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Ideas are the Only Currency in the New Economy

How David Beats Goliath – Break the Rules to Succeed

May 17th, 2011 · No Comments · Ideas

Big Ideas:

  • You can’t win against bigger or more skilled competitors if you follow the same rules. Create your own rules to succeed.
  • The underdog has to outwork the competition in unexpected ways.

Malcolm Gladwell has a great article in The New Yorker on how underdogs can triumph against more skilled opponents. (Thanks to Karol Gadja for the link.) There are many great military and sports examples of how unconventional strategies and outworking your competition are the only ways to succeed.

When an underdog fought like David, he usually won. But most of the time underdogs didn’t fight like David. Of the two hundred and two lopsided conflicts in Arreguín-Toft’s database, the underdog chose to go toe to toe with Goliath the conventional way a hundred and fifty-two times—and lost a hundred and nineteen times

Insurgents work harder than Goliath. But their other advantage is that they will do what is “socially horrifying”—they will challenge the conventions about how battles are supposed to be fought.

This type of strategy is at the heart of all business model innovation. As the old saying goes, “you can’t out Amazon, Amazon.” If you want to compete against established players you need to create new rules that favor your style of company.

  • Selling T-shirts is a commodity business. turned it into a monthly design contest where customers vote on the best designs.
  • Apple doesn’t compete on price and features with other computer companies. It sells premium priced, beautiful computers that work better because they monopolize the hardware and software.
  • Installed software is expensive to buy and maintain. SaaS (Software as a Service) applications turn those purchases into a monthly subscription where data is always backed up and the software is always current.
  • Discount European airlines can make more money from selling hotels, rental cars and upsells than they can from the flight itself. That is how they can give the flights away for next to free.
  • Starbucks has a limited food selection that is shipped out of a central location. Great local cafes bake fresh pastries right on the premises.

Action Items

  • What can you do to change how your industry works?
  • Could you give away your main product in order to upsell other services?
  • What unique skill or knowledge can you use to compete against larger companies?
  • What is the biggest bottleneck in your industry? How can you completely bypass that bottleneck?
  • Instead of selling services sporadically, can you charge a monthly subscription for an ongoing solution?

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