Beating the 800-Pound Geurilla

June 14, 2011 § Leave a comment

I already did a post about who I think the main competition is for a start-up.  (i.e. the back button).

But Mark Suster did a great post yesterday about fighting the big competitor once you have some traction.  It is worth a read if you haven’t already done so.  The gist is, that a focused team can (and often does) out-innovate a big competitor entering late.  That if the focused start-up is crafty enough, is nimble and acts quickly with aggressive moves, it can build enough product differentiation and it can still carve out a sizeable market position.  But the start-up has to be smart and differentiate away from reliance upon a single platform.  One of the most common examples of this is leveraging multiple platforms.  This always seems to be the answer on how you will beat Apple, which for all its greatness, never opens up its great technology outside of its stack.

It is SO refreshing to see a well-respected VC say this, because it is so true.  I can’t tell you how many times this question comes up in investor meetings.  “It is a good product idea Steven, but why doesn’t facebook do this?”  “What are you going to do when they do?”.  To me, these questions fall into two camps:

1.  Either the investor across the table is lazy and doesn’t want to think through the question properly.  Which happens a lot.

2. The investor already knows the answer and is just testing to see if you thought through it

If you sit in enough investor meetings, you can quickly tell which reason is the genesis of the question.  But the point is a valid point, and you should always have a good thought on this.  You shouldn’t rely on any one platform too much.  You should always build differentiation into your product.  Your team has to be nimble and bring aggressive, disruptive features and capabilities to the market faster than the competitor.  Want a good case study for this?  Check out Apple’s history.  When Jobs came back in 1996, Apple was near death.  WinTel was dominating.  They were a niche player.  They are now worth more than Microsoft and Intel combined.  They did it by disrupting music and telecom and soon to be the laptop market.  They were nimble and built differentiation.  And that was against an entrenched competitor, while most start-ups are going after open space in the market.  So it is an impressive case study.  But Mark highlights more impressive case studies.  So you should check out the article.

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