Startups vs. The Big Guys: The Power Of Caring For Customers

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Startups vs. The Big Guys: The Power Of Caring For Customers


I’ve been working in and around startups for most of my professional career.  A topic that often comes up in startups I’m advising or considering an investment in is:  “How will the big guys respond?”.  This is an interesting question and for all the obvious reasons, should not be dismissed as being irrelevant.  Too many startups answer the question on big competitors either inaccurately or inappropriately.  [Note:  I use the phrase “big guys” throughout this article as informal short-hand.  No gender bias is intended.]

Instead of the common arguments of why one of the big guys (Google, Microsoft, Oracle or whoever) can’t/won’t compete with you, it’s sometimes helpful to answer a slightly different question and look at this through a different lens:

Here is what BigCo would have to do to win in this market.  First, they’d have to <x>.  Then they’d have to <y>.  Finally, they’d have to <z>.

You get the idea.  Instead of making decisions on behalf of the other party, let them decide on their own how hard it will be for BigCo to do x, y and z.  As a potential investor/advisor, I like to see the startup founders have an objective stance on competition and can accept that one thing those of us that have been around the block know a wee bit about is the realistic impact of competition from big players.

Having said that, I came across an interesting article recently that should provide some comfort to startups.  It was interesting not because it revealed some startling fact, but because I was not all that surprisng.  The title of the article is “190,000 Office Live beta accounts left in limbo.”  It was penned by Phil Wainewright whose blog I follow regularly and who I believe has a reasonably balanced view on things.  If nothing else, at least his arguments are usually pretty objective.  The best I can tell, neither Phil nor I hate Microsoft (quite the contrary, I’ve been a customer for years, build on top of their platform and own Microsoft shares).


The thing that leapt out at me about this article is that the article didn’t leap out at me.  I have read about similar things all the time with big software companies – particularly those that deal with smaller customers.  This brings me to a couple of points I’d like to share with you:


  1. When the ratio of the size of the software company and the size of its customers is very, very large (as in the case of most big businesses selling software/technology to small businesses), there’s the danger of a lapse in customer service.  In the aggregate, they do really well.  But, often, individual customers or groups of customers can get really, really screwed.


  1. The reason for the above is that as a company gets larger another important ratio starts to slide downward.  This is the ratio of the number of people in the company that genuinely care about customers to the number of customers.  


So, when you’re up against big competition, try to figure these ratios out.  What’s the company size / average customer size  and what’s the people that care about customers / total number of customers.  Of course, the latter is not easy to come by in terms of hard data, but simple looking at the world through this lens is helpful.

I generally tend to believe that the fiercest competition for a startup often comes from other startups, but that doesn’t mean the big guys should be ignored.  Often, the most reliable source of competition eventually is the big companies.  This kicks in if and when you become moderately successful (and thereby the big guys start to care enough to come after you).  

What are your thoughts?  Any war stories from the trenches in having gone up against competitors many, many times your size?  If so, would love to hear them and any other comments you might have.

Posted by Dharmesh Shah on Tue, Jan 30, 2007


That is an outstanding observation...and presented in simple terms that even someone like me can grasp.

As I think about it, that's probably why I have always worked for smaller companies. 1) I personally feel my imput and efforts make a difference and 2) I personally interact with our clients to resolve issues that may arise.

I tried working for "the Big Guys" a couple of times and never lasted more than a year. The ratio of people who show up with a different agenda "other than taking care of the customer" is too large.

There are only a few companies, in the traditional sense, that do a good job: Southwest Airlines and Nordstrom's have reputations from employee's and customers that books and seminars are produced based upon their focus on the customer.

Many web companies such as Ebay or Amazon seem to
focus on user feedback and ratings to keep track of customer's experience...and it seems to be working, at least for those two companies. There has to be someone watching and reacting to those numbers. But I have no personal experience of what happens when something goes wrong and you have to speak to "a real live person" to get your issue resolved.

So in respect to a startup, it brings you to what your goals are?? Is it getting big...I mean really big...then you will find yourself in the same position as the rest of "the big guys", or maybe you could break out and have a reputation like Nordstroms or Southwest. The odds are really against you. Or you could take the "User Rating System" but then you have given your vision off to the customer...which might be a good thing, but then it might not...we don't have much history about it yet.

Or you can find that spot in the market that you excell in, software, hardware, lures, whatever. The part of the market that you Know! You have the answers, the applications, you know the questions to've already make all the mistakes. You can have a great company, that makes you and your team a very good living...maybe not billionaires...but still a very good living. That also has your vision and personality and those you surround yourself with. So you have to understand and be comfortable with what your goals are. I'm sure being a billionaire has it's if that's what you want...go for it. But there other measures of success that can profitable too and you get be in charge of a great company too.

Just my nickles worth...sorry I got so long...

posted on Tuesday, January 30, 2007 at 4:05 PM by Cecil

A very sensible post.

Insofar as my experience goes, big guys tend to focus on potentially large segments or atleast on those that appear so. They would want some quick action, grab market-share fast and establish themselves as leaders.

So long as startups keep themselves out of radar, they need not fear competition from the heavyweights but then they run the risk of being small all the time.

I have also seen the 'programmer mentality' in the big guys approach to products that doesn't endear their products at all. I remember watching one demo of a personal finance software from a leading company where the user is forced to remember the 16 digits of his credit card while logging a transaction!!!

Competition from another startup can be comforting because they would help grow the market and contribute to a better product from your own stable.

posted on Thursday, February 01, 2007 at 11:39 AM by Badri

i agree customer service is the key, your going to find it hard to compete on price but your genuine caring factor is hard to beat.

posted on Friday, February 02, 2007 at 8:20 AM by MarieLu

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