A bold and brilliant Saudi Arabia pulled off one of the biggest shocks in World Cup history as they came from behind to stun two-time winners Argentina 2-1 last week. Ranked 51st in the world, Saudi Arabia could have been done and dusted in the first half as Messi opened the scoring with a penalty before Argentina had three goals ruled out for offside.
But the Green Falcons flipped the game on its head in a stunning ten-minute period after half-time, Saleh Al Shehri levelling and Salem Al Dawsari firing them ahead to spark pandemonium. Argentina came into the tournament among the favourites, on the back of a 36-game unbeaten run. They beat Mexico in their second game so look likely to keep alive their hopes of a first global triumph since 1986 and give Messi a fitting ending to what is very likely his World Cup swan-song, but what a victory for the underdogs!
Who saw this coming? Argentina are among the elite teams at Qatar, with a star-studded squad. In contrast, few saw Saudi Arabia making a dent at the tournament. Only Ghana of the 32 nations in attendance rank lower. Argentina are now arguably the victims of the biggest shock in World Cup history, up there with England’s 0-1 loss to the United States in 1950 and West Germany losing 1-2 to Algeria in 1982.
Then Japan produced the World Cup’s second huge upset in 24 hours, netting two late goals to stun Germany 2-1, Asano’s late winner was sensational. The drummer buried within the knot of Japanese supporters was still thumping out his beat long after the final whistle. He had not stopped all afternoon and neither had the team he had travelled so far to see. This upset was caused by courage and persistence.
Having been second best to Germany for so long, Japan remained in the game on the back of some stout defending, some inspired goalkeeping and, it must be said, some errant German finishing. But as the game entered its final fifteen minutes, Japan sensed a waning of German industry, the four-time winners easing off the throttle, either deliberately or otherwise. And when they struck twice in eight minutes towards the end, this was an upset almost on the same scale as the Saudis had inflicted on Argentina the day before.
Then over the weekend, Morocco beat Belgium 2-0. It is only Morocco’s third-ever win at a World Cup and it comes against the second-ranked team in the world. Another upset for the underdog. All three results reminded me of David’s victory over Goliath, in the Old Testament. You know the story, David and Goliath confront each other, Goliath with his armour and shield, David with his staff and sling. David hurls a stone from his sling with all his might, and hits Goliath in the centre of his forehead. Goliath falls on his face to the ground, and David cuts off his head. Job done. Every bit an unexpected result as much as last week’s football!
This victory is held to be an anomaly. It is not. Davids win all the time. The political scientist Ivan Arreguín-Toft looked at every war fought in the past 200 years between strong and weak combatants. The Goliaths, he found, only won in 71.5% of the cases. That’s remarkable, especially when the result is in the context of Arreguín-Toft’s sample was in which one side was at least ten times as powerful in terms of armed might as its opponent – even in those lopsided contests the underdog won almost a third of the time.
What happened, Arreguín-Toft wondered, when the underdogs acknowledged their weakness and chose an unconventional strategy? He went back and re-analysed his data. In those cases, David’s winning percentage went from 28.5% to 63.6%. The lesson is this: when underdogs choose not to play by Goliath’s rules, they win.
I often use this story and Toft’s research as a source of inspiration to startup founders on how they can overcome the odds. Small businesses can defeat their large competitors by outmanoeuvring and out-imagining them. Entrepreneurs are perfectly positioned to operate as insurgents, because they’re more willing to take risks, challenge the conventions about how commercial battles are fought, and are generally more alert and agile.
Large companies expect to confront competitors. They build strongholds and assets anticipating of large-scale engagements. But, despite their size and strength, these companies are rarely prepared to confront nimble and fast-moving adversaries that refuse to challenge them on the market place dynamics they have prepared for.
David vs Goliath — Underdogs, misfits and art of battling giants is a great book by Malcolm Gladwell which captures some key thoughts for startup around the strategy and for underdogs to win, here are my takeaways from the book.
1. Don’t give up before entering the fight David the shepherd was confident of his own abilities because he had fought against more ferocious opponents like lions and bears trying to protect his sheep. In startups, you may encounter more naysayers than otherwise. Don’t let their views subdue your self-belief, their notion of opponent strengths and weaknesses will be very different from yours.
You know your capabilities and skills better than anyone else. Compare them objectively to those of the competition and size up your chances of success. Be realistic, but it’s better to try and fail than regret later for not having tried at all. Remember, you are a pioneer.
- Google search came after Yahoo. They have 83% market share, Yahoo’s 3%.
- The iPod launched many years after MP3 players and has sold 300m devices and currently has 78% of the portable music player market.
2. Never fight incumbents in areas they are strongest Goliath was tall at six foot nine inches, wore a helmet and body armour, carried a javelin, spear and sword to fight. David on the other hand was a shepherd boy who wore just his clothes and carried nothing except a stick and sling. Goliath was impossible to beat at close range in hand-to-hand combat due to his size and strength. David’s strength was speed, agility, and a super-fast sling.
Startup founders need to map their own core competencies. Never try to replicate your strongest competitor’s product/solution, you’re unlikely to beat their advantages (money, resources, customer access etc). Instead find your own core strength and make it your USP, making your opponent’s biggest strength also their biggest weakness and thus irrelevant to your offering.
- Google Docs didn’t compete with Microsoft Office in desktop application. Google Docs USP was no-software install, no maintenance, browser only usage.
- WhatsApp didn’t create a voice/video calling application to compete against Skype, it was messaging to replace SMS.
3. To win, change the rules of the game Feel free to change the rules of the game. David shocked Goliath by showing up with just a stick and sling. Before Goliath could reassess his opponent’s approach, David fired his slingshot to knock him down.
Startups shouldn’t look to play by the rules. Surprise the incumbents with better and more unique USPs. Pick a better, smarter, and faster approach to customer acquisition and make it one of your customers USPs. These models/processes aren’t easy to change for an incumbent. They are almost part of the company DNA, so a faster nimbler challenger has an a large company.
- Chromebooks didn’t have a local hard drive or storage. Instead, all the storage was on the cloud. This could bring down the price of a notebook drastically.
- Google gave away their office productivity suite for free when Microsoft was charging for MS Office; also Google Docs could be accessed anywhere anytime using any device as opposed to Microsoft’s PC installed solution.
4. Substitute power/strength with speed & agility Goliath was tall and powerful, but also slow to move. Whilst incumbents have more employees, money, and market share, they don’t have the speed and agility of a startup. Startups should release their MVP quickly, get rapid feedback and iterate on newer versions before corporates can react.
- Google launched Chrome browser updates faster than Internet Explorer and Firefox, and captured a huge market share – 66%. Microsoft replaced Internet Explorer with Edge (4% market share). Firefox has 3%, Safari has 20%.
- Amazon launched, tested, and iterated on AWS services faster than IBM, Microsoft and HP could respond. Today AWS has 60% market share, and quarterly revenues of $200Bn+
5. Focus on smaller wins before planning the big ones David brings down Goliath to his knees before beheading and killing him. Likewise, startups should focus on smaller wins against larger incumbents, so they feel vulnerable and weaker. This leads to panic, what is happening? In turn, this leads to mistakes which means more opportunities for startups to gain their customers. These wins boost morale of startup teams.
The value of an individual customer is greater for startups than for large corporations. Your business is important to me. The stores, restaurants, and other small businesses that we use are more in touch with our needs. The primary reason is that small businesses are able to feel their own pulse.
The pulse of a business is the stream of day-to-day events as they occur. In a small business, you feel all of these things as they happen. If a customer complains about something, or a competitor does something out of the ordinary, you notice. This high level of sensitivity is unique to small businesses. The pulse gives you a sixth sense and how to retain and win individual customers.
6. The competitor’s size is simply a false cover Don’t judge the might/strength of opponents by their size. Look deeper. Goliath’s size was simply a cover for his weakness. When Goliath sees David standing in the distance, he challenges David to come nearer to fight. But this was due to his weak eyesight as he couldn’t see afar.
Studying your larger competitors could reveal interesting vulnerabilities in their business model – customer acquisition strategy, marketing strategy etc. Don’t let their apparent advantages from scale be overwhelming, find their weaknesses and exploit them.
7. Being an underdog is a good thing Goliath dismissed David due to his size and didn’t take him seriously. Startups gain valuable time by being an underdog and flying under the radar, all while gaining valuable customer feedback. Incumbents don’t tend to take new challengers seriously because they don’t treat them with respect.
- Microsoft CEO Steve Balmer, famously dismissed Apple’s iPhone in 2007 when it launched because it lacked productivity software. Microsoft also dismissed Android’s popularity thinking it was simply patent infringed software. Microsoft discontinued their mobile phone in 2010.
- Microsoft, IBM, and HP dismissed Amazon AWS because it wasn’t as powerful as data centre servers. They were complacent and didn’t seek to understand cloud advantages at scale.
8. Focus Giant companies suffer when they lose touch with the granularity of their business. Often, they make compromises, thinking customers won’t swap to a new, smaller operator. Often, they’re not close enough to their customer. Some distant manager adjusts a few numbers on a spreadsheet.
This complacency is the biggest opportunity for startups. The path to success is speaking to as many customers as possible, pitching potential solutions, collecting feedback, and relentlessly iterating the product until it is right. Your customers are the ones who are going to back your idea – so listen and learn, and you will start generating better solutions. As Seth Godin says It’s easier to make products and services for the customers you seek to serve than it is to find customers for your products and services.
Start building a loyal group of early adopters that love your product so that they tell other people about it. This was a strategy Monzo executed, with almost no marketing budget, taking them from being a plucky startup to a legitimate challenger to the big banks. Swarms of start-ups serve a Darwinian purpose: their experiments enable the ‘fittest’ new products and technologies to emerge.
The battle between every startup and the incumbents comes down to whether the startup gets distribution before the incumbent gets innovation. The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow. As Mark Twain said, it’s not the size of the dog in the fight, it’s the size of the fight in the dog.