesn’t mean that there aren’t opportunities in markets where Goliaths exist, either.

Let’s say that you’re an expansion stage company in a $2 billion market and your behemoth competitor already owns 60 percent of it. Sure, they’re dominating. But there’s still 40 percent of that $2 billion market available. So, if you can manage to take five percent of the total remaining market and steal as little as 1 percent away from that big competitor, you’re looking at potential revenue that exceeds $100 million.

Not bad, right?

The difficulty, of course, is identifying that competitor’s vulnerabilities and understanding the market’s needs. What can you do better than the big guy? What market pain point are they ignoring?

Your goal as the David in this analogy is to focus on your competitive advantage. Is it stronger, more responsive customer service? A better, more feature-rich product? A faster development cycle?

It may be one of those things. Or it might be all of them. But whatever your competitive advantage is, that’s how you win. You need to show your customers and prospects the value of a business that’s focused on one product and one pain point. You’re not going to try to sell them a suite of solutions that they don’t need — just the thing that fixes their problem.

Over the next couple weeks, I’m going to write more specifically about some of the best tactics that smaller startup and expansion stage businesses can use to peck away at the giants in their markets. The three main approaches I’ll talk about include:

  • Identifying and commit to your competitive advantage: It’s important to identify and understand your competitive advantage, but it’s also critical to create and execute a visionary’s road map that will help you leverage it.
  • Becoming a thought leader: Whether it’s starting a content marketing program, investing in influencers, or writing about your market or product’s ecosystem, by helping the person that’s responsible for buying your solution you’ll also open the door to a potential business relationship.
  • Excelling at customer service: As a smaller company, you have a decided advantage when it comes to customer service. I’ll share a few examples of companies who recognized that and made it the keystone of their business.

The bottom line is that winning in a market that’s dominated by a big business isn’t easy. But it’s not impossible. Remember, all you need to excel is a very small piece of their pie.

So, what’s your Goliath’s weakness (or your crowded market’s biggest need) and how can you go after it? Stay tuned!

SVP Marketing & Sales

<strong>Brian Zimmerman</strong> was a Partner at OpenView from 2006 until 2014. While at OpenView he worked with our portfolio executive teams to deliver the highest impact value-add consulting services, primarily focused on go-to-market strategies. Brian is currently the Senior Vice President of Sales and Marketing at <a href="http://www.5nine.com/">5Nine Software</a>.