How startups can take up established players

While the first customer could help break the ice, innovation, networking, competitive pricing, and good service quality can help you beat competition

When Yedu Balehosur and Naresh Sadasivan founded Robust Designs, a software solutions company, in 1999, they found it paid to understand the need of their customers beforehand.

The duo strongly believed that it was only through innovative use of technology that they would be able to help their customers and make a mark for themselves in the competitive IT business. A CEO of a mid-sized hospital in Malaysia told Balehosur that she was unable to keep track of her business and that hindered in her strategic decision making. "The idea of a CEO dashboard (with key metrics, updated daily) was then born, that would continuously aggregate data from multiple systems and update key metrics on her dashboard every day," says Balehosur. This was the beginning of Robust Designs' product portfolio and the acquisition of their first customer.

It is a challenge for any entrepreneur to take on big and established players in the market but a multi-pronged strategy can help swim against the tide. Here are a few pointers that can help you tackle the competition:

Know your competition: It pays richly to research the competition. Sometimes you are taken unawares of what hits you when you enter the market unprepared. Make a list of big players that rule the market, their products and services that are doing well, and also those that are not so good. Tracking companies on a regular basis through the media can give you an insight into their strategies and plans for the future. Competition can also come from other startups vying for a piece of the pie and wooing customers in their own way.

"Competition comes from two ends for us - the big established players and the two-bit startups. We are always at the risk of getting sandwiched," says Shouvik Roy, founder-director at Brand Planet Consultants, a brand consulting firm. How does Roy deal with this? "We approach any new business with great zeal. We go back with real solutions for real problems - not contrived. Therefore, we have to constantly struggle to outthink the competition (small or big) on any given day. Now, that's a challenge that we're up to," he says.

Getting your first customer: A good rapport with your previous employer or the people you have been in touch with in the past can get you your first customer. If you are starting in a totally new domain, you may have to work hard in the beginning to make sales pitches to bag your first order. "Our first two customers signed up with us on the strength of the relationships we shared with them in our previous engagements," says Roy.

Mrutyunjay Mishra of JuxtConsult, an online research solutions consultancy, says he did not bother to poach into the customer base of his competitors. Instead, he focused on new customers who were entering India, looking to get their research work done. "Our first customers were those who were coming to India for the first time and did not know about India and Indian research companies," he says. "If you react to the market then you become better. If you react to your competition then you are dead," he adds.

Offering niche products and services: This has to be any startup's best bet. It is also its biggest challenge. Offering those products and services that either already exist or those in which the big players are in good position will not work. As an entrepreneur, you have to keep thinking of how you can get noticed by what you offer. Take, for instance, the market research segment. There were many such firms when JuxtConsult entered the market. The entrepreneurs behind the company thus had to carve a niche for themselves. They found that using the Internet as the medium for market research was one such area. Thus, it made a mark for itself in the already crowded segment.

Competitive pricing: It may sound clichéd, but as a startup you may have to put a competitive price tag to be able to take on the big players who can offer rebates at the drop of the hat. "Startups must price themselves competitively, not necessarily lower than competition/existing players," says Roy. "An 'entry pricing' with an upward revision clause may work in certain cases," he says. But it may get difficult to raise prices quickly, so it becomes important to think through the starting price tag. Balehosur of Robust Designs also believes that he does not want to lose a customer because of price constraints. "We, therefore, offer a variety of pricing and deployment models to make pricing a non-issue during the evaluation process," he adds.

Service Quality: No matter how good your product or service, if it annoys the customer, you have lost the game. Thus, as a startup, you can set new benchmarks for quality. It can make the big players jittery and also take note of you. This could be a great differentiating factor when it comes to competing against them. Here you can look into the shortcomings of the big companies and in turn fill in with your service.

Mishra believes that service quality and service satisfaction is always the function of expectations. So you create expectations and accordingly you make somebody satisfied

"If I know I can do something in two days, I commit five days to keep a buffer with me and then deliver in three or four days. You should set the expectations right at the beginning, keeping in mind your capabilities to deliver in the given time frame," he says.

Advertising and PR: When bootstrapping is the order of the day, it may be unthinkable to take on the big names on the advertising turf. But that does not mean that startups cannot reach out to new customers swiftly. Word of the mouth is the best strategy. One satisfied customer can rope in many more. Outsourcing work to smaller PR agencies that are themselves startups could also help. They will understand the need for publicity from a startup's point of view. Similarly, networking can also do wonders. This can be done either through participation in conferences and events, meeting people through channels such as TiE, or even social networking on the web. LinkedIn, Orkut, and Facebook have made it easier to spread the word.

Employee motivation: Startups can harp on the productivity of their employees by creating values such as hard work, punctuality, and customer service. While they may not be able to offer hefty pay packets, an inspiring work environment can make them get the most out of their employees. In big organizations most employees become a cog in a big wheel, while in the case of startups they can experiment with and come up with fresh ideas. Values such as integrity, hard work, and motivation should percolate from the level of the entrepreneur. This ought to go a long way in improving the productivity of employees.

Constant innovation: It is through constant innovation that a startup can retain customers and add more to its kitty. As an entrepreneur, it becomes part and parcel of your role to think out of the box and work upon improving your products and services. Applying for patents is another way of ensuring that your ideas do not get stolen. An innovative streak can also help attract good investors who are on the lookout for such startups. It is only through innovation that companies like Microsoft, Apple, and Google have reached the top of the technology ladder. "Innovative products and services are great things to have in the portfolio. But given the time and effort any new product/service takes to sell, it is better to bring them onto the forefront once the basic cash flows needs are taken care of," says Roy.

Grab a pie in big projects: It helps to keep an eye on the work that large corporations get done from outside agencies, and grab a part of that business. You may be surprised at how big the money is. It can also lead to big-ticket deals and a steady flow of projects. Take the case of advertising. Large organizations that are consumer-focused have huge advertising needs and thus hefty advertisement budgets. Instead of giving the whole of it to a big advertising agency, they prefer to opt for a number of smaller agencies. It makes good sense to grab such business.

-Sourced from DARE

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