How Can Start-Up Brands Beat Well-Known Brands?

I was recently asked two related questions: Why are new no-name brands able to topple big decades old brands in today's environment? How can a small start-up brand effectively challenge older established brands?

There are so many different ways to answer this, many related to technology, but some also related to legacy brands resting on their laurels. The advent of digital photography (invented by Kodak) killed Kodak's previously highly profitable business model that was driven by film purchase and developing. This disruption was amplified by the advent of smart phones with built-in cameras. 

Uber's online platform not only revolutionized and democratized the way people can get rides but it also made it much simpler to find, hail and pay for a ride. Plus, it provided for a record of one's paid automotive excursions. This is an innovative model that is scalable and has network effects. Also working in Uber's favor is the general low level of quality of taxi service compared to the service offered by Uber drivers driven by a constant customer feedback loop. 

Though backed by a lot of money from Pay Pal's founder Elon Musk, Tesla also has made significant inroads vis-a-vis legacy automobile brands. It has done this by sheer strong will and innovation. From its vigorously pursuing the concept of a luxury all electric vehicle to its sales and marketing innovations, Tesla has taken the risks to do things differently. 

The Internet also makes it easy for smaller companies to seem bigger than they are and compete effectively with larger, more well-known companies. And the customer targeting offered by Facebook and other social media platforms makes it more cost effective to go after highly targeted customers. 

CarMax, though supported with major funding, came into existence because legacy used car dealerships did not treat customers well. CarMax saw the opportunity to make automotive purchasing easier and more transparent. Again, it relied on an innovative business model and a transformative technology, a database that can be accessed from anywhere through the Internet. 

Airbnb is another example of a brand that has used the Internet as its platform to achieve scalability. But it also is driven off of the concept of shared resources. This same sharing of resources has worked for Zipcar and Zagster.

So, in summary, these examples point to the following sources of legacy brand disruption and displacement:

• An innovative business model
• A superior model of customer service delivery
• New superior technologies
• The Internet
• Software-driven solutions
• Scalability
• Network effects
• Resource sharing
• Product differentiation
• Highly targeted marketing

Brands and Networks

I have never heard anyone talk about brands in terms of networks, but it would be useful to do so. In economics and business model strategy, "network effects" refers to the added value to certain types of businesses when more people are networked into them. 4G LTE networks become more valuable to their customers with each customer that they add, especially when they offer free "friends and family" plans. Social media platforms also have positive network effects. Consider the increased value of LinkedIn, Facebook and other social media platforms as they add more people. The same goes for a variety of online commerce websites. Consider the power of network effects for eBay. And consider how important network effects are for Airbnb, Craigslist, Angie's List and others.

In what ways can brands benefit from network effects? Certainly in the way that I describe above, when the business proposition itself improves with more users. But here are some other networks to consider:

• A brand's communication/media networks. Are they creating greater brand awareness? Are they getting to people who will act as brand advocates? Are they connecting with people who are "network hubs" and who can substantially extend the brand's reach to a large number of others?
• A brand's distribution networks. Are they extending the brand into new markets or they limiting the brand's chances of success?  Are they creating additional visibility for the brand with key target markets? Are they proactively introducing the brand to new markets or are they reducing the brand's value by extracting too much profit without a commensurate increase in brand value?
• A brand's delivery networks. Brands and their products and services can be delivered in a variety of ways - in person, through software, over the telephone, over the Internet, through ATM machines, through other companies' products, through other companies' services, etc. Some of these networks have great reach, while others are more limited in their reach. Some get to key influencers. Others don't. 

Reaching one person who is well thought of, highly networked, and outspoken through multiple communication platforms to the right audiences will have a very large impact. Consider me, for example. If you want to get your message about brand strategy out, if you can get me to say something about it, I could do so through one of my two blogs reaching close to 50,000 marketing professionals, or through my Brand Aid book, available in many languages throughout the world. The book is available in hard cover, an eBook version and an audio version. To date, more than 20,000 hard copies have been sold to marketing professionals. It is used in dozens of business schools across the world, influencing thousands of future marketing managers. And, I am highly active on social media, with LinkedIn, Twitter, Facebook, Pinterest and other accounts. Finally, throw in dozens of speaking engagements and dozens of new clients each year, enabling thousands of other people to hear what I have to say.

Another thing to consider is that some networks are more appropriate for your brand than others. And some are more credible than others. Some have higher quality perceptions. Some target more upscale audiences. Some are faster than others. And some are better at reaching the target audiences in the most effective and efficient ways. 

Clearly, considering and managing what networks your brand is tapping into will have a big impact on its success. 

Creating a Sustainable Competitive Advantage

There are several concepts you must consider to create a sustainable competitive advantage for your business and your brand. Here are some of them:

• Dream big. 
• You must have deep insight into your customers' values, attitudes, hopes, aspirations, anxieties, fears, needs and desires.
• Perform deep market segmentation analysis. This should include need segmentation.
• Discover customers' frustrations and pain points, things they wish could work better. 
• Address all of those frustrations and pain points. 
• Challenge your category definitions and your business model assumptions. 
• Consider vertical and horizontal integration.
• Consider product/service bundling and unbundling. 
• Drive your business off of proprietary systems, technologies and processes.
• Find a way to make your business scalable. 
• Create a business model that benefits from network effects.
• Your business and brand must stand for something and live consistently by a carefully chosen set of values. 
• Link your sales and marketing processes and messages seamlessly.
• You must say "no" to revenue sources that are not in your bulls-eye. Otherwise, you will become distracted and be taken off the game that you are best suited to win.
• Actively engage with your customers on a regular basis, even before revenue streams occur.
• Constantly reinvent your business model, products and services. Throw out what doesn't work and keep what does. In this way, continue to evolve. Your competitors will not stand still. 
• Stay in the business flow. Stay close to your customers and your markets and your competitors.
• Form as many strategic partnerships as possible. Always try to create a win-win situation.
• Do not try to steal share from competitors. Rather, focus on creating enhanced value with your customers and in the industry. Expand the pie rather than trying to take someone else's slice of it.
• Become an expert and a thought leader. 
• Play your own game. Do not get sucked in to matching your competitors' every move. 
• Craft your brand's story. Make sure it is emotionally compelling and purchase motivating. 
• Find the big influencers in your industry. Befriend them. Learn from them. Influence them.
• Always be honest. Never lie about anything. If you lose your trustworthiness and integrity, you lose everything.
• Remember, your business will only do well if it focuses on helping its customers, employees and business partners. Organizations thrive because they are meeting real needs and helping others achieve their goals.