Startup Businesses: Don't Fight with Fortune 500s!

On Inc. Magazine, BusinessWeek, and most other media outlets, we're constantly bombarded with Joe Schmoe tackling the IBMs and Googles of the business world. Somehow, entrepreneurs began to fancy that myth. They thought, like we once did, to succeed, they'll have to attack bigger companies. Who have deeper pockets. With bigger resources. With an established customer base.

Not the best strategy for startup businesses.

Entrepreneurs who narrow their focus toward competing against Goliath are doomed to fail. Rather, says Columbia's Amar Bhide, startups should focus on partnering instead of competing against large companies:

The common wisdom was wrong then, and it is wrong today. Large corporations and small start-ups are not mutually exclusive organizational forms. Rather, they exist symbiotically, each requiring and drawing on the unique capacities of the other. Yes, it is easy to point to examples of upstarts attacking incumbents, such as Compaq taking on IBM and Amazon.com targeting Barnes & Noble, but such battles are exceptions to the rule. Most start-ups pursue small, low-cost, and highly uncertain opportunities, while giants take calculated risks on large-scale initiatives. David and Goliath do not wage battle; they rely on each other.

Trizzy first started out as a computer hardware company. We wanted to build the greatest servers, and the greatest business-focused computers and workstations. Our target: Dell Computers. No, this didn't occur in the early 1990s when small companies had a legitimate shot at taking on Dell. This occured in late 2003.

To keep it short, we bombed.

We couldn't compete against Dell, HP, or even smaller giants like Alienware. They had too many resources, and too much of an established customer base to have them switch to our computers. Luckily we realized the reason why: startups just trying to establish their cashflow can't compete against the Goliaths of the world. Rather, startups need to find ways to work together with those large companies. As disruptive-innovation guru Clayton Christensen likes to teach, small companies can't compete against larger counterparts on product features. Instead, Christensen's studies show startups need to attack markets where the biggies aren't serving.

Using the Disruptive Innovation Approach

For our computer hardware business, that meant services. Bigger companies could provide the hardware, but couldn't service smaller businesses. They had headquarters around the country, but not around small cities. That's where we came in. Luckily, that kept us in business. And most fortunately,

that mindset of serving the under-served accelerated our business and cashflow

. If you think you can compete against the Fortune 500s, think twice about it. You might just, and probably will, make 10-fold if you'd complement their products.

If you enjoyed Startup Businesses: Don't Fight with Fortune 500s!, get a complimentary subscription to our freshest articles through email or through your feed reader.