In spite of everything you read – including here – there isn’t really one right way to run a business. Businesses can become successful via all sorts of weird strategies, including ones that are diametrically opposed to one another.
The single greatest fissure of this type is that between independent companies, and group companies. By “independent” here, we mean businesses that are founder-owned or run, and thus have a single, highly invested, leader at the helm, and presumably limited budgets. And by “group” we mean those that are subsidiaries of a major conglomerate, such as Unilever or General Electric.
Now, we could be forgiven for assuming that the go-to-market techniques employed by the corporate giants must be pretty effective. After all, they have the deepest pockets, and thus access to the most brilliant minds, along with decades of research that has enabled them to fine-tune a low-risk approach. The problem, however, is that their deep pockets don’t only buy them talent; they also place them in a completely different starting position to that of most independent brands. They have bundles of cash, whilst most growing companies don’t. They can also borrow the influence and clout of their parent brand, opening doors to distributors and retailers that are closed to genuine newcomers to the market. In short, they are brands born with silver spoons in their mouths, and their strategies are naturally developed accordingly.
Bearing this in mind, it should be self-evident folly for an independent brand to copy a Mars or Coca-Cola approach to growth, since they are starting with such different resources.
Sure enough, the best independent brands do indeed chart a different course – a course so different from the “big brand approach” that it often easy to tell what kind of business you’re looking just by cursory observation.
The crux of the difference is this: big brands grow by taking, small brands grow by giving.
Now this sounds highly critical of the big brands, but it isn’t really. They are simply operating in an intelligent manner given the resources at their disposal. Their technique is to constantly watch the market, observing upcoming trends and shifts in consumer behaviour, and when they see a wave rising (let’s say for sake of argument, coconut water), they jump on the bandwagon and try to milk it for all it’s worth (OK, you can’t milk a bandwagon, but you get the idea). They extract value from the market by copying something that’s working, and use brute force to overthrow the pioneers in that space.
Those pioneers of course, are likely to be independent brands who have achieved success via a giving approach. What this means is having an idea that adds new value to the market (rather than replicating an existing one), which if you’re lucky gains some traction and takes off. Coconut water would have, at one time, been such an idea.
To distil it down to its crudest form then, group brands thrive copying what works, and using their power to gobble up as much of the market as possible, whilst independent brands thrive by doing something original, with minimal competition.
You can see how adopting the opposite approach would be folly for both parties. Why on earth would a business like Procter & Gamble ever actually gamble on a new idea, when the likelihood of success is so low? They know that getting in reasonably early on an idea that someone else has already tested has a far better hit rate, so to do anything else would be irrational. By the same token, an independent brand using a replication strategy would also fail, since they wouldn’t have the resources to overthrow the pioneers. They’d simply be too late.
These dynamics tend to lead to noticeable differences between the very best group and independent brands. Group brands thrive on broad appeal, and not excluding anyone needlessly. Independent brands thrive on highly specific appeal, and willingly turning some people off. Group brands tend to favour building difference through stylistic factors and borrowing external credibility (such as celebrity endorsement). Independent brands tend to build favour by talking about themselves and the way they do things. Group brands tend to be faceless. Independent brands tend to talk about their people. Group brands tend to be opaque. Independent brands tend to be transparent. Group brands tend to be normal. Independent brands tend to be weird.
All of these are good moves by both parties, because all match with their respective taking or giving strategies. What would not be good however, would be for an independent brand to borrow from the other side of the aisle – and this is why looking up to “big brand success stories” is so dangerous for entrepreneurs. David cannot beat Goliath at Goliath’s game, so he shouldn’t waste his time trying*.
It’s hardly surprising that so many great businesses have been founded by people who had no direct experience of their product category. The world of soft-drink startups isn’t dominated by former Coke execs, despite that being what some investors might favour. It’s instead dominated by founders who haven’t been taught those incompatible habits. So if you find yourself in such a situation, and are torn between your intuition and the supposed “best practice” of the titans in your industry, go with your gut. Because although you may not be right, the alternative is probably – in your case – wrong.
*The same doesn’t quite apply the other way round unfortunately – Goliath can beat David at David’s game. However it’s more difficult that way, so the good news is he probably won’t bother.
Subscribe to The Way to receive regular lessons in strategic thought. With it you'll get:
- A new insight into effective decision making every couple of weeks
- Ideas on strategy in business and life in general
- Bonus material such as downloads and book reviews
- And a free ebook: Effort is the enemy: the 5 philosophical principles of strategy