Rock Paper Scissors

Technology markets look like a game of rock paper scissors. Startups have to find an effective counter to a competitor’s offering not just a slightly better version. Their pebble cannot beat the incumbent’s rock, they have to use paper (and scissors is a really bad idea). 

Rock Paper Scissors: Identify Where Your Strength Can Exploit a Weakness

“The race is not always to the swift, nor the battle to the strong, but that’s the way to bet.”
Hugh Keough

Mark Leslie wrote an article in mid-2015 that was published in two places, on First Round as “Leslie’s Law: When Small Meets Large, Small (Almost) Always Wins” and on the Stanford GSB site as “In Technology, Small Fish (Almost Always) Eat Big Fish.” His key suggestion for startups:

Your rallying objective should be to build something truly great for the low end of the marketplace, solving an important problem with a simple, low-friction product in a segment of the market that’s underserved by the incumbents. Once you’ve achieved excellent market traction in this arena, you can nibble your way upward until you’re competitive with the heavyweights of your industry.”
Mark Leslie

I think the article’s advice is good but it does not actually substantiate that “small (almost always) beats large.” Leslie advises the small to target for customers that large do not consider core to their business. That’s entirely different advice and echoes Christensen’s “Innovator’s Dilemma” research (see “Understanding The Innovator’s Dilemma“) and Gordon Bell’s guideline from “High Tech Ventures”  “Don’t attack a walled city.”

True for Bootstrappers As Well

Seth Godin offers similar advice in the Bootstrapper’s Bible when he lists the advantages of big companies:

Big companies have better distribution, access to money whenever it’s needed, a brand that customers trust, access to the people who buy, and great employees. They’ve got lots of competition, big and small, and they’ve sharpened their axes for battle.

Do you have a chance to succeed?

Not if you try to compete head to head in these five areas. If you try to steal the giant’s lunch, the giant is likely to eat you for lunch…You have to go where the other guys can’t. Take advantage of  what you have so that you can beat the competition with what they don’t.

Many bootstrappers miss this lesson. They believe that great ideas and lots of energy will always triumph, so they waste countless dollars and years fighting the bad guys on their own turf.

This is also reflected in the “surfaces and gaps” model in the principles of maneuver warfare: avoid strong points and attack where the enemy is weak (customers are poorly served by current product). This requires “recon pull” where your product leadership has to be in direct conversation with prospects to understand the facts on the ground not reading market research or trade press: by definition early or emerging markets are hard to observe and unattractive for larger players, and since they pay for the research and the ads that fund trade press these markets are poorly covered.

Blue Ocean strategies recognize these same realities, a startup lacks the resources to compete head to head with an incumbent and must find a more compelling offering, using fewer resources, that’s attractive to a niche.

“I keep my eyes clear and I hit ’em where they ain’t.”
Willie Keeler

Other Articles By Mark Leslie

The Sales Learning Curve: Mark Leslie also wrote a fantastic article on the Sales Learning Curve (also mentioned in the First Round article) that was contemporaneous with Blank’s “Four Steps to the Epiphany” (see “Entrepreneur’s Guide to Customer Development‘ for a better written explanation). It’s a different and valuable perspective on the exact same set of challenges. I also blogged about “Other Customer Development Models”

The Arc of Company Life: Leslie has another article on First Round “The Arc of Company Life–And How to Prolong it”  that’s a nice complement to “Leslie’s Law: When Small Meets Large, Small (Almost) Always Wins.”  One way I try and visualize an industry is as a forest where you have trees in all phases of their life cycle. The same is true for the product portfolio of a mature firm and the firms taken collectively in the industry

Related Blog Posts

• Crossing the Chasm – Look for a Niche in a Lot of Pain
• Focus On a Niche Increases Your Chances For Success
• Worry About Scaling After You Find Your Niche
• Preserving Trust And Demonstrating Expertise Unlocks Demanding Niche Markets
• Doing Less with Less: “Startups survive because they can live on the scraps of a market (a niche) that larger competitors ignore or would be unable to pursue profitably. This is doing less with less.”

Image Credit: Wikipedia “Rock Paper Scissors“