6 Strategies for Startups to Compete with Tech Giants

As a member of an angel investor group, I was disappointed to see innovative start-ups failing to thrive or survive against aggressive tech giants, especially in the digital/AI era. I always encouraged them to proactively create strategies to anticipate these types of competitive threats, but I was never able to provide a roadmap to unlock the hidden potential of a company.

I recently found a good source of specific advice and recommendations in the new book Smart Rivals: How Innovative Companies Play Games That Tech Giants Can’t Win by Feng Zhu and Bonnie Yining Cao. The authors are experts in platform strategy, digital transformation, and innovation, tempered by time spent at Harvard Business School and working in new markets.

Here I will summarize their six most important strategies for building a competitive and sustainable path for innovative businesses in this digital era, despite the best efforts of the tech giants to seize every new opportunity they see and that you will discover thanks to your efforts:

1. Discover your strengths and develop them. Instead of trying to beat the tech giants at their own game, your goal must be to leverage a new technology, business model innovation, or emerging opportunity to redefine the business landscape. Avoid trying to become a jack of all trades and a master of none. Focus on a niche where you excel.

2. Put the customer at the center of your attention with a human approach. Leverage your intimate and timely customer insights through human interactions with key segments to counter the homogenization of big data. Leverage your unique channels and assets and innovate selectively to achieve greater customer centricity in the segments that truly matter to profit and image.

3. Find a platform, not a product opportunity. That could mean giving up some control, as Tesla did when it opened up its battery patents to become the industry’s standard EV platform. Digitization has increased the connectivity between products or services and their users, allowing new offerings to serve as conduits, thereby expanding opportunities for everyone.

4. Create your own open and dynamic ecosystem. Tech giants want to have it all, while new entrants can quickly leverage shared resources, increase innovation, and secure competitive advantage by managing networks of customers, suppliers, competitors, and partners. The challenge is finding partners who honestly complement your strengths.

5. Separate friends of tech giants from foes. Smart competitors regularly analyze giants to anticipate tensions and take action to arm themselves with patents, trademarks, and brand marketing. Take the necessary time to develop a strategy and protect uniqueness and develop innovations to prevent potential enemies from easily replicating your value proposition.

6. Rebuild from the crisis with new growth. Leverage existing competencies to forge a new trajectory for expansion rather than fighting every invasion to death. Build relationships with new partners to create new opportunities, such as adding a cloud business to your software product offering. Leverage acquisitions to expand your base.

Above all, avoid the trap of imitating the tech giants, assuming that all you need is to grab a small piece of their big pie. Focus on the harder but ultimately more effective goal of designing a unique strategy to amplify your competitive advantage, cultivate the inner mindset of being a smart competitor, and ultimately find a path that the tech giants have difficulty competing with.

This digital era and new global marketplace are full of opportunities. In my experience, smart young companies have long been considered the nemesis of even the best technology competitors using these and other strategies. I encourage you to start fearlessly pursuing them today.