The Secret to Winning Against the Big Guys
Much has been said about how technology has leveled the playing field, letting small and unknown startups compete with the large, well-established companies. But, why is it that when every company has access to the same technologies, so often the smaller players come out on top?
Successful market newcomers all start with one thing in common, a winning bet on an architectural decision. Take Snowflake software for example. They bet on an architectural decision to leverage serverless technologies. Unlike larger, legacy players like Oracle, where you have to license and pay for more servers as you grow, Snowflake separates storage from computing and only charges for the compute power used. When you’re not using it, you’re not paying anything for it.
Snowflake’s architectural decision is a paradigm shift from traditional data processing where licenses are per server and growth requires more servers, whether it’s for storage or for computing power. Snowflake, won the bet and now competes head-to-head with the major data warehouse players like Oracle. Snowflake’s winning bet led their employee growth from a handful of employees a few years ago to now over two thousand employees. In fact, on the day Snowflake put out their IPO, they were valued at more than General Motors.
Just to be clear, building a new architecture is quite a different concept than adding new features. In the software space, it’s easy to get confused between architectural decisions and feature decisions. Architectural choices speak more to the foundation your product is built upon. For Snowflake, that is serverless technologies. While features are things that can be added to your product, such as Continuous Data Protection (CDP), that help protect data stored in Snowflake against errors and malicious acts.
Innovation is just an architectural decision to bet on new technology
Innovation is often made possible by bets made on new technology. Some years back, when Tesla was starting out, the market began heralding Tesla for its innovation in electric cars. Tesla took advantage of new battery technology which provided both range and power. Turns out Tesla’s bet on innovation paid off. The market is so impressed with Tesla’s next-generation in automobiles that, as I publish this post, Tesla’s valuation is over twenty times that of Ford.
All market superstars have bet on something and won. If you look at many recent technology innovations, they are often led by selecting the right architectural decision at the right time. And timing is critical. The challenge with being innovative is to be forward-looking with your decision and to time it with market forces and external factors, like third-party components, or regulatory issues. If the cloud infrastructure was not mature enough and failed to deliver, Snowflake would not have been successful, despite their bet on serverless technology. And, Tesla may very well have failed if Panasonic could not deliver quality batteries, an essential part of Tesla’s car.
It’s not easy being the big guy
So, for startups, this is all good news. Take advantage of advances in technology, make the right bet on new architecture to build your product or service, and watch as you outcompete the big guys. But what do you do if you’re one of the big guys?
The short answer is you have to reinvent yourself, which is not easy. For some companies, that means spinning off their own startup company, just as Amazon did with Amazon Web Services. Many others, however, are sold or end up dying a slow death.
Looking ahead, Tesla, who is leading the second generation of automobiles, will face its own challenge. Now, we are entering into the third generation — autonomous cars. Amazon recently purchased Zoox, the developer of robo-taxis and autonomous driving technologies. But, Tesla has some autonomous driving features you say?
Zoox made an architectural decision to build a platform that completely disrupts the way Tesla thinks about cars and driving. Zoox is designed for passengers, not drivers. Imagine a car with no driver’s seat, steering wheel, or gas pedal. If Zoox and autonomous driving becomes a reality in the near future and Tesla is not reinventing themselves today, they will already be behind.
Small players and startups that make the right bet on architectural decisions from the start have a good chance at winning against the more established players. The real challenge is that, once made, architectural decisions are locked in and near impossible to change, no matter how much money or resources are available. It’s key to note, however, that the architecture of today will change again. It’s important to be constantly re-evaluating architectural decisions as you may need to reinvent in order to stay on top, lest you be beaten by a newcomer.
