Entrepreneurs Vs. Market Leaders: Three Strategies Entrepreneurs Use To Win
As seen on Forbes
Question: How many entrepreneurs does it take to change a light bulb?
Answer: Does it have to be a light bulb?
If you work for a big, established light bulb company, the answer to the question above is yes. If you are an entrepreneur trying to illuminate an industry, the answer is a resounding “NO!” — and therein lies the secret sauce of most entrepreneurs: Rules need not apply to us.
It is a lesson I learned early — in Catholic school of all places.
In the fourth grade, I was caught talking during class (again). My punishment was to stay after school and write, “I will not talk in class” 200 times. My teacher was stunned when I turned in the assignment 15 minutes after starting detention.
Anticipating the inevitable punishment and aching wrists, I had used the rest of class time after having been caught talking to create a modified pen designed for my act of contrition. I taped together four BIC pens on a very slight angle. Each pen was separated by those little milk straws they hand out in grade school. The result was a pen that wrote four identical sentences, perfectly spaced to our writing tablet lines. KaaaaBAM! Now I only had to write 50 sentences to create 200 lines.
For the rest of the year, my pen rented out for $1 a punishment — the entrepreneurial itch stars early — thus validating the winning innovation and entrepreneurial formula:
Market Need + Novel Solution = Revenue
Entrepreneurs see hurdles — be they detention or entrenched large competitors — as a chance to do things completely different. Henry Ford is often quoted as saying, “If I had asked people what they wanted, they would have said faster horses.” Whether he actually said it or not, one thing is for sure: Big companies are in the “faster horses” business while entrepreneurs are in the “does it have to be a horse?” business.
While large firms are stuck with existing business models, supply chains, distributors and the like, entrepreneurs are blissfully free to think well beyond horses, candles and even light bulbs. There is something incredibly liberating about a blank sheet of paper, which leads us to three ways that entrepreneurs change the rules to win at innovation.
Strategy 1: Disintermediate
Millennials are the first generation to draw a straight line between what they want and the entity that can give it to them. Virtually every industry is now dealing with anyone or anything that feels like a middleman being eliminated. For entrepreneurs, this has become a business-building gold rush.
If you’re looking for examples of disintermediation, here are a few examples of how the desire to get products and services more efficiently cuts professionals out of business models:
- Petmeds.com cut out veterinarians
- Dell computers cut out a host of brokers, computer shops, etc.
- Orbitz cut out travel agents
- iTunes cut out record shops and agents
- Quicken Loans cut out mortgage brokers
- Progressive cut out insurance agents
- Edmunds.com cut out car sales people
- Dollar Shave Club cut out CPG companies and brick and mortar
You get the idea. If you are entrepreneur, you should be gunning for every company that has a business model or industry that depends on middlemen (which is virtually every traditional business). After all, you — unlike your far larger competitors — are unencumbered by the rules, legacy systems, employees or partners that serve your business.
Your goal? Serve the end customer faster.
Which leads to your next secret weapon:
Strategy 2: Get Outside the Jar
You can’t read the label when you are sitting inside the jar. The sad irony of being an expert at an established, really large company is that it keeps you from seeing possibilities. After all, you know what works, what doesn’t, what you can afford, what’s been tried in the past, and you are extremely unlikely to follow a new or different approach. If you’ve been working in an industry for more than six months, you are in the jar.
The nice thing about being an entrepreneur is that you usually don’t have this problem. So instead of relying on your own expertise — which is typically nonexistent — you can go looking for experts solving similar challenges to the ones you are facing and search for technology that could allow you to take shortcuts.
You know the doctor visits upon which hospitals build their whole business models? Yeah, there is about to be an app for that.
Strategy 3: Move Fast and Take Fewer Risks
In the innovation portfolio model we use, entrepreneurs almost always live in the fast-fail quadrant. This allows them to quickly experiment and pivot, often changing an idea dozens of times before a larger company can even create its first prototype.
People often believe that entrepreneurs enjoy risk. The opposite is true, and working in the fast-fail quadrant proves that. They don’t have to put up very much money to find out what works and what doesn’t. They can play fast — and cheap.
If you run a big company, you might be tempted to blindly adopt everything I just talked about.
As we discussed last time, large organizations tend to turn their back on their strengths in their quest to keep up with entrepreneurs and invariably fail in the process.
Those of you at large firms must move slowly or risk freaking out your people who, in their quest to move quickly, will create simple and safe solutions that won’t have a market impact.
Instead, you need to strive a deep understanding of your customer’s customer. (You have the resources to do that; entrepreneurs usually don’t.) Go way beyond demographics to learn everything about the deepest desires and fears of your true customers — the people who ultimately use their product.
And rely on innovation portfolio models to manage your new product/service pipeline and balance risk. You have the capital, the distribution, the brands and the brains to win at innovation if only you would take a balanced, pragmatic approach and invest appropriately in all quadrants.
The moral for you is the same as it is for entrepreneurs: Don’t play by the competitions’ rules.