Should Small Businesses Take More Chances?

[vangogh]

Interesting post about underdogs taking more chances to compete (http://www.37signals.com/svn/posts/1735-why-underdogs-should-take-more-chances). The basic idea being if your odds odds of success are low, why play the same game as the leaders. You're better off changing the game to increase your odds.

The post I linked to above really comes out of an article Malcolm Gladwell wrote for the New Yorker earlier this month, called How David Beats Goliath (http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_gladwell). The article is much longer than the post above, but I'd encourage reading it when you have some time.

From the post:


Sometimes the riskiest thing to do is not take any risks. If you’re outmatched by the competition, isn’t it silly not to take a chance? If you’re an underdog in your niche, playing it safe and imitating the established players will probably doom you to failure.

I agree. Though I think a certain amount of following the leader is probably still necessary taking a chance can be a great strategy for standing out and in the beginning you don't have must to lose and so have limited risk.

What do you think? Is it a good idea to take chances even though most of those chances will end up in failure? Or should you play it safe, knowing it will be difficult to compete with the big players in your industry?

[SteveC]

This is just my opinion... when everyone goes one way you should consider going a different way... let me give you an example...

An awful lot of businesses now send out email newsletters... these are cheap and quick to produce and almost none of them ever get read... We saw this some years back and we instead produce a printed newsletter that is sent out just to our customers... as it is printed and not many people do this, it is read and the responce is fantastic.

Another example... some years back everyone was selling websites, we decided to rent them out (I believe we were the first to do this)... this now means that we appear to all market segments... customers come to us and we tell them about our custom website solutions starting at $10K and we then tell them about our rental website options... and they decide which one best suits them... this means we close more sales and as an added benefit we have lots of rental customers and lots of residual income.

There are lots of examples I could give... the secret I guess is to get noticed and to engage people, because if you engage them everyone wins.

As to big players... most are slow to react and so small businesses often have the advantage... I know my market and I don't mind fighting any of the large companies for it... just like they know theirs and I tend to steer clear of it... although I do stray now and again...

[vangogh]

I thought you might agree with the idea of taking chances and being different.


the secret I guess is to get noticed and to engage people, because if you engage them everyone wins

Agreed. It's the getting noticed that's difficult when you're new, but doing something no one else is doing is one way to get noticed. I think for most of us our natural tendency is to follow the leader. And to a degree maybe you have to. If everyone in your industry does stays open till 10 PM, you probably should too. However you could also do them one better and stay open all night.


most are slow to react and so small businesses often have the advantage

That's really one of, if not the, main advantage we have as small businesses. We can adapt and change gears much faster and so can get to new markets quicker.

[phanio]

Not always the best idea to go your own direction - may times those leaders are going in the same direction because they have found out what works and what doesn't. If you plan on going your own direction -make sure it has not already been tried. Plus, make sure that the direction you want to go in is the same direction your customers want. Think about the car industry. Before the gas hikes (which are coming again) several companies created smaller more efficient cars - this was a new direction away from the big SUVs. The problem, no one wanted to buy them. New direction - no customers. Now, people really do not have a choice and these cars are selling - but, they still want big SUVs. If you can make a SUV (what customers want) that has all the benefits of a smaller car - you will have it made - at least until we no longer need vehicles.

If you want to stand out - think Better, Faster, Cheaper. If you can do one of these better than you competition, then you will stand out. Or, think about staples - staples does not do anything different than its competitors - but it was able to brand itself like it did (easy button). That made the company stand out.

[vangogh]

Your examples with car manufacturers and Staples wouldn't really qualify as small businesses though. Most of us are not starting a new auto plant tomorrow or jumping right into opening a retail chain.

I agree that you can't just go your own way for the sake of going your own way though. Ideally you would have done your research and would be choosing a new direction based on something not being delivered to the market.

To me the main point of both articles is that sometimes we compete with others on their terms where we have very little chance of succeeding. The articles use sports to describe the problem. If you're a fan of any sport you've games where you know one team is going to win before the game starts. Or at the very least a few minutes into the game it's clear one team is much better than the other. In those cases doesn't it make sense for the lesser team to use an unconventional strategy? It's clear right away using the conventional strategy is only going to lead to failure.

Now consider small businesses. One of the more difficult things for any new business is standing out from the competition. Your competition is already a known entity. They've established trust with segments of the market. What's the compelling reason someone should buy from your new company? If your simply doing what everyone else is doing there's little reason to choose you.


Better, Faster, Cheaper

I'm not sure these are the best strategies for small business out of the gate. The first two can only be seen after you've been hired. The last never works for small business. Someone else can always come along and be cheaper than you. Business that use price as a selling point need to be high volume businesses and that's not generally small business.

What I take from these articles is the idea that you should look for ways to differentiate yourself and be willing to take a chance to stand out. As Steve pointed out the advantage of small business is the ability to react and change. And early on you don't have much to lose as a small business owner. If your idea doesn't work you can change and try again.

It's not to say you should ignore what has be shown to work, but if all you do is try to be the same as everyone else in your business, you're relegated to playing catch up with the competition. And you aren't giving anyone a compelling reason to choose you. You become just another business in a sea of similar businesses and most people will sooner choose the known entity.