An industry expert outlines how small companies with generally fewer resources and less funding can successfully compete with big business.
More companies are starting new disengaged entities that are very loosely connected to the main operation. Why the necessity of getting new ideas and products out of the organization chart and into a small entrepreneurial setting? Why can�t the big company adapt and put new ideas into the stream of activity? Let�s take a look at what�s involved and why big is not always good.
The general manager of a large company recently visited my office to take an in-depth look at our new product and discuss whether it fit his needs. To my surprise, the GM spent more than an hour of the meeting explaining his organization. He detailed the functions of various groups and how each had to be persuaded to use any new product such as ours.
In other words, unless every division approved the product, it would be vetoed for his group. The organization chart was sleek and streamlined as a drawing but much different in reality. Each group acts as its own fiefdom complete with king and entourage.
It occurred to me that if this company chose our product, it might be a hollow victory. There is no product that can satisfy each group in an organization. To attempt to do it will only kill us in trying. Oftentimes, working with a large company is like trying to serve many masters. The server goes in so many directions that the outcome is nil.
So let�s look at the advantages for large and small companies.
Flexibility
Oh to be free to set your own destiny. Isn�t this what it�s all about?
That�s the beauty of working in a small, well-focused organization. The goal is clear; communication is good. After all, most times you just talk over the cubicle walls to let a coworker know what�s going on.
There is freedom to explore new approaches, unfettered by rituals and meeting schedules. There is no need to get buy-in from many others, near or far. Most times, everyone with a commitment is right there together. The result is quick decision making.
Large companies have process. Endless rounds of presentations, rebuttals, and buy-ins are the norm. New ideas are rapidly shot down in the process. After all, backup proof for a good decision requires a rearview mirror rather than a look into the future.
Quick to Market
All companies want to get the new product out FAST. But in their minds, the larger company has a lot to lose. After all, the process must be served to ensure that any new product has the proper integrity and quality.
Admirable goals. But new products to new markets have a greater need. Being first mover in a market can make a huge difference. Small companies feel they have nothing to lose. They are less troubled by the implications of failure.
Funding
The money on the balance sheet of a larger company is so comforting. It also is an albatross of a big public company. After all, we are talking about spending this money. That is an expense or a reduction in profit.
Companies work very hard at budgets for responsible fiscal planning. That is the good working discipline of major organizations. Trying to get R&D funds for crazy new ideas requires process, meetings, and sign-offs. These are all obstacles to new markets. It is much easier to shoot down a new idea by asking for proof that there is a need or market for it. The future always is murky, and the idea person always is looked at askance as one-sided.
Now, small companies are driven by ideology, not numbers or proof. They see a wonderful technology or opening in the market and drive to get it out to potential users. The hurdles are very low to proceed despite the low bank account balance.
Ideas
Ideas abound in large and small companies. The difference is what it takes to have open-minded listening.
Quite the opposite type of individual tends to run a new or start-up company. He often is the crusader who has run into roadblocks at larger companies and found himself unsuited to the give and take required. He regards such activity as useless or, worse, as incompetence.
Small companies are idea generators. Thoughts for these generally are flying fast and furiously because there are no processes, handbooks, or committees to consult. New approaches are encouraged. A high pride of ownership follows that can lead to sparkling results.
Products and Customers
Products and customers are wonderful things to have in abundance. They must be served. After all, that is the reason the company exists. Its central core is to produce products for those customers at the lowest possible cost.
Any new idea is tested against the present customer base. After all, isn�t that the only way forward? Just ask our customers.
Of course, unless the customers see a clear need or a lower price in their systems or applications, they cannot relate. What looks like a clear approach often can lead to meaningless results. Also, the company representative conducting the research may have other motives for not wanting to rock the boat with the customer, which may lead to strange interpretations.
I say never listen to the customer. Of course, this is facetious on the surface but true without very good understanding of the inputs. There is no better way to derail a good idea than tabulating these results.
Buy-In
What does this mean? The powers that be must get behind a new concept, or certainly they will make sure that it doesn�t succeed.
Every organization has power brokers�people, gurus, managers, consultants�that have a vested interest in the status quo. Large companies have many of these. They must be satisfied or simply involved to get any new funding or resources committed.
This takes time, energy, and a special ability to make it through such a labyrinth. Delay is akin to killing a new project or idea. After all, they will claim that the project needs more study, more market research, and more input from various potential customer sites. They have the best interests of the company at heart. Their objective is to prove what is likely unprovable, no matter how much study is given to the subject. But the result is the same: to delay a project is to kill it.
In a small company, there may be only one or just a few decision makers. There are no delays, no committees to satisfy, no customer�s opinion to obtain. It is faster, much cheaper, and more focused and has the person�s heart and soul behind it. Oftentimes, these aspects are much more powerful than apparent resources.
Commit to the Shot
This is a well-known concept in golf, purportedly said by professional golfer Lanny Wadkins. To me it says make up your mind and give it all straight at the target. Don�t cloud your thinking with implications or other possibilities.
Larger companies do this for their existing customers. They are built to do just this and only this. Any other ideas or projects take away from their single-minded purpose.
Small entities don�t have these implications to consider. They can truly go for the target without obstacles except for the most obvious: funding and resources.
Conclusion
Is it possible to compete against the big guys? These seven reasons can tilt the field in your favor. Small companies or start-ups have tremendous advantages when competing for any new market or new product endeavor that threatens an existing entity. Use these very clear opportunities, and you just may succeed beyond all conventional thinking.
Then the bigger guys will come knocking to buy or form a relationship.
About the Author
Fred Molinari is president and CEO of Data Translation. During his 30 years as president, Mr. Molinari has gone public, started another company within Data Translation, and gone full circle by going private. He holds M.B.A., M.S.E.E., and B.S.E.E. degrees. Data Translation, 100 Locke Dr., Marlboro, MA 01752, 508-481-3700, email: [email protected]
November 2006