Starting a new business comes with a whole host of disadvantages against established competitors. You don’t have the money, the employees, the contacts, the clients, the volume discounts, and so on. At times this may seem overwhelming, yet such barriers haven’t stopped small companies from becoming the next big giants by reshaping industries before existing players know what’s hit them.

Just like in a living being, size has a major say in what a company’s strengths and weaknesses are. Being aware of this property when developing a business will allow you to tap into your advantages rather than fighting against the reality of your company’s mass (big or small). If you’re just starting up, here’s why the cards aren’t all stacked against you:

1) You’re fast and nimble.

A large company is a cruise ship travelling forward with tremendous momentum behind it. Attempting to turn is a difficult and long process requiring the shifting of thousands of tonnes. An ambitious well-driven startup is on the other hand more of a motorboat (or jetski if you’re really small!). Easily tipped over by the ocean, but with the power of being able to travel at tremendous speeds and turn practically on a dime.

Large companies are rife with bureaucracy and politics, the natural result of organizing thousands of people into working together. Authority is distributed not only vertically through a chain of command, but also horizontally between different interacting departments. Decisions at all levels require input and approval by multiple people and must survive through both the bureaucracy and politics. Something as simple as purchasing a piece of required software from an unknown vendor could be held up by legal or IT for months, if not stopped altogether. Likewise changing directions on a product or company strategy will involve complex risk analysis, in-depth business plans, and a long time.

As a startup there is often very little stopping you from “just doing it”.

2) You aren’t locked into a dated product supporting millions of users.

A large company’s established customer base is a major asset that it can’t afford to lose. This means supporting all previous products that still have any significant amount of users, a problem that is especially difficult with technology based services. Startups have nothing to lose because they have nothing, yet they have all the freedom of learning from mistakes and shortcomings in existing products.

Microsoft is a terrific example of this problem. The company’s last quarter revenue came to almost $11 billion, but this gigantic size is a major thorn in the improvement of products like Hotmail. As I wrote in an earlier post, Google’s GMail was able to sweep in with a brilliant and innovative webmail service due to not having any prior architecture to update. The company has been able to plan all these features from the start, and then code them in right the first time when adding this functionality is cheap. On the other hand, as this interview with a Microsoft engineer discusses, making even minor changes to Hotmail is a complex task due to the sheer size of platform. I really doubt that Microsoft hadn’t previously thought of the features that GMail now has, but implementing them must have been a daunting and difficult to justify task.

3) You don’t have to hold a million meetings.

Meetings are of course necessary, but they are expensive in a number of ways. When you’re in a meeting you aren’t so much working as making decisions for future work. Thus every person that is sitting in that room is not producing output. That’s not the worst part though. Meetings are really a symptom stemming from the decision making process in point #1, and the more frequent and larger they are, the more people that influence the fate, shape, and timing of an idea. In the worst case you have leadership by committee, which will destroy or dilute innovation into mediocrity in order to appease all involved.

Startups have much fewer people to have meetings with and much fewer formal obligations in the decision making process. This results in fewer sanity checks, but by trading-in this security a startup gains a great speed advantage in both making and implementing decisions.

4) Flexible working environment.

Flexibility in a startup channels its way from a quickly evolving business plan right down to the startup environment itself. There’s greater opportunity for fostering exceptionally loyal and strong teams, and providing the kind of working conditions to allow them to succeed. I’ve seen this happen and it’s really amazing to see people caring so much about the company itself. There’s a major psychological impact of not being employee #5343.

A large company has far more people to manage and collaboration has to occur across it, not just within individual departments. Politics become a major issue and inevitably harm some of the relations between coworkers. It’s tougher to see one’s own work in the results of the company as a whole. Then there’s the tendency to pack as many people as possible into cubicles…

In all these points large corporations aren’t completely helpless. Thanks to management that deeply understand the advantages of speed and flexiblity into today’s environment, some companies like Google will give startups a run for their money even in areas that startups should have the upper hand. Luckily for us little guys, the above advantages do hold in general so rather than trying to emulate the disfunctions of large corporations with none of their resources, startups should be exploiting the weaknesses of their large competitors as much as they can.

Have you come up with advantages that I missed? Be sure to comment!

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This entry was posted on Monday, June 19th, 2006 at 7:09 am and is filed under Business, Entrepreneurship, Startups. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.