Seems rather unconvincing to frame your article on "small fish" eating "big fish" with a story about big fish IBM vs the small fish of DEC and Sun. IBM currently has (according to Google) a market capitalisation of 160 billion dollars; DEC and Sun don't exist any more.
I think now companies are more conscious about the innovator dilemma and they can acquire innovators before they grow and integrate or kill them into their ecosystem.
Although the innovator dilemma is real, company profits came also from support contracts, so acquiring a cheaper more innovative product will also include a big support contract.
Survivor Bias? Confirmation Bias? Wilful ignorance of the 'acqui-hire'? These and more, just take your pick.
I also like how smartphone OSes are implied to be 'small fish', when both major OSes were released by giant thunder-lizard companies, both with far more 'household name' power than IBM.
This post seems like a restatement of "The Innovator's Dilemma"[1] by
Clayton Christensen.
A new product that serves a market that is initially small but growing is ignored by the established company. The established company is conditioned to focus on their current customers' needs instead of imagining that future customers of a product they don't currently make could be a much bigger market.
A Stanford prof like Mark Leslie would presumably be well-read and therefore be aware of Clayton Christensen's popular book. He should explicitly state where his thesis differs from, or is more refined than, The Innovator's Dilemma.
Great stuff by Leslie. He is also the author of Sales Learning Curve, a framework to figure out when to ramp up your sales force.
Likewise, technology companies shouldn't expect to sell their 1.0 product without undergoing a learning curve around the needed feature set, the competitive response, the right type of channel and sales rep, optimal pricing, etc. And yet, nearly every business plan I have seen shifts gears directly from Development to Sales, staffed by a growing number of experienced sales reps charged to sell their regular quota of product.
The consequence of skipping the Sales Learning Curve in a business plan is all too common: the company fails to meet the plan, sales reps are fired, eventually the VP Sales is fired, and the company has to raise a highly dilutive down round of capital to stay in business.
Leslie's prescription for success and capital efficiency is a plan that includes the Sales Learning Curve. Accept that until we're out there selling, we can't know what we don't know about the selling process. The goal at this point is to maximize runway, since you can't rush science. As my erudite partner and Harvard Business School Professor Felda Hardymon likes to instruct, "run the business like a one story whorehouse" (with no fucking overhead). Hire only two or three creative, guerilla-style reps and a VP who knows how to experiment with multiple channels.
It may take 4, 7, or 10 quarters to climb the curve. Only then, when your sales force is a profit center (with two quarters where contribution exceeds twice the sales costs) is it time to flick the switch. At this point, raise lots of capital and hire as many talented reps as you can possibly find! This kind of prescriptive framework for clearly distinguishing the phases of a company is so much more actionable than the wishy-washy approach of hesitantly adding more and more sales reps over time.
Big fish are almost always eaten by small fish. On the other hand, almost all small fish fail. It's the rare exception among small fish that bests a big fish. Stated correctly it sounds unremarkable because it is unremarkable. So much for "Leslie's Law".
His DEC/IBM comparison shows that he somehow stopped reading the tech press around 1990. Intel's decomposed platform ate them all and opened the door to Linux and open source. Intel still dominates servers, but on the client side has been bested by the system on a chip cpu designs licensed by the mobile vendors. The two big client OSs are of course rooted in open source (iOS is from OSX is from NextStep is from Mach/BSD, and of course Android is Linux).
EDIT: Lawtonfogle is absolutely right, so I removed the word "completely" and left "unremarkable". Good point. Also I think most small fish die on their own. Usually because they build the wrong product.
While it is far less remarkable the way you put it, I wouldn't call it completely unremarkable because it still is remarkable that big fish eat big fish so rarely.
When they came out, yeah, Android and iOS were tiny. iOS couldn't even run third-party apps for the first 6 months, and lacked basic features like cut & paste for the first couple years. Android had a clunky UI. Both of them faced the problem of "What can you possibly do on a 4-inch screen with a tiny on-screen keyboard?"
I think the article was intended to be about company/firm size.
Calling Google or Apple small is kinda wrong ;-)
But also, if you interpret it as technology, then it's still pretty wrong to describe the original smartphones as small or simple -- they're not the sort of thing you could slap together and make work. The partnerships and supply chains and software and scale necessary to get smart phones working "well enough" would have been extremely difficult for a small player to pull off.
For Android at least, it holds. Android was a 6-person startup when it was acquired by Google.
The point, though, isn't the size of the company that sponsors the product or even the size of the team involved in the product itself. It's the product's power level relative to incumbents in the space. When Android and iOS came out, they were both significantly less powerful than the PCs and laptops that were previously used for general-purpose computation. But they had the useful attribute of being able to fit into your pocket. When the platforms came out, mainstream PC vendors didn't even view them as competition, because you obviously cannot do the same things on a phone that you can on a laptop. Many mainstream PC vendors still don't view them as competition. But with new input methods, changing social patterns, and increased hardware power, phones are being used for more and more things that you would previously have had to stick a laptop in a car for. Think of FedEx delivery computers vs. Uber or Instacart.
Essentially what you're saying in this post is that new products emerge over time and cannibalize the market for old products. Not exactly an earth-shattering observation, nor one that's unique to the past 50 (or 500) years. Which is probably why it's (hopefully) not the observation Leslie was attaching his name to...
> Android was a 6-person startup when it was acquired by Google.
So a big fish ate a small fish?
Also, Android wasn't successful because it was small. Android was successful because it was bought by a big company that could use its size and capital to build the brands and partnerships necessary to succeed in the space.
Finally, msartphone provides didn't initially follow the advice at the end of the article. Smartphones were definitely serving the high end of the market for a long time.
In other news PC sales fell off a cliff in the last quarter.
I think most PC vendors totally get that smartphones are direct competition. What they don't get is what to do about it - which is understandable, because that problem probably doesn't have a solution. ("Better PCs" or "PCs that are more like tablets" are clearly not the answer. Apple solves the problem with status, branding, a complete product ecosystem, and frostings of technological sugar. The generic PC industry doesn't have those options.)
But this underlines the point - you can't compete by producing another version of current technology. You can only do it by simplifying, packaging, commodifying, and finding new markets.
This doesn't always work if the markets aren't really there (see also: Apple Watch). The challenge is to find a niche that has real customer demand, not produce a clever project in search of a market - which is probably the main startup failure mode.
Eh, I think it's a matter of perspective. Parents don't care about the millions of sperms that died on the way to fertilize an egg. They only care about the one that made it. You're thinking about it from the perspective of the sperm. I think the authors perspective was from that of the parents.
> Big fish are almost always eaten by small fish. On the other hand, almost all small fish fail.
I think you are missing the point. This is not a story about all the small fish out there. This is a story about how the big fish die. And I think the author got it right.
Maybe I'm not thinking about it long or hard enough, but this article just seems kind of wrong.
Acquisition events are way more common than small-company-eats-big-company events. It's literally logically impossible for small fish to always eat big fish, because there would then never be any big fish to start with, all fish would work out to the same size +/- one fish.
[EDIT] - After reading some more of the article it's just the title that is linkbaity/exaggerated... I made too cursory an evaluation
33 comments
[ 2.2 ms ] story [ 78.9 ms ] threadI think now companies are more conscious about the innovator dilemma and they can acquire innovators before they grow and integrate or kill them into their ecosystem.
Although the innovator dilemma is real, company profits came also from support contracts, so acquiring a cheaper more innovative product will also include a big support contract.
I also like how smartphone OSes are implied to be 'small fish', when both major OSes were released by giant thunder-lizard companies, both with far more 'household name' power than IBM.
A new product that serves a market that is initially small but growing is ignored by the established company. The established company is conditioned to focus on their current customers' needs instead of imagining that future customers of a product they don't currently make could be a much bigger market.
A Stanford prof like Mark Leslie would presumably be well-read and therefore be aware of Clayton Christensen's popular book. He should explicitly state where his thesis differs from, or is more refined than, The Innovator's Dilemma.
[1]https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma
Likewise, technology companies shouldn't expect to sell their 1.0 product without undergoing a learning curve around the needed feature set, the competitive response, the right type of channel and sales rep, optimal pricing, etc. And yet, nearly every business plan I have seen shifts gears directly from Development to Sales, staffed by a growing number of experienced sales reps charged to sell their regular quota of product.
The consequence of skipping the Sales Learning Curve in a business plan is all too common: the company fails to meet the plan, sales reps are fired, eventually the VP Sales is fired, and the company has to raise a highly dilutive down round of capital to stay in business.
Leslie's prescription for success and capital efficiency is a plan that includes the Sales Learning Curve. Accept that until we're out there selling, we can't know what we don't know about the selling process. The goal at this point is to maximize runway, since you can't rush science. As my erudite partner and Harvard Business School Professor Felda Hardymon likes to instruct, "run the business like a one story whorehouse" (with no fucking overhead). Hire only two or three creative, guerilla-style reps and a VP who knows how to experiment with multiple channels.
It may take 4, 7, or 10 quarters to climb the curve. Only then, when your sales force is a profit center (with two quarters where contribution exceeds twice the sales costs) is it time to flick the switch. At this point, raise lots of capital and hire as many talented reps as you can possibly find! This kind of prescriptive framework for clearly distinguishing the phases of a company is so much more actionable than the wishy-washy approach of hesitantly adding more and more sales reps over time.
http://whohastimeforthis.blogspot.in/2005/09/best-startup-ad...
https://hbr.org/2006/07/the-sales-learning-curve
Big fish are almost always eaten by small fish. On the other hand, almost all small fish fail. It's the rare exception among small fish that bests a big fish. Stated correctly it sounds unremarkable because it is unremarkable. So much for "Leslie's Law".
His DEC/IBM comparison shows that he somehow stopped reading the tech press around 1990. Intel's decomposed platform ate them all and opened the door to Linux and open source. Intel still dominates servers, but on the client side has been bested by the system on a chip cpu designs licensed by the mobile vendors. The two big client OSs are of course rooted in open source (iOS is from OSX is from NextStep is from Mach/BSD, and of course Android is Linux).
EDIT: Lawtonfogle is absolutely right, so I removed the word "completely" and left "unremarkable". Good point. Also I think most small fish die on their own. Usually because they build the wrong product.
So to rephrase what you're saying: fish that get eaten are eaten by other fish. Not quite as interesting.
Calling Google or Apple small is kinda wrong ;-)
But also, if you interpret it as technology, then it's still pretty wrong to describe the original smartphones as small or simple -- they're not the sort of thing you could slap together and make work. The partnerships and supply chains and software and scale necessary to get smart phones working "well enough" would have been extremely difficult for a small player to pull off.
The point, though, isn't the size of the company that sponsors the product or even the size of the team involved in the product itself. It's the product's power level relative to incumbents in the space. When Android and iOS came out, they were both significantly less powerful than the PCs and laptops that were previously used for general-purpose computation. But they had the useful attribute of being able to fit into your pocket. When the platforms came out, mainstream PC vendors didn't even view them as competition, because you obviously cannot do the same things on a phone that you can on a laptop. Many mainstream PC vendors still don't view them as competition. But with new input methods, changing social patterns, and increased hardware power, phones are being used for more and more things that you would previously have had to stick a laptop in a car for. Think of FedEx delivery computers vs. Uber or Instacart.
So a big fish ate a small fish?
Also, Android wasn't successful because it was small. Android was successful because it was bought by a big company that could use its size and capital to build the brands and partnerships necessary to succeed in the space.
Finally, msartphone provides didn't initially follow the advice at the end of the article. Smartphones were definitely serving the high end of the market for a long time.
I think most PC vendors totally get that smartphones are direct competition. What they don't get is what to do about it - which is understandable, because that problem probably doesn't have a solution. ("Better PCs" or "PCs that are more like tablets" are clearly not the answer. Apple solves the problem with status, branding, a complete product ecosystem, and frostings of technological sugar. The generic PC industry doesn't have those options.)
But this underlines the point - you can't compete by producing another version of current technology. You can only do it by simplifying, packaging, commodifying, and finding new markets.
This doesn't always work if the markets aren't really there (see also: Apple Watch). The challenge is to find a niche that has real customer demand, not produce a clever project in search of a market - which is probably the main startup failure mode.
I think you are missing the point. This is not a story about all the small fish out there. This is a story about how the big fish die. And I think the author got it right.
Acquisition events are way more common than small-company-eats-big-company events. It's literally logically impossible for small fish to always eat big fish, because there would then never be any big fish to start with, all fish would work out to the same size +/- one fish.
[EDIT] - After reading some more of the article it's just the title that is linkbaity/exaggerated... I made too cursory an evaluation