Staying Competitive
How to fight (back) big corporations
Starting a company is always a challenge. You start small, and you might have to fight competitors that are way larger than you. They could crush you.
However, being small does not mean that you will necessarily lose against large companies.
Last week, I was wandering through a forum where I regularly hang out with other SaaS founders. We share founders’ issues, anything from how to run ad campaigns to how to fire people (sigh).
That day, one of the participants asked a question about staying competitive when large companies enter your market. They were facing a few challenges, the main one being that a multi-billion corporation was adding features to its product that would poach on their turf.
That resonated with me. Mergify went through the same hassle when GitHub launched its own merge queue features last year.
Being in this position is extremely risky. There are many horror stories out there of startups being killed by larger competitors. You’d just have to watch the latest OpenAI DevDay announcements over the last few months to see how many startups they would instantly disrupt with the announcement of a single feature (marketplace, custom GPTs, etc.).
Now, that being said, being the underdog is not necessarily a bad thing and can turn out to be a strength. When survival is at stake, the smallest dog can become the more fierce one.
80/20
In 1668, Jean de La Fontaine wrote a famous fable, Le Lièvre et la Tortue. If you never heard of it, the TL;DR is: a confident hare mocks a slow tortoise and challenges her to a race. The hare, overconfident, takes a nap mid-race while the tortoise steadily continues and wins. The fable teaches the lesson that persistence and diligence can triumph over arrogance and haste.
There are multiple choices to do in this situation, but my feeling is that most large companies will implement the “20% features that do 80% of the job.” It makes sense to them economically. With little effort, they can enter the market and grasp a large amount of the share using their moat, branding, marketing, and existing customers.
They can leverage their vast resources and existing ecosystems to quickly dominate this space. However, they often leave gaps in niche or specialized needs because building the remaining 80% of features to cover every specific use case requires more effort and may not align with their broader goals.
Unfortunately, if you were also targeting the same 20% feature, this can hurt your business. You’ll stop seeing new customers and will lose existing ones as they remove the one-too-many vendor from their list.
However, there is a chance for you to stay ahead of the game. Like the hare in the tale, large companies will just take a gigantic nap once they’re done with what they expect to be enough. This is where you can shine.
A small company that builds beyond the basic 20% and focuses on solving complex or specialized problems can appeal to customers who require more tailored solutions, thus capturing a large share of a more focused market. While large companies serve the general market, small players can dominate specialized verticals. By implementing, e.g., 40% of the features for a particular scope, you could address 97% of the market, thus appearing as an expert and leader in your area.
Vertical
Another play that I like is to target different verticals. If you design presentation software and suddenly PowerPoint enters the market, it’s going to be pretty hard to win over the long run. Microsoft will win because they’re known (the “nobody gets fired for buying IBM” rule), and they can reach out to millions of customers — you can’t.
However, if you pivot to becoming the presentation software specialized in building convincing, AI-generated, prospect-centered sales decks automatically, then you can win an entire part of the broader market.
For sure, the initial market might be narrower, but by being focused, it’ll be easier to win it. As you’re winning it, you can expand into adjacent markets and grab more share of the global offering.
Strategy
For both strategies — expanding beyond the 80/20 or addressing a particular, the key to discovering which approach might suit you better is to talk to your existing customers. They are the ones having the answer to the questions “Is there a usage pattern they rely on?” or “Are they working in the same industry?”. Focusing on customer experience or specializing in integrations that large corporations won’t do is only identifiable if you speak to your users.
Small companies have the agility and execution speed that large companies lack, making them the best innovators.
I guess that’s my message to anyone out there being attacked by large corporations. Don’t throw the towel too soon. There might be different plays for you to continue growing and fighting back against the Goliath.
In the end, it’s not just about size. It’s about understanding where you can uniquely provide value and delivering that value better and faster than anyone else.