“How does a startup break into an established market and not get squashed by the giants there?”
Great question I am often asked. Perhaps you’ve also been thinking about it.
Serial entrepreneurs have learned there is a trick for entering a market dominated by large, established corporations. Let’s take a look at what they can tell us.
We’ll use a lesson from Olin Stephens, innovative designer of modern ocean-racing sailing boats that became game changers, including craft that won eight of the prestigious America’s Cups. I first read about him in the November 24, 2015 issue of Investors Business Daily, in their daily “Leaders & Success” section (which I highly recommend as regular reading for budding entrepreneurs.)
GIANTS ARE FATALLY VULNERABLE
In his 1999 autobiography, Stephens described sensing an opening back in 1929.
“The scenario must be as old as sport,” he wrote. “Competition builds along certain lines which suit the participants, and thus a norm is established.”
Each year, advances are merely marginal. “Then,” he wrote, “along comes someone, something of an outsider and more single-minded in his efforts to win, who seizes an opportunity that is obvious to him though unrecognized by the routine participants.”
“The new player exploits a new way that offers a winning margin.”
SPOT THE WEAKNESS – AVOID THE FATAL STRATEGIC ERROR
- The current market leader(s) will have a weakness – that’s what the startup must exploit. The trick is how to exploit it. In Stephen’s situation he saw “old, heavy and less nimble racing craft” as his opening. And at 21 years of age, formed a company that raced to success producing series of revolutionary ocean-racing craft.
- The danger is attacking head-on. History has buried many startups that tried that strategy. Their plans are filled with “er” words: Better, faster, cheaper, greater. The established market leaders easily, quickly, crush them. Stephens avoided this trap, staying away from improving existing designs, leaving that market to entrenched competitors. Instead, he did something radically different.
- Startup winners out-flank the established leaders by focusing on a new, as-yet-uncontested market. They focus everything on entering and dominating the fresh opportunity. Stephens’ startup focused on designing a new kind of boat, a type that many considered too radical: they were shorter, narrow, light in weight. But they were quick to maneuver and very fast, even in rough ocean waters. His designs sailed away from their competition that continued to be built with old established boat designs.
BOTTOM LINE: Serial entrepreneurs look for openings in existing markets, for weaknesses among dominating giants. The trick is to figure out how to exploit perceived vulnerability and not get crushed (by attacking head-on). That’s where the veterans innovate until they figure out how to create a fresh business, whose plan is to enter the fresh market quickly, leaving the lumbering giants panting for breath trying to catch up. You can do the same. It’s part of what makes a first-timer into a winning entrepreneur who has an unfair advantage. That can be you.
I wish you The Best on your Adventure!