Amazon is currently a $95 Billion in revenue company with over $250 Billion in market cap. Does anybody remember when Amazon just sold books?
Not long ago, brick and mortar retailers like Borders and JC Penney dominated the U.S. economy. Now with mobile devices and online platforms, innovative startups are conquering their fear and slaying established giants with increasing speed. Why?
I believe the secret lies in the philosophy of Malcolm Gladwell’s book David and Goliath. The book has been an inspiration to me as an entrepreneur, both professionally and personally. My goal with this blog is to share with you 3 relatively simple ways you can compete with and win against much larger rivals.
Malcolm Gladwell’s spin on the David and Goliath story is that small companies or individuals can overcome weaknesses and triumph over large rivals if they change the game.”
I’ve used examples of Amazon, Netflix and Hubspot to illustrate ways that small businesses can use supposed “disadvantages” to win against much bigger competitors.
We tend to forget that even mighty Amazon was once a David challenging established Goliaths!
1) Change the Weapon of Choice
Many people know the epic Biblical battle story. When David first came of the crowd to challenge the mighty Goliath, the Jewish soldiers had a good laugh at his expense. How could this little shepherd boy stand a chance against the strength and weaponry of Goliath? Simple: a slingshot.
David: Amazon vs. Goliath: The “Big Box” Retailers
Do you remember when Amazon was a start-up? Jeff Bezos founded the company in 1995 and went live with Amazon.com as an online bookstore. Back then, I remember warehouse-style bookstores like Books-a-Million pushing the small bookstores to the brink of extinction. Venerable Barnes & Noble expanded to become the #1 bookseller in the U.S.
The weapon these large chains used was to under-price their competitors, keep a deep selection of on-site inventory and provide amenities such as Starbucks to make them into a “destination”. Still, there was one big problem with the big chains at the time – they weren’t on-line.
Everyone knows what happened after that. As on-line shopping exploded in popularity, Amazon got better at delivering faster and making the buying process more user-friendly.
Because they weren’t constrained by geography or the carrying cost of inventory, Amazon started to develop economies of scale with automated distribution centers that guaranteed just-in-time delivery. Who needed to go to a “big box” store when Amazon had a better price and free shipping?
The real slingshot that Amazon brought to battle was the platform they created. Innovations such as “1-click ordering” and the suggestion engine that tells you “Customers Also Bought This” make you virtually powerless to resist their onslaught. Now Amazon has morphed into a massive store of consumer data and has developed the computing power to dominate cloud computing.”
Borders has already fallen victim and big box retailers like Best Buy and J.C. Penney are bleeding a slow death. According to Wikipedia, Amazon has now become the world’s largest Internet company bringing in almost $100 Billion annually.They completely dominate online retailing and cloud computing in the U.S. and internationally.
2) Pounce on a Weakness
According to Malcolm Gladwell, Goliath told David to come closer because he probably had poor eyesight. At long distances, Gladwell says, Goliath was essentially blind.
David: Netflix vs. Goliath: Blockbuster
Back in the ‘70’s we got our movies on VCR tapes from Blockbuster. It was lousy technology from a company notorious for lousy customer service. But at that time, what choice did we have?
Then along came Netflix with their crazy idea of offering DVD’s that you could get through “snail mail” (remember before e-mail?). Like Amazon, they recognized the power of creating a simple online platform with features such as ratings and prioritization to get your list to come in the order you wanted – not the order that Blockbuster got them in stock. Plus you didn’t have to deal with Blockbuster’s snotty clerks.
When you sent a DVD back in the mail, the next movie came “auto-magically” – with no late fees. What a concept!
DVDs were not a new technology at the time when Netflix challenged Blockbuster. But the speed, availability and convenience of the delivery were an innovation. Netflix had a better idea and Blockbuster was too big, too slow and too arrogant to react in time. Then Netflix beat them to the punch again with streaming video.”
Game over, Blockbuster!
3) Don’t Fight on Their Terms
David wisely decides to stay at a distance from Goliath and use the slingshot instead of moving in close and fighting “hand-to-hand combat”, which he will almost surely lose.
David: Hubspot vs. Goliath: Outbound Marketers
When Hubspot debuted in 2006, they brought with them a new slingshot: Inbound Marketing. Founders Brian Halligan and Dharmesh Shah had recognized that the effectiveness of “invasive” marketing techniques such as television ads and telemarketing was declining dramatically. Legislation such as the CAN SPAM act and the “Do not call” list were killing “hand-to-hand combat” techniques like cold calling and e-mail “blasts”. Hubspot wanted to turn the traffic and leads inbound so that customers would come to them rather than waiting to be hunted down.
Most of the tools that Halligan and Shah proposed for the new battleground – SaaS, sales automation, SEO, analytics, etc. – weren’t new. Sure, they did add a few new features like a “website grader” that ranked clients’ websites against competitors in terms of SEO and lead generation potential.
Hubspot’s real competitive advantage, though, was how they used the weapons together and how they could amplify the power of their content marketing using social media.”
In addition to the Hubspot SaaS software, the company created a Hubspot blog and a number of on-line resources to learn how to blog, build organic SEO and combine inbound techniques with minimally invasive outbound techniques like e-mail “nurturing” to move prospects gently through the sales funnel. Then they used social media networks such as Twitter and YouTube to go viral and spread positive word-of-mouth quickly.
By changing the terms of the battle, Hubspot could run rings around their slower competitors without the need for expensive armor. The analogy I like to draw is that Hubspot used many different types of slingshots and cloned an army of Davids to shoot at the plodding outbound marketers from all angles.”
The result? In 8 short years, Hubspot has grown from two MIT professors and $500K of Dharmesh Shah’s own seed money to $77 million in revenue in 2013, up 48% from the previous year. They have raised $100 million in funding from sources such as Sequoia Capital and Google Ventures. These guys are no dummies.
So, How About You?
Are you ready for this? Are you ready to RUMBLE? OK, next battle…
David: YOU vs. Goliath: Your BIG Competitors
If you use these 3 techniques to beat big competitors to the punch, could you build your company to be the next Amazon, Hubspot or Netflix? Of course you can, young David.
Now get out there and change the game!
I hope you’ve enjoyed this blog and have drawn some inspiration that even though your business may be small, it still can be strong. If you are involved in a start-up or your company is in growth mode, I invite you to check out my blogs ‘3 Surefire Ways to Take the FEAR Out of a Startup‘ and ‘3 Simple Ways to Avoid an IT Project Disaster‘.
There’s an amazing TED Talk by Malcolm Gladwell where he explains the unheard story of David and Goliath. I’m sure you’ll find it inspirational. If you have any similar stories about companies like Amazon that have challenged established giants and won –or that are about to – I hope that you will share them with us by leaving a comment.