July 7, 2015

Size matters: Why it’s better for startups to be David than Goliath

Image: Corbis

By Darren Guarnaccia

This article is part of DBA, a series on Mashable about running a business that features insights from leaders in entrepreneurship, venture capital and management.

In the classic story of David and Goliath, David wins the battle through the use of clever tactics; he uses a sling to knock Goliath to the ground and then slays him. Likewise, today’s small and nimble companies are the Davids of the world and should keep his strategy in mind. It’s not about company size or budget. It’s about what you do, and how you do it.

Startups often aim to overpower the juggernauts of their industry, yet many fall into a trap of one-upping their competition and focusing on features instead of understanding what their customers want and need. The behavioral economist Dan Ariely nailed it when he said that in order to make customers’ lives better, you have to understand their needs and problems.

See also: 5 ways legacy brands can revamp with startup talent

While large companies may start out with a customer-first mindset, they often lose sight of the customer focus as they scale. Instead of wishing you had the resources and scale of bigger competitors, focus on how you can be more nimble by knowing your customers better and solving their problems faster. These qualities are essential to success and too often get watered down as companies grow.

Here are three tips for “David” companies to embrace their competitive advantage as the underdog.

1. Stay focused on the distinctive way you can delight customers

Shopping-Mobile-ThumbImage: Luke Leonard/Mashable

One thing’s for sure: As customer preferences change, smaller companies become more able to shift because they’re less encumbered by legacy, bureaucracy, org charts and red tape. As Clayton Christensen’s Innovator’s Dilemma notes, the bigger the ship, the harder it is to turn. Companies need to think about what customers’ unstated or future needs are. Those who don’t will fall behind.

For example, the rental car world is filled with companies offering daily rentals, but Zipcar discovered that customers wanted to rent a car by the hour. Zipcar saw an opportunity to delight customers and created a distinct service as a result.

2. Ask why and how

As a small company, you’re challenged with uniquely solving the customer’s biggest problem and understanding why it’s a problem in the first place. Ask yourself these two questions: Why am I creating this particular product or service and how does this solve my customer’s problem?

If you address the why and how, the what will take care of itself. Agreeing on these fundamental questions will align your teams and bring you closer to your customers. Employees and customers will rally around the why and strengthen your company as a result.

Take Zappos, for instance: The online shoe company is known for its company culture and flat structure, but baked into that is Zappos’ singular mission to align people around the why and how.

Zappos is David compared to its counterpart Amazon, but the former puts the customer first by experimenting with new approaches to delight them. Zappos customers, for example, weren’t satisfied with the industry’s standard 30-day return policy, so the company introduced a 365-day return policy.

In addition to creating happy customers, this policy shift also led Zappos to discover that customers with the highest return rates also bring in the most money for the company.

3. Create a culture of empowerment

women empowerment, social good, gender equalityImage: Mashable composite. Akindo/Getty Creative

Creating a strong company culture starts from the top. Just ask Bradley Tilden of Alaska Airlines. As CEO of a small airline — small, that is, in comparison to Delta or United — Tilden created a culture in which employees feel empowered to act as they see fit, without asking permission of a higher up.

At some point, Goliaths get so big that employees are simply corporate drones, following guidelines and policies to a T, but Davids don’t have to subject themselves to that.

Take my experience at the Alaska Airlines check-in counter a couple months ago. I had been booked for the wrong flight, and since it was a company error, the agent at the counter didn’t charge me the rebooking fee. Many airlines, in a similar scenario, would charge a customer because of corporate policy. By providing a “north of expected” experience for employees and customers, Tilden shows that he trusts his employees by empowering them to have autonomy.

While many aspire to be Goliaths, I encourage Davids to embrace the advantages of being a small underdog. As you build a product or service that delights customers and inspires employees to put their best foot forward, don’t forget about the foundation that makes your company strong.

Darren%20guarnaccia-2066Darren Guarnaccia

Darren Guarnaccia is Chief Strategy Officer at Sitecore, the global leader in customer experience management. Darren leads Sitecore’s global strategy, shaping the company’s products to simplify complexity and e…More

Business, customer satisfaction, DBA, Small Business, Startups