Entrepreneurs beat big businesses: Here is how
Small entrepreneurs versus big businesses can feel like an unequal fight. In this video from 2014, I explain why I believe a small business can also have advantages when a major player enters the market.
Small entrepreneurs versus big businesses: I knew the feeling
I could understand a small business being frightened when a large competitor entered its field. Perhaps you had few employees or none at all and were already struggling to afford product development, marketing and the salespeople you wanted.
Then a giant appeared and wanted a slice of the market. My image was of sitting in your little tank and seeing an entire armada of tanks coming towards you.
I had felt that myself at Jubii. I mentioned Søndagsavisen and competition from Yahoo, AltaVista and later Google, among others, as part of my recollection of that period. I did not go through the companies’ ownership or the full history of the competition in the video.
In my view, Google was a slightly different case because they were highly specialised and took a sizeable chunk of our business. I wanted to include that. My point was not that large competitors could never do damage.
You could forget your own advantage amid the fear
What I thought the small entrepreneur easily forgot was the strength of being outside a large organisation’s bureaucracy.
I occasionally helped a larger company with projects as a consultant. I did not want to say which company it was. But I described it as capable, with highly competent employees, a dedicated team and access to plenty of money when the projects made sense.
Even so, I found that an incredible amount of time went into working the organisation. That was what I wanted to set against the resources you might envy as a small business.
An idea had to pass through many layers
An employee could have an idea, but it then had to be considered by others and perhaps go all the way through senior management and the board.
I caricatured it as 17 different layers and worried men in suits. Senior management had to answer to the board, and the CEO might be afraid of making a decision that went wrong.
My description of boards was deliberately harsh. I spoke of people who might once have had one big success and now sat there with rules, coffee and scepticism towards anything new. It was my polemical assessment of a type of resistance, rather than a description of all board members.
The innovative team constantly had to produce presentations, forecasts and calculations: What would it cost? What could they earn? How much, and when?
My frustration was that you could not necessarily know all that in advance. Even so, a basis for the decision had to be produced before you were allowed to move forward.
I compared it with our two and a half years on Dinero
We had been working with the Dinero team for around two and a half years. The larger organisation had also started projects at roughly the same time.
I described how our monthly revenue at that point was equivalent to what the other project had generated since the beginning. I also felt we had more momentum. That was my comparison of the projects I knew, without presenting accounts or precise figures.
I did not say things would necessarily go badly at the other company. On the contrary, I believed the talented people, the money and the committed team could make something good of it.
But they were still working as salaried employees. In my view, they did not have the same ownership and personal risk as people whose own business was at stake.
Having something to lose could make a difference
If a project failed, a salaried team could be disappointed about the time and energy spent. But that was different from personally risking your business and finances.
I believed that difference could give an entrepreneur extra drive. It was not an argument that employees could not be dedicated. I had just highlighted how committed the other team was.
So my advice was not to stop being afraid. I actually said you should be afraid, but use the fear to make an extra effort and pay attention.
A large share of resources could disappear internally
I made a very categorical estimate that 50–70 per cent of a large company’s resources could go towards the internal battle to get permission to do things.
That was a figure in my argument, rather than a documented measurement of that company or large companies in general. It was meant to remind the small business that a competitor’s total budget did not necessarily translate into speed in the market.
When a new technology or opportunity appeared, a small business could, in some cases, decide and act quickly. You did not have to wait for the same layers of approval.
My hypothetical example was a new mobile platform
I imagined Microsoft’s mobile platform becoming so widespread at some point that it made sense to build for it. I said myself that it was not there at the time of recording. It was a hypothetical example from September 2014.
The small business might spot the opportunity, make a decision and move its solution to the new channel in 14 days.
The large company might first have to put together a new business case and request permission for an app costing 500,000–700,000 kroner. If the amount was large enough, the matter had to go to the board.
If the board only met four times a year and had just met, three months could pass. If it then asked for more data, another three months could pass. In the end, the answer could still be no.
That was my illustration of how six to eight months could disappear while a smaller organisation acted. I was not giving a timetable for a specific app project.
Outpace the big players using the strengths you actually have
I wanted the small business to believe in itself without underestimating its competitor. Big companies could certainly do exciting things too.
But in my view, there was still room for small businesses to create something good and build a good business. Quick decisions, ownership and attention to the market were strengths you needed to remember to use.
That was my rallying cry in 2014: Let fear give you energy and stay ready to respond. The competitor’s size was a challenge, but it did not have to decide the outcome in advance.
Small entrepreneurs versus big businesses: Use your speed
I had experienced large competitors myself when I worked on Jubii. It could be frightening to see their money, employees and marketing opportunities.
But money and size are not the only things that determine how quickly you can move. In a large organisation, a lot of time can go into gaining support, preparing business cases and waiting for approvals.
I had also worked with a larger company with very talented and committed people. My criticism concerned the organisation’s processes, rather than the employees’ ability to do their jobs.
You can make a decision and move forward
As a small business, you can sometimes change direction quickly when an opportunity or new technology appears. You do not necessarily have to go through the same layers of meetings and approvals.
I compared it with the work on Dinero, where we had been going for around two and a half years. Those were my experiences from the projects I knew, rather than a measurement of all large and small businesses.
Ownership can give you extra drive
When it is your own business, you have something at stake. That concern can also make you pay attention and put in extra effort.
I also say the big players can certainly do exciting things. My point was that you should not forget your own strengths just because the competitor had more resources.
Use your ability to respond quickly, watch the market and believe there may be room for your business. That was my rallying cry in 2014, rather than a promise that you would beat every large competitor.
You can find more of my experiences of life as an entrepreneur in Iværksætter til jeg dør.
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