Why Small Companies Beat Big Companies
Big companies are getting bigger. Barely a day goes by without some multinational being in the news about buying another.
It’s not surprising. It’s what big companies do. It’s what big companies have to do.
If you’re a big company, then you’re under a ton of pressure to keep performing – over and over again. Sales for the quarter have to be better than this time last year. Profits need to continue to grow. Costs need to be squeezed. New products to be launched and new markets to be found. Stakeholders and/or shareholders demand nothing less. It’s no wonder many big companies look to mergers and/or acquisitions for growth, since it’s often the only way to please those up high.
But big companies can only grow so far before they forget what made them big in the first place. They’re too busy chasing profits and market share to care about their customer. Invariably quality and standards drop, fit-for-purpose goes out of the window, and customers move on. History is littered with examples from every industry you care to imagine.
Big companies have had their time in the sun. Today, being a small company is where it’s at.
Small Companies Are Better Positioned To Innovate
I don’t mean that Apple, or Walmart, or Coca-Cola are going to go bust tomorrow. I mean that small companies are outmaneuvering big companies because (now) they can.
Here’s an example. Back in the day, I used to work for a systems integration company that sold to – amongst others – publishing companies. Companies that published books, magazines, catalogs, and brochures. In those days publishing a magazine used to be a costly, elaborate and risky venture. You needed tech staff, a bunch of Apple Mac computers and expensive software. You had to produce the pages in multiples of 4, optimize the pages for the printing process (what used to be called “prepress”) then get them printed, trimmed, bound and distributed. Publishing a magazine only made financial sense if you could sell lots of (physical) copies – and lots and lots of advertising.
Today, you don’t need to be Time Inc., or Hachette, or Random House to be a publisher. Today, anyone can be a publisher – and many people are. The cost of entry is an internet connection.
Big Companies Are Large – And That’s The Problem
The problem with big companies is their size.
Small companies have the flexibility to react to market changes and capitalize on opportunities without having to go through 27 levels of bureaucracy and a Board-level vote. They don’t have markets and shareholders to answer to. Small companies innovate, changing the way that we think about finding a place to stay when we’re away from home (Airbnb), or storing/sharing our files with others (DropBox). Why? Because they have no other choice. Small companies innovate because they can, and because they have to.
Small companies focus on customer relations – in not being an anonymous, faceless corporate façade. Small companies listen to customer feedback, continuously iterating and developing their product, pricing, and distribution model, to ensure their customers are as happy as they can be. Small companies get the business because they’re good, not because they’re big.
Forget the multinational conglomerates with their “one size fits all” mentality. Buying an iPad online doesn’t give you any better product than buying it from a bricks-and-mortar store. A Big Mac or Diet Coke tastes the same no matter where you buy it.
And that’s precisely the problem.