When David becomes Goliath...
(What happens when the upstart grew so fast and so big that they become the giant.)
We all know the story. Little David took down giant Goliath with a well-placed sling shot between the eyes, cut off Goliath’s head and a legend was born. Now, whenever a weaker, smaller but more nimble person or organisation defeats a stronger, bigger but slower opponent, the narrative will quickly return to this epic battle.
Needless to say, we all love the underdogs. We all celebrate the victories of the little guys. But, what happens when the little guy eventually becomes the big guy? What happens when the underdog is now the big bad wolf trying to gobble up everything?
This question came about while I was having a drink with a fellow public policy wonk a couple of weeks ago. We have both spend time in our respective governments devising policies and enforcing regulations. We then ended up as in-house lobbyists for separate tech companies. We eventually left after close to a decade in our respective in-house jobs to strike out as independent advisors to tech startups struggling with public policy challenges. Funny thing was the Davids we joined when we first become lobbyists years ago actually grew to become Goliaths when we left. And when we went independent, we also both advised several upstarts, which very quickly grew to become the almost-monopolies that everyone now seem to loathe… Over a vodka martini (for me) and a whiskey on the rocks (for him), we both went, “What the F$&@ have we done?”
When we looked back, we found that all the stories unfolded the same way. Along came a small team or passionate, idealistic and wickedly smart people who have come up with a brilliant idea to change the market order. They have spotted the market opportunities presented by lazy, slow-moving, arrogant incumbents which have grown fat and possibly blind with monopolistic profits. These Davids identified the pain points suffered by the customers, came up with products that remove or reduce these pain points and basically “floated like butterflies” and “stung like bees”. Only problem — and that’s where my buddy and I come in — the law was usually not in their favour. And it was our job to figure out a way to change public opinions and pressure law makers to bend to our wills.
And bent they did! Our clients were changing the world! They were disrupting the evil Goliaths. They were solving a real world pain point. They were giving the little guys a level playing field. They were giving everyone the opportunity to connect, share their life, find anything, trade everything, pay and be paid, drive, ride, fly, live like a local, work anywhere, anytime… well, you get the picture. This was the future. And if you are not with these little Davids, you are against them.
As the regulatory hurdles were being removed, these Davids we were advising grew, and grew. My buddy and I have both advised several startups over the years which all started as the Davids that everyone loved. They seemingly came out of nowhere, took on the impossible challenge of toppling the mighty Goliaths in transport, hospitality, payments, retail and, well, basically every industrial sector there is! But, in a few short years, all these little guys we were advising became the giant incumbents. David is suddenly Goliath?! And guess what, they are now hated by their own customers. Their partners are up in arms. Even the incumbents, hitherto lumbering Goliaths, were suddenly back in favour and gleefully pointing their fingers at our clients for behaving like monopolies. What have changed? What could they have done differently? Is this outcome inevitable as a startup scale and become the dominant player in the market they are trying to address?
These were the questions my friend and I were struggling with that evening. We still believe in the power of technological advances and business model innovations to bring positive change to the world. We still think the little Davids are the way of the future as new Davids continue to come along and disrupt the existing order. But, we need to figure out a way forward for all the aspiring Davids which will eventually become Goliaths if they are not careful. And after many martinis and whiskeys, we think it all boils down to 3 simple things all Davids might want to keep in mind as they scale:
- Stop drinking your own Kool-Aid.
As we are also angel investors, my buddy and I both agree that when we evaluate a startup that comes to pitch us for money, the №1 thing we look for is a strong and cohesive team. And we almost always find the power-packed team when there is a group of strong, charismatic and visionary co-founders leading the startup. These founders bring to the startup a burning desire to bring positive changes to the world. These founders will also make sure that the employees, partners, vendors and customers they bring on board at the earlier stages of the startup are true believers. The visionary founders and the true believers together create the culture that will define the startup. In some startups we have worked with, they almost felt like cults.
But, the problem with being in a cult is that you become blind to anything which does not align with your beliefs. So, naysayers are discouraged from speaking up or simply pushed out of the way. Slowly but surely, everyone who works in the startup will only believe in whatever they believed in and would not listen to anything else. If you find yourself running a company where everyone agrees with you or you find yourself working in one where everyone agrees with the boss, take a second to step out of that bubble, and do a reality check. That is why when we are investing in startups, we always look for not just the actual team running the startup, we also look at the advisors they have assembled. Hopefully, when the startup founders and their teams become too intoxicated with their own Kool-aids, the advisors can step in and be the adults in the room.
But, how would you know you have gone too far with believing in your own vision? For me, the simple test is your users are pissed off with you and/or your company. With social media, there are plenty of ways for a company to get a real sense of how your community feels about your company and your product. Seek out the naysayers, the critics in the media, the investors giving you the silent treatment, the angry users, the unhappy customers or even the employees who have quit or are about to do so. Hear them out. That is always the best reality check. And this reality check is what will keep the Davids always honest, always humble and always nimble. The alternative is that you buy into whatever b.s. you have been peddling to the outside world, letting your early success get to your head and the next thing you know, you would have turned into the lumbering Goliath you have just toppled a while ago.
2. Grow big, but think small.
My buddy recounted to me a client that he has advised for a few years in his home country. When they first made their entry into that market, they were a small player in a market with many big players — both domestic and foreign. As the upstart and challenger, they came up with many innovative solutions that customers have been dying for. Amazingly, for a rather conservative market, it embraced my buddy’s client like it was one of their own. Very quickly, the client expanded their business across the country, added plenty of headcounts, branch offices and a lot more product offerings. However, along the way, layers of bureaucracy were added to that local subsidiary. The in-country CEO, who was previously very easily accessible, now have an entourage of staffers that would block calls and screen requests for meetings. My buddy got less and less face-time with the guy and eventually, not at all.
In a sense, this kind of corporate development is inevitable. However, staying close to the ground or at the frontline is critical to staying honest. One of the most valuable lesson I have ever learnt was at Louis Vuitton. When I was still there, the CEO was Yves Carcelle. Yves made all LV executives spend time in our stores selling LV products on a regular basis. When I first joined, I think I must have spend my first 2 months learning how to sell at our Paris, Hong Kong, Singapore and Shanghai stores. I even spent some time at our factories in France. The other thing which left an indelible mark in me was how Yves would personally attend to every single store-opening around the world. I think during my stint in LV, the only 1 time I have witnessed Yves missing a store-opening was when 2 store managers from across 2 different continents failed to coordinate their launch parties properly. As a result, Yves could not fly from one store opening to the other one in time. Even then, the man actually called in to apologise to the team that he was missing out on the opening.
When we asked Yves why he put himself through such a punishing routine of trying to attend every single store opening, he gave a very simple but poignant answer, “This keeps us honest. This reminds us that every single store matters. More importantly, this tells our loyal customers in every city that they matter.”
Another valuable lesson I learnt came from my time in the Singapore Police Force. I have gone through the senior officers’ training and held the rank of Assistant Superintendent of Police. When I am deployed for any operation, I was usually in command of a sector in our area of operation. That meant I would have many officers under my command and a fairly big geographical area to cover. Before deployment, we would work on the operations plans. I would like to think that we have pretty solid plans but when we deployed and I started walking the grounds, I would find out a lot of things which were not right about the plans. We would then have to make changes as we learnt about the things that we did not anticipate when we were planning.
The other thing I got out of walking the grounds is that the experience kept me honest. I now know what my officers are going through while they were deployed for the various roles in our area of operations. I could see for myself that a particular post offered no shelter from the elements. The officers at the post were at the mercy of our blazing sun and our torrential downpours which happened pretty regularly. So, we have to tweak our plans to make lives just that bit more bearable for the affected officers.
When you go down to the ground, you get to see things at a more micro-level — keeping it small — and then see how that might fit into the bigger picture. If I have not seen how my officers were absolutely wilting under the blazing sun and continued to insist that they stood guards at the position I have planned behind a desk, it would be just a matter of time before they collapsed from heat exhaustion or they would try to find somewhere shady to hide. What good is that for my operation?
What we have observed from our experience advising rapidly scaling startups is that almost all of them would get lost in the big picture discussions and lose sight of what everything meant to the individual user, customer, partner, vendor and other important stakeholders who collectively make the startup a success. And that is why we think growing big while thinking small is so critical to avoid the pitfalls of scaling.
3. Don’t forget your Users (and they may not be your paying customers)
We are now pretty well-conditioned to the reality that we are the PRODUCT that is being sold by the many free platforms that we use online. Be that as it may, if your startup has a business model where users get to use your platform for free but they are served up targeted ads based on what they do on your platform, more power to you. We are not here to argue with you whether that is ethical, sustainable in the long run, etc. or not. You are running a business afterall and you must figure out some ways to provide returns to your investors.
However, my buddy and I also think that there are companies which have probably forgotten that without users, they would not have a captive audience to sell to their fee-paying advertisers/customers. It’s probably early-days yet whether any or all of these platforms will go the ways of MySpace, Friendster or SimCity. But, online tastes, habits and behaviours do change — and they change at a very fast pace. That is why we think that all platforms, big or small, must not forget the users whose activities and the data they generate are critical to the survival of the platforms. There is a breaking point where users would just go #delete(whatever) and that might be the start of the end for the Davids who have become Goliaths.
By now, my buddy and I already had one drink too many. We still think that helping the Davids to go up against the Goliaths is something we will continue to do for the foreseeable future. Technological and business model innovations over the last 20–30 years have come faster and faster. And for the most part, all our lives have improved (just think about all the crazy IDD charges we used to have to pay to stay connected to our overseas friends and business contacts. You really think that is a good thing?) Hopefully, our musings over a few drinks have helped all the Davids out there who aspire to topple the Goliaths from ending up being one themselves.