Doubtless you recall the story of David and Goliath, a tale of a contest where a smaller, weaker opponent takes on a much bigger, stronger competitor...
In an age where businesses need to be adaptive and nimble to survive and thrive, sometimes the individual entrepreneur can find ingenious ways to outperform the giant behemoth. It was very much the Virgin way to do this when Richard Branson challenged the slumbering giant that was British Airways in the 1980s. We can learn a lot from the David and Goliath story if we are also prepared to be adaptive and nimble in our approach as entrepreneurs.
Size is supposed to confer advantages of scale and efficiency, but in many cases size means slow and inefficient. Interviewing Tim Smit, serial entrepreneur and CEO of The Eden Project, he summed the issue of size up neatly:
"My role as a CEO is to shake things up, to make sure we don’t atrophy. As soon as an enterprise atrophies, as soon as something becomes a career path, you lose that sense of flux and excitement that makes the enterprise a great place to work."
Yet from my long experience of working in major corporations, there is a tendency for larger organisations to lose their adaptive and responsive behaviours that made them successful in the first place. In a competitive world, this offers business opportunities for smaller companies. What “David” sized businesses can we learn from, then?
Sticking it to the man
Bandcamp is sticking it to the man by offering its customers superior service and clear commercial advantages for the aspiring musician. As a musician on Bandcamp, you gain a whopping 85 per cent of the income from your music (90 per cent for revenue above $5k per annum), whereas your royalty on a £0.99 single can be absolutely nothing on the major platforms, depending on how many other places the purchaser has gone through to get your song.
The artist gets paid immediately when they have sold their music. In contrast I know some musicians who are still waiting for royalties from traditional music labels some 30 years later! As a result of offering these clear advantages to musicians, Bandcamp is growing rapidly. Amongst the artists that have rejected traditional music deals for Bandcamp are Amanda Palmer and Bedhed. Artists like Thom Yorke, Four Tet and Wolfmother all have their own accounts, alongside notable indie labels like Sub Pop, Ninja Tune and Fat Possum, who make music from notable acts like Tom Waits, The Black Keys and Spritualized.
The maximum number of people that can function together effectively in a tribe is somewhere between 100 and 150.
Bandcamp’s founder Ethan Diamond had the idea after becoming frustrated trying to buy an album from a local artist from their website about six years ago.
"After many emails, a couple of calls, and several weeks, I got an email from one of the band members with a link that left me with tracks titled something along the lines of 01masterfile.mp3."
He thought that there had to be a better way for any band to be able to sell their music directly to fans. This is pretty much the same frustration that led James Dyson to develop the Dyson dual cyclone vacuum cleaner, after his hoover "did not suck".
Keeping the customer satisfied
Cultured Llama is an entrepreneurial micro business, which publishes poetry, literature, cultural interest books and "curiosities". They approached me after noticing that I was experiencing difficulties in sourcing copies of my own books from Amazon Create Space who manufacture them. Create Space manufactures all its books in one US location and this adds considerable cost in terms of international postage costs and time delays, it can take several months to obtain books.
I’d written to Amazon four times in as many years asking them to simplify, by using a printer in the UK who would fulfill the order locally at local postage costs in less than three months. I was told that this was difficult due to the size and complexity of their operations. Like James Dyson, I became frustrated and posted a message on social media to see if there was another way.
There was! Cultured Llama work with a large but also nimble POD (Print On Demand) company. The partnership of David and Goliath enables me to get small runs of books that I need for events and personal use, whilst also preserving all the advantages of the larger sellers, as the books remain on Amazon and all major outlets. Both Amazon and the small enterprise prevail in this arrangement, but Cultured Llama also supports small entrepreneurial businesses that would otherwise be unable to trade effectively via Amazon.
Does size matter?
Large does not have to be cumbersome and slow. HP used principles derived from anthropology to maintain a small company ethos inside a large corporate structure. Anthropology suggests that the maximum number of people that can function together effectively in a tribe is somewhere between 100 and 150. Whenever a unit exceeds the magic number the idea is to subdivide the unit to preserve the benefits of thinking and acting small.
So size need not matter, but it’s often true that comfort breeds complacency in business. As soon as that happens, someone is likely to enter your market and find a better way to deliver your product or service to a demanding customer. All too often hunger, naivety and playfulness are driven out of corporate life with disastrous consequences for the health of the business. So, size does not matter, but agility does.