3 questions startups must answer before taking on their largest competitors

Successful startups will inevitably draw the attention of powerful incumbents in their industry. They will fight you, but if you are positioned well for the challenge there has never been a better time to prevail.

In recent years, we’ve seen startups overcome seemingly insurmountable odds to redefine industries that had been stagnant for decades. Three key factors are tilting the balance in favor of emerging players:

• The cycle of creative destruction is shorter than ever. Gone are the days of five-year plans; they’ve been replaced by 12-18 month roadmaps that favor the agile.
• Customer loyalty has waned. Even the most entrenched businesses and industries are willing to try something new to stay competitive.
• Portability and the cloud have permanently altered user expectations of their technology providers. Vendor lock-in is no longer an option.

What separates the successful from the rest is understanding how to compete with established companies that seem to have major advantages at every turn. The success of startups in recent years, particularly during the uncertainty of the pandemic, is testimony to this. We can learn a lot from companies like Twilio, Snowflake and Zoom about how asking the right questions and developing a competitive plan can lead to success.

Are you an improver or a disrupter?

Most startups follow one of two paths, and the first step is to determine which one you’re on. The first path is traveled by improvers — those who see an opportunity to make an existing dynamic better. The other is traveled by disruptors, startups that believe the current way of doing things should fundamentally change. Established companies have playbooks for battling both, but knowing who you are and what you’re about will allow you to stay on the offensive in the right way.

The immediate challenge for improvers is to find relevance in an established market. Not only do you have to be exponentially better than the competition, you have to find a way to prove it. For disruptors, it’s about convincing prospects that they’re going about things the wrong way — and doing so without being confrontational. Beyond that, the playbook for taking on your industry’s giants is similar.

Here’s how it will play out:

What to expect: At the outset, the big vendors will ignore you. They will tell their customers that you provide an unnecessary service – if they recognize you at all. Getting a foot in the door here is the first major obstacle. Your challenge is to find someone within the organization willing to take a chance on what you have to offer, and to demonstrate an improvement they can’t ignore.