David vs Goliath… or a Story of How Start-ups Can Choose a Winning Strategy

david

By Fernanda Arreola and Pierre Daems

A start-up company entering any given industry may well find itself in competition with incumbent businesses that have powerful advantages in the form of operational experience and brand track record. What, then, can a start-up do to stand a chance of being an effective challenger to such giants? There is a well-known biblical precedent.

We may all know the story, but let’s take some time to go back into mythology. In ancient times, the Israelites were fighting against the Philistines but had a huge handicap: a gigantic and strong fighter called Goliath (according to the Book of Samuel, Goliath was 2.9 metres tall1). The Philistines were so confident of Goliath’s power that they challenged the Israelites to a one-on-one encounter. The winner of the fight would win the war.

Over 40 days, Goliath comes out between the lines and challenges the Israelites to send out a champion of their own. A poor young man named David finally accepts the challenge. David, concerned by starvation in his family, supposed that if he won, he would be able to change the destiny of his family. Once on the battlefield, he was offered several weapons, but he chose a simple one: a sling and five stones.

In his first move, he managed to launch a stone straight into Goliath’s forehead, which made him fall to the ground. David then seized the opportunity to take Goliath’s sword and cut off his head. He won the battle and Israelites won the war.

But why go back to mythology when talking about start-ups? We believe that this analogy can help many young entrepreneurs understand that resources, strength, and power are not the only weapons available to successfully launch a new company. And, as we will learn by looking at the Treacy/Wiersema framework, guess what … you can be a David, too!

It’s not about cutting off heads. It’s about understanding the underlying strategy of your competitors.

leadership value
Figure 1: Source: Treacy and Wiersema’s Framework2

The Treacy and Wiersema2 framework can help us to take David’s way to win the war against a powerful competitor when launching a new product or service. The Treacy/Wiersema perspective is simple. To delight our customers and “win the war”, we have the choice between three strategic approaches: operational excellence, product leadership, and customer intimacy.

Let’s begin by speaking about operational excellence, and for this there is no better example than Amazon3. This is the pillar of their success and the keystone of their strategy. What matters for them is the right product, in the right place, at the right price, at the right time. But, as a start-up, such efficiency seems unattainable, primarily because in the majority of cases there are still a lot of tests and learning4 and also because infrastructure is minimal. So, coming back to our analogy, it is as if we had wanted David to master a martial art in one day, with the knowledge and precision needed to defeat his opponent.

Second, we have product leadership. We recently visited the Apple store at Opera in Paris. It looks as if they give away products for free. Queues are enormous and customers come out with great smiles and a contagious feeling of satisfaction. Are they giving away phones? No, they are giving away something worth more than that: product leadership. Every customer that comes out of the store may have a slight idea of the cost of production of an iPhone (which is around $5005), but what they have in their hands is worth way more than that. It is worth a couple of thousand dollars of exclusivity, a couple hundred more for seamless interaction with their other devices, a couple extra from the latest camera features, a bit more for the best screen resolution, and a lot more just for the brand. All the value adds up differently depending on our perceptions but, in the end, it is the product leadership and the fact that we have the state-of-the-art guarantee of almost every single component that makes us feel like we are buying a little piece of heaven. And, yet again, if you are a start-up, you cannot dream that your POCs (proofs of concept) and prototypes, regardless of their advanced technology, could compete against that. So, coming back again to our analogy, it is as if we had wanted David to invent instantly a magic sword to defeat his opponent.

customers

So, dear start-up leaders who want to act like a David, there is, as you may have guessed, a last-case scenario that we have been able to explore through our research. That third strategic approach seems like an effective weapon to have a chance in this competitive battlefield. Through a review of interviews, research, consulting, and interaction with customers, we have come to see that there is this very secret source of magical power: customer intimacy. The concept is not necessarily new, as it is something that in the late 90s used to be called KYC6. But today, it’s not only about knowing, it’s not only about dragging, it’s not only about getting acquainted, but it’s developing an intimacy that allows you to perceive the little tweak, default, lack, problem, or addition that would change what your customer experiences from day to day. What did David know about Goliath? For 40 days, he observed and tried to understand everything Goliath could do and not do. It was not about strength, it was not about dexterity, it was not about resources. All he needed to identify was his weak point – one that no one had noticed before, but that would be impossible to defend. He looked at his opponent, he realised his fragility, and he pointed straight at it (let’s forget about cutting heads). For a start-up, developing an intimate understanding of the environment (customer experience, partner experience, competitors’ strengths and weaknesses, …) is key to “winning the war”.

Our research shows that big companies invest more and more in customer experience to develop this customer intimacy.

Our research shows that big companies invest more and more in customer experience to develop this customer intimacy. They nominate CXOs (chief experience officers) with large teams to listen to customers and improve the experience, they implement powerful experience management software platforms like Medallia to help in the identification of priorities, they develop change programmes to build a customer experience culture. All these efforts clearly demonstrate that it’s not easy for a big company to build this intimacy with customers.

customer lineA lot of start-ups, today, are customer-experience native, because they were launched to solve a “problem” experienced by customers. Moreover, the “prototyping” spirit naturally includes regular feedback from customers. It makes it easier to find the specific moments in the experience of a product/service, that will be unforgettable for customers, with a clear impact on recommendation and, finally, on financial results.

For a start-up, customer intimacy is not an option. It’s clearly the winning strategy to build success. The customer experience culture needs to be present from day one, and specific practices and tools to understand and design customer experience should be a priority for leaders. But as mentioned by Treacy and Wiersema, it is essential, even if you have to choose one of the three strategic approaches, to be good enough on the other two. It means that start-ups need to be good enough at operational excellence and product leadership, never forgetting, while growing, that customer intimacy needs to stay top of mind for all employees!

About the Authors

fernanda arreolaFernanda Arreola is the Dean of Faculty & Research at ISC Paris. She is also a Professor of Strategy, Innovation & Entrepreneurship and a researcher focusing on service innovation, governance, and social entrepreneurship. Fernanda has held numerous managerial posts and possesses a range of international academic and professional experience.

Pierre DaemsPierre Daems is CEO of Aube Conseil, a strategy and management consultancy based in Canada and France. Pierre is a certified expert in Customer Experience Management (CCXP) and co-founder of the CXPA (Customer Experience Professional Association) in Montreal and Paris. He contributes to making organisations more sustainable, helping them to develop a purpose that takes into consideration the experience of all stakeholders (“Human Experience”).

References:

  1. Goliath. n.d. Wikideck. https://wikideck.com/Goliath
  2. Value Disciplines: Customer Intimacy, Product Leadership and Operational Excellence. 23 October 2018. Business to you. https://www.business-to-you.com/value-disciplines-customer-intimacy/
  3. Operational Excellence Pillar – AWS Well-Architected Framework. 15 December 2022. Amazon. https://docs.aws.amazon.com/wellarchitected/latest/operational-excellence-pillar/welcome.html
  4. The Cost of Making an iPhone. Updated 27 December 2022. https://www.investopedia.com/financial-edge/0912/the-cost-of-making-an-iphone.aspx.
  5. Test and Learn: La stratégie des entreprises agiles. 9 September 2021. https://www.amazon.fr/Test-Learn-strat%C3%A9gie-entreprises-agiles/dp/2311625160
  6. Know You Customer in banking. n.d. Thales Group. https://www.thalesgroup.com/en/markets/digital-identity-and-security/banking-payment/issuance/id-verification/know-your-customer
  7. Treacy, M., & Wiersema, F. (2007). The discipline of market leaders: Choose your customers, narrow your focus, dominate your market. Hachette UK

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