Firms competing in David vs Goliath struggles can be interpreted in different ways.
It is counter-intuitive to realise that even while competing among themselves, large MNCs, SMEs and small startups require each other to co-exist. Established companies and startups exist symbiotically in market ecosystems, engaging the unique capacities of the other (e.g. Facebook and Whatsapp) to survive and grow.
Most startups work on small, low-cost and high-risk opportunities. MNCs and SMEs invest resources in large-scale initiatives with calculated risks.
David and Goliath compete, even while enabling the other to expand and explore market spaces and opportunities in the market universe. But then again, how can Davids beat Goliath? How did Google survive while InfoSeek, Lycos, Altavista and others failed? The answer lies in controlling the context.
Corporations and startups Corporations have advantages executing large initiatives. Established track records and stability enable generous fundraising from investors and securing commitments from suppliers, customers and staff, while corporate bureaucracy allows the coordination of complex projects. For example, Google maintains Google X, which researches everything from teleportation to space elevators, an investment most companies baulk at.
But their long-term perspectives and leadership structures prevent experimentation with small projects in risky, undefined domains. This is where startup entrepreneurs play a crucial role. Disruptive technologies like 3D printing start off unsuitable for mainstream markets, with development focussed on niche areas initially driven by hobbyists and academics.
Startups have incentives to cultivate unformed markets. They create practical uses through small-scale innovations, experimenting and building towards a critical mass, at which the tipping point is reached and larger corporations enter the market as it grows. Quoting Amar Bhidé , the Thomas Schmidheiny Professor at The Fletcher School of Tufts University: “Swarms of startups serve a Darwinian purpose; their experiments enable the ‘fittest’ new products and technologies to emerge.”
Controlling context In the Abrahamic tale, when David fought Goliath, it was Goliath that was disadvantaged. Simply put, David controlled the context. David made use of a sling, a ranged weapon that was a feared weapon in the ancient world. Stones launched from slings exceed 100 km/h, with ranges of 180 metres and more, having slightly less stopping power than a modern pistol. Slingers possessed considerable accuracy at range as well, able to hit specific body parts from more than 150 metres away.
Goliath had superiority in armour, strength, size and weaponry. However, he was an infantryman, whose operational context was fighting at close range against other infantry with swords. David was a slinger, with superior range and agility, whose operational context was fighting at range with a powerful weapon.
David and Goliath each had a specific set of tools and advantages available to them, with Goliath possessing overt advantages at first sight. David had his own, yet they were not immediately apparent. David went in with a specific tool and skill, capitalised upon it and competed with his opponent in a context that he understood and favoured him. In short, the “David Strategy” of using the tools and resources he had to generate a maximum return for the effort invested.
If Goliath had wanted to win, he should have controlled the engagement on his own context. If your competitors control the context and dictate whether you can stay close enough or stay far to negate your striking power (competitive advantage), all stratagem is lost. And where stratagem is lost, so is the market.
This is a classic business story repeated ad infinitum. What can make a company formidable – size and resources – can also inhibit adaptability and responsiveness when the context is fluid and shifting. Here, startups and small businesses with their agility, flexibility and adaptability maintain a competitive advantage. They operate without the benefits, yet also without the troubles, of size and resources.
David walked into the fight determined to control the context and use the tools at hand – namely his sling – to fight Goliath at a distance. Each and every business possesses strengths that may not be immediately apparent, or an apparent deficit that can be turned into a competitive advantage. You simply have to look at the details, look at the context, then look at it from a different angle.