DOING BATTLE with the large company
Feb 1, 2000 12:00 PM, Alan Kruglak
One of my favorite pastimes is to write down quotes from well-known people. The ones worth remembering condense a powerful, complex idea, which may be difficult to communicate, into one or two short sentences, or they have the power to evoke strong feelings, stirring the passions of human emotion. Remember Dr. McCoy from the original Star Trek series? One of his most notable quotes, which stirred deep emotions from TV audiences, is now part of the curriculum of all medical schools. Always said when he was in a life-or-death situation, his standard retort to Captain Kirk was, "Jim, I'm a doctor, not a mechanic."
Another of my favorite quotes is from President Franklin D. Roosevelt. It was right after the Japanese had bombed Pearl Harbor in 1941 when he uttered a statement that became part of history: "There is nothing to fear but fear itself." Think about it. Fear is a common human emotion, created and controlled by the brain. And although F.D.R. probably feared the carnage to come, he knew that he had no choice but to overcome his emotions and focus on the issue of the day.
F.D.R. was right about fear. Most of us in business are afraid of the unknown, especially when it comes to the mega-companies, the big companies with revenues in the tens if not hundreds of millions of dollars, usually growing by acquisition, amassing a huge war chest along the way. Their mission is simple - grow, grow, then grow some more by any means necessary.
Fear begins the moment they enter your comfy little market. You are scared because you do not know how they will affect your business. Ultimately, the main question that races through your mind is: "How will I compete against the mega-companies? Is all hope lost?"
Mega-companies can be tough competitors. Their major selling features to clients are "We're large and have the financial resources to take care of you," and "Wehave a large technical infrastructure, with hundreds of customer-service personnel to support clients."
Competing
Being scared when a mega-company (MC) enters your market is a normal reaction, but being frozen like deer in the headlights guarantees that you will be mowed down. The best way to compete against an opponent is to find its weak spots and make them your strengths. When we competed against the MCs, we used several successful strategies.
One strategy involves defusing the size advantage. For many prospects, company size is important because it conveys stability. One way to defuse size as an advantage is to level the playing field by enhancing your size image and stability. Even if your company has been in business for 30 years, hearing it from your sales reps usually means little to a client. An effective way to show stability is having a quality brochure. It does not have to be a 10 page glossy; it can be a simple 8.50 infinity 170 folded in half. Not only does this project stability, but it also informs the client about all the other services provided by your company.
Another approach is to make size a liability. To highlight the liability of being too big, I took a large duffel bag full of ping pong balls labeled with different numbers on a sales call. When asked the difference between my company and the MC, I put my hand in the bag and pulling out a ping pong ball, replied, "With our company, you will not be just another number; every client is important." I usually followed by saying, "If you ever have a problem, you can talk directly to the president and owner of the company. Your interests are his interests."
Further, emphasize service. The weakest link for many MCs is service. Their service revenues are usually too small to impact an MC's annual growth target. At best, service is an after-thought.
At our company, we used service as a strong lever to squash our competitors, small or large. We developed a full service agreement package, which guaranteed around-the-clock service, instant replacement of defective products, problem correction within 24 hours or less and all parts and labor covered. By creating charts highlighting the features of our service program, we were able to educate the prospect that not all service programs are the same. If you treat service as a commodity, you are only giving the MC an upper hand.
Also, seek niche markets. As Captain Kirk once said, "The mission of the Starship Enterprise is to go where no man has gone before." The same concept applies to competing against MCs. If you compete head-to-head on the standard cookie-cutter projects, where price is the only determining factor, you are probably wasting your time. To enhance our win rate and increase gross margins, we went after only the niches where price was not the key factor, and we could demonstrate added value. Sometimes, added value meant off-site software programming services or providing a product not available to our competitors. In either case, offer what MCs cannot.
Finally, drop your prices. One way to discourage a new competitor from entering your market is to reduce your prices on every major new project where both companies are competing. It is not the preferred way, but it is an alternative. If your adversary cannot make headway, maybe it will give up and check out another market.
Just as there is no single way to skin a cat, there is no single set of ways to compete against the MCs. Their entry into your market means only one thing - you have to take the offensive. Although they are big and can afford to lose money, you can leverage their size to your advantage. As we learned at our company, being small has its advantages. Down the road, after the big, ugly MC has packed its bags and left town, you can be quoted as saying, "I've never seen anything that big run so fast."
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