Smart Non-Money

Spending money to compete toe-to-toe is dumb.

But this hasn’t stopped start-ups from doing just that.

Most start-ups are about as broke as college kids (and from the looks of their management team photos, may well be staffed with the same). They do need to spend money on marketing, but competing is foolish. For every face-off, someone loses face. Slugging it out with gorillas is fast suicide and shin-kicking many small competitors is the slow form.

In every market, you can outmaneuver competitors, even gorillas. By understanding the position of each competitor or how they approach buyers, you can compete without competing, which is more cost effective and more effective in general. SuSE Linux remains my worn-out example because it worked against the sitting gorilla.

Back when Linux was only starting to be seriously considered for mission-critical IT infrastructure, the U.S. market was owned by Red Hat and littered with also-rans, which included SuSE. Becoming the undisputed contender was our objective, and many things went into the process. One aspect though was understanding Red Hat’s communication plan and knowing who made IT decisions. At that time, CxOs were willing to use Linux for non-critical file and print servers, but little else. Yet Oracle, IBM and others SuSE partners were ramping up for a market revolution.

At that time, Red Hat was committing the classic marketing mistake of relying on what had made them successful in the past, namely talking to techies who took Linux into IT. In the typical IT hierarchy, techies had functional veto power over some IT decisions, but not the strategic ones. We decided if Red Hat wanted to talk to techies, we would romance CxOs by understanding their long-range strategic plans and articulating how Linux (especially SuSE Linux) could make their strategies succeed. While marketing did this, out PR team convinced the media that discussing anyone else aside from Red Hat and SuSE was a mistake and substantiated that notion.

The point of this example was that SuSE could have gone toe-to-toe with Red Hat, attempting to win the minds and hearts of techies everywhere. Instead we nurtured them with technical fodder while telling their bosses how SuSE would make business imperative strategic decisions possible. This did not guarantee sales, but it did guarantee two important things: SuSE would be on the short list and techies would have to justify why Red Hat was better than SuSE (and since CxOs knew that core Linux was nearly identical regardless of distribution, techies could not justify Red Hat).

positioning-grid-w350You can apply the same basic strategy to positioning within a market or even a segment. Odds are there exist a dozen different viable positions within your market, and that most of them are vacant. Competing for the hot spot means restricting your market share and dominance because your competitors will get some of that business. Finding a position that you can dominate with little or no competition, then growing tentacles into other vacant positions allow you to grow more quickly and dominate the market, eventually squeezing the life out of your competitors.

Exploit, dominate and expand.

To use a football analogy, if your team did nothing but run successful three-yard plays every time, they would win every game, gaining twelve yards per every four downs. Market dominance is the same game played on a non-linear field. Run a safe play, get market share every play, then do it again.

That strategy would make even Lombardi smile.


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