How small businesses win against big corporates – and you can too!

A few years ago, my mentor’s small business got cheated out of money by a big corporate. Being so large, they just didn’t care about the individual customer and just ignored his emails, complaints and calls. He decided to take this further and created a fake Twitter account, taking special care to have an anonymous email and mask his IP address at all times. He built up a huge following and his tweets tarnished the brand badly. The impact was so great, that the company offered to refund him more than what they owed him.

This story might make you think that you have to be malicious to get what you want in life. It is, however, a good example of how thinking differently can change the course of history.

David and Goliath

According to historians, Goliath was at least 2.38 meters tall. His strength, size and demeanour intimidated the Israelites to the point that they lost all courage. David, a young shepherd boy challenged Goliath’s so-called authority and strength – but not in the conventional way that would’ve been expected. David realised that he couldn’t win by using the same weapons that Goliath prized. And the heavy armour was eventually the downfall of Goliath: David was much more agile and able to change direction faster than his opponent and killed him while everyone was looking on.

When David wins and brings down a company

If you’re playing by the rules set by Goliath, you will almost always lose. But what happens when you do things differently?

Things change – and the landscape is not excluded – it changes too.

Let’s look at some case studies where Davids slew Goliath.

Small businesses that are winning against Goliath

We don’t always hear about small businesses that can survive the onslaught of big corporates. I do, however, want to mention a few that I’ve seen.

• Both my wife and I own flourishing businesses. Our marketing tool is word of mouth – our happy customers tell other friends about us. The same has happened to Frugallocal – big brands come to me to get access to my followers. I own a software development company, Effectify, and my wife runs Effects Interiors.
• My best friend owns a restaurant in Pretoria. He started it with 3 tables. He’s competing against big brands in his industry and isn’t competing on convenience, but on atmosphere and quality. His restaurant has grown to be one of the biggest and busiest in the area!
• One of my friend’s suppliers is in the lime business. They have a small plot of land and offer direct delivery of limes to restaurants. His business model works like this: You pay the same amount in and out of season: but you need to sign a 1-year contract. This gives the supplier the stability of income and the restaurant the constant delivery of limes.
• The Pretoria Farmer’s Market has a big variety of fresh produce, meat, dairy, coffee and even dim sum. As each stall produces something in its niche, you can be assured to get top-quality products at a decent price. The market ends just after 09:00 am and stalls are often sold out long before they close.

How the innovator’s dilemma makes small businesses win

Simplifying business operations for the win

As soon as a business starts to grow, business administration becomes more complex and painful. For example, an IT infrastructure team needs to monitor for malware and the visiting of inappropriate websites. A legal team, HR and accounting team is also required. Most of these departments are cost centres – they don’t bring in money, but enable the business to run smoother and diversify the risk of a hostile takeover by creating silos.

Small business owners need to be able to do everything. This streamlines many of the complex processes that corporates have and allows for agility: the ability to change direction fast and without approval from 50 departments.

How complexity and rigidity open opportunities

Standard operating procedures (SOP’s) create edge cases that don’t serve the needs of many customers. Oftentimes, people inside the organisation see this niche and pitch the idea to their superiors, who do not see the value in the idea. Many of these people resign and start a small business or startup to cater for an untapped niche. For example:

• ex-Adobe software developers created Balsamiq to serve the UX community
• Staff from a big corporate insurer in South Africa started Naked Insurance

Doing marketing the unconventional way

“If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”

Warren Buffett (Yahoo Finance)

Big corporates spend lots of money on billboards, TV ads, YouTube ads and other ways to force you to take notice of their brand. Furthermore, I am seeing a shift away from mass media advertising, where brands are using influencers and content creators to spread their message to more targeted communities. Influencers, however, tend to charge corporates large fees. In my experience, they often help small businesses for free by a retweet or a post.

It’s therefore important not to play by the same rules as the big companies. With a limited time and money, we need to be clever about how we reach out to potential customers. For example, if they are running expensive Google Ads, then you shouldn’t necessarily do that. Here are some creative examples that I’ve come across that illustrate this:

• Botto Bistro took on Yelp! to get as many one-star ratings as possible. One of the comments posted was “My food arrived before I wanted it to come. It was too hot to eat. It brought back all kinds of terrible memories of eating in Italy.”
• Dollar Shave Club created a viral, low-budget video. They sold their business for $ 1 billion to Gillette.
• I started FrugalLocal with only a Twitter account. I interacted with influencers and people and built up a reputation and influence. With some hard work over time, I now have a big reach and work with some amazing big brands!

Quickly test your idea for viability

I have a friend who worked for a big insurer. He wanted to do something small that would’ve increased the speed of claims. After months of working on the solution, it was stopped by the marketing’s brand manager. Corporates can waste time, but you don’t have to. When starting out, you have the opportunity to quickly test if your idea will work. Here are some ideas for testing your idea quickly:

• Speak to as many people (and customers) as possible
• Run a Google Ad campaign without a website – check if people are interested in what you have to offer
• Build something small and show it to potential customers to get feedback
• Contact an influencer in your field and ask for a retweet or a comment. They’re all normal people and willing to help!

Conclusion

Big corporates are slow due to all the red tape and silos. Taking advantage of how long corporates take to launch a product can be a big competitive advantage.

As with David and Goliath, you don’t have to play by the rules of the giant. You can find creative solutions to reach your target market without big budgets. If your big-company competition runs Google Ad campaigns, don’t do that. Their budget can destroy your marketing attempts.

Happy investing!