Thursday, October 4, 2007

800lb Gorrillas Don't Care

NetFlix just posted their first ever decline in subscribers. They attributed this to Blockbuster -- the company some people thought they would put out of business.

A year ago Blockbuster responded to NetFlix's success with a similar program of their own, except that you could trade in DVD's at the store which meant more immediate turn-around time. It's a great way to leverage their advantage -- physical stores -- against a seemingly unstoppable business model.

And it worked. Or did it? Blockbuster reported an $82 million loss for the first half of 2007, attributing this to costs associated with the new plan. So they slowed NetFlix, but it's hardly a success.

Small business operators worry about this sort of thing, especially when evaluating ideas for new ventures. What if the 800lb gorrilla wakes up and decides to compete with you? They have zillions of dollars to throw at it, and they probably don't even have to make a profit. How can anyone compete with that?

Stop worrying. In my opinion, this should never enter your mind, and here's why:

First, I'm assuming that you have your own niche, your own market, your own game. Something no one else -- certainly no one with a large, established business -- is doing. You're not going to go head-to-head with them out of the gate.

So assuming you're skirting the big guys, your worry is that they'll notice your activities and squash you.

First of all, your market ought to be so small that a big company wouldn't care. Even a $500 million market is too small for a mega-corporation to attack -- even owning 50% of it wouldn't account for the amount it would cost to own it. As much as you might think this is personal, it isn't. They don't care about squashing you, they just want to make more money.

If you do grow to such a size that you've validated this (new?) market, perhaps proving it's better than anticipated or that there's buzz to be had or whatever, to the point where the Goliath is willing to spend 100's of 1,000,000's of $$, you've already won. You're already wildly successful, more than you ever thought possible.

So don't worry. The elephant won't swat the fly. They don't get it, and that's in your favor!