Playing entrepreneurial judo...

You enter the “Kill Zone” when your startup’s business is getting closer to some of your BIG competitors. As explained in this short podcast episode by INSEAD Prof. Michaël Bikard, you can easily be copied or crushed by the mighty competitor if they realize that you are getting too close to their business. Or you can survive… and thrive!

I devote one of the 9 steps of the ‘From Tech To Growth’ framework to the moves you make vs. competition, esp. against mighty competitors. This is a key aspect of your Go-To-Market strategy.

Another INSEAD Prof. Javier Gimeno argues that Startup CEOs are often in a market position where they must devise a strategy which overcomes both the uncertainty of the business opportunity for their product and the competitive threat and potential response to their own moves. This is what Javier calls “Entrepreneurial Judo”.

Recently, a startup CEO developing Private 5G networks told me that they may decide to attack the fortresses of the likes of Ericsson and Nokia. On one hand, the market is uncertain, as Enterprises have not decided the scale of their Private 5G deployments yet, while on the other hand the big competitors are prepared to retaliate strongly. So, let’s practice judo!

The entrepreneurial judo strategy exploits the BIG competitors’ prior commitments and turns them into rigidities. Like in judo, you use the opponent’s size and strength to your advantage. So, the startup must identify the competitors’ rigidities and select strategies which are incompatible with their rivals’. Javier identifies 6 types of rigidity:

1. Exploiting competitors’ network of established relationships with key customers and key partners. This may prevent them responding to innovations which are less relevant for those established stakeholders. In our example, Private 5G may be a good target market, as the big guys have established relationships with many Operators which do not plan to implement it at scale.

2. Exploiting competitors’ main market positions. They address large segments with the same standardized product. Defining a niche which has different requirements may prove beneficial to the startup. The incumbent may be better off giving up that niche segment or addressing it with a subpar product offering. In our example, the startup would not focus on Tier 1 private networks but could instead develop specific products for a promising niche with complementing features driving new use cases.

3. Exploiting competitors’ Pricing and Marketing procedures. Startups who challenge these procedures may benefit from a slower competitive response, as competitors may stick to their traditional policies. In our example, the startup would come up with innovative business and/or pricing models for the niche that they have identified.

4. Exploiting competitors’ compatible complementary products. The startup may challenge their dominant position by introducing a superior product which is not backward compatible with the installed base. The big incumbent may choose not to respond especially if the superior product could cannibalize its installed base. In our example, this could be the case with private 5G in some countries. The big guys have started to respond with their own products, but it has at least given a timing advantage to some of the nimblest startups.

5. Exploiting competitors’ interdependent activities. They have built over the years a complex architecture for their business model. If the judo strategist attacks one of the elements of the business model, the competitor may decide not to respond.

6. Exploiting competitors’ sunk commitments. Non-recoverable investments are not flexible to new usages. Once the assets are deployed, the most viable solution is to commit to the market. An example would be a factory dedicated to a certain production type.

 After playing your aggressive judo moves leveraging your big competitors’ rigidities, you must quickly build your own moats, to prevent retaliation.

Ask yourself these questions:

• What is a good moat? It can be Intellectual Property, branding, higher switching costs, etc.

• How do you use your moats efficiently? How do you benefit the most from your competition’s inertia? Is it their corporate immune system which reacts against the innovation that you offer to the market? Is it their business model which is not agile enough?

In summary, the “entrepreneurial judo strategy” does not guarantee success, but it should always have a positive effect on the startup/scaleup’s performance. Even if it is only delaying the competitive response, it may well make the difference between success and failure for a nimble and ambitious new entrant.

Let’s aim for the entrepreneurial judo gold medal!

Thank you

Philippe

P.S.1. You may take the “From Tech To Growth” self-assessment scorecard. It is free, it only takes two minutes. It offers some reflective questions on the 9 steps and provides some customized tips based on your score.

P.S.2. Whenever you are ready, you can take a short, complementary appointment with me to discuss your business growth issues at hand. Go to the “From Tech To Growth” Recognition Call.

Philippe Poggianti, CEO, Poggianti Insights

[email protected]

+33-6-6404-3802