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A Method to Their Madness

Rooting for the underdog? Read how these formerly small businesses rose to the top.

They call it March Madness, but on paper, the NCAA basketball tournament is the ultimate in normalcy and fair competition. No polls. No computers. No politics. Once that first ball is in the air, any team can win. And every year, almost without fail, some school you've never heard of and couldn't find on a map finds a way to knock off a couple of the big boys and capture the attention of the whole sports world, if only for a few short days.

That's what makes the tournament so special, and it's also what makes it such a great metaphor for aspiring entrepreneurs. Here are a few companies that started as the plucky underdog and rose to superstardom.

The sincerest form of flattery
Imagine how shocking it would be if tiny Mississippi Valley State were to beat UCLA in the first round of this year's NCAA tournament by using a revolutionary strategy. Now imagine if UCLA opened next season having adopted MVSU's playbook, and you have an idea of the impact Netflix has had on the movie rental industry.

"Wherever there are innovators, there are imitators," says Steve Swasey, vice president of corporate communications for Netflix. "The key for the innovator is to keep innovating. Competition sharpens your saw."

According to Swasey, Netflix started its runaway success when the company combined online movie rentals with a system of local distribution centers. This allowed movies to be delivered faster, giving Netflix its competitive edge. Although competitors have picked up on this idea, Netflix thrives by steadily improving the one thing that made the company so successful to begin with--its website.

"We knew we created the category," Swasey says. "We stayed focused. Panic is not allowed at Netflix."

As the playing field now moves to online television, Swasey says Netflix will continue to use its philosophy of focused innovation to both further the company's success and distinguish it from the competition. He says it's a credo even the smallest business owner should take to heart.

"Stay focused on your core value and build moats around your business," he says. "Make it more and more difficult for others to emulate your idea."

You scratch my back, I'll scratch yours
In some cases, the little guy can beat the odds by borrowing a few plays from the big guy's playbook and adding his own wrinkles. Such was the case for meebo, an IM company that hosts accounts from giants like Yahoo, Microsoft and AOL. As a result, co-founders Elaine Wherry and Sandy Jen brought the accounts even more users and enhanced the IM experience for existing users.

"We sort of expand the pie of users the IM network can reach," Jen says. "Through meebo, they can chat with their friends. In the end, it's not about the [online service] you use. It's about finding the person you want to find."

At first, meebo was the product of Jen's need to consolidate her 13 IM identities and something she figured would be popular at internet cafes. She soon discovered that the client was a hit with people everywhere who were isolated from their online friends by firewalls at schools and businesses.

"When we launched, we were solving our own problems," Jen says. "But we were solving other people's problems, too. That's when the service took off. "

After developing the service that now draws about 2.5 million unique users a day and 30 million overall, meebo added interactive ads that maintained the user-friendly interface that had put them on the map.

"The world doesn't need another banner ad," Jen says. "What we've learned from social networking sites is that that doesn't work very well."

So far, with an 85 percent user return rate and a partnership with AOL, the formula seems to be working. And while constant innovation is less of a priority, Wherry says the company will do whatever it takes to keep fans coming to its arena.

"One of the ways we've been successful is by listening to the user," she says. "Our innovation comes from our users."

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