Why Every Entrepreneur Starts As A David But Ends Up Becoming A Goliath

Breaking through tough times prompts us why we kicked off and keeps us determined on the target.
Why Every Entrepreneur Starts As A David But Ends Up Becoming A Goliath
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Founder, Inflexion Point
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The fateful battle of the Valley of Elah, where the skilful shepherd named David took on the giant Goliath, is all too well known. The boy from the tribes of Israelites butchered the ominous warrior from the army of Philistines in one decisive blow using nothing but his sling. For centuries, the story of David and Goliath has become a metaphor of the improbable victories – the conquest of the underdog, the triumph of the weak over the mighty but Malcolm Gladwell reminds us, in his 2013 book David and Goliath that David was not weak but simply different.

David engaged Goliath in a contest which turned the latter’s very advantage of size and strength into his vulnerability. All the young shepherd did was to focus on what only he knew, for no one told him the rules of the game. What everybody cared about was the end and not the means.

As Malcolm explains the implausible victory, he writes: “There is a set of advantages that have to do with the material resources and there is a set that have to do with the absence of material resources –and the reason underdogs win as often as they do is that the latter is sometimes every bit the equal of the former.” But he is also quick to note that, “But most of the underdogs don’t fight like David.” It must be kept in mind that the influential and the strong are not always what they seem and entrepreneurship is all about that belief in action.

While most entrepreneurs start of as a David and want to remain so, they often drift into becoming the vulnerable Goliath to be then knocked down by another David from right across the corner. In this article, I explain why being a David and remaining so is important but difficult and how to avoid being the Goliath.

Start-ups are born at the interlude of the market

Peter Drucker, the father of modern management, calls an entrepreneur as someone who “always searches for change, responds to it and exploits it as an opportunity.” He further goes on to say, “Results are obtained by exploiting opportunities, not by solving problems.” Where are the opportunities lying? Not in sight of the incumbent or the endowed but of that of the hungry and the foolish.

Start-ups are born out of the gaps which are left-over by the enterprises. The functionary might find such markets too small for their interests hence ignore them; not realizing that such markets might be the very seed of next growth wave. Take for instance a market for shampoos, oils and colors for male beard – how niche is that? Its niche till recently.

The duo of Priyank Shah and Ashutosh Valani spotted this opportunity and in October 2015 started Beardo in Ahmadabad and in just two years; Marico has a 45 per cent stake hold in the company and would soon be absorbing the entire unit. On the acquisition, Marico CEO Saugata Gupta notes, “It fast-forwards our journey towards nurturing a future-ready male grooming portfolio. This partnership will help us access the emerging niches at the premium end. We are impressed with the founders and the velocity of growth of the business since inception.” The big shots like Unilever, P&G, Dabur and even Marico didn’t side with this market. Perhaps the market potential wasn’t proven or it didn’t fit their leading logic at that time.

The best bet an entrepreneur has is not taking a plunge in the ongoing contest in the market but to observe the cracks in it, and exploit them, eventually creating a Blue Ocean – an unchallenged market space. Disruption is what Patanjali did to Unilever by exploiting the swadeshi dimension of consumer products and so did Paperboat by appealing to consumers’ nostalgia.

Enterprises are most vulnerable during a crisis

A crisis such as the looming economic slowdown in India, which is further deteriorating with the coronavirus threat, is what creates the condition for a ‘creative destruction’. The author of the phrase and the famous Austrian Economist Joseph Schumpeter explains, “Situations emerge in the process of creative destruction in which many firms may have to perish that nevertheless would be able to live on vigorously and usefully if they could weather a particular storm.”

Such storms expose the vulnerabilities of the large, established enterprises, which for long, have benefited from their well-entrenched value networks and dominant logics of conducting business. Suddenly, their most prized possessions turn out as impediments of change and their assets become liabilities, much like what the century old Barnes and Noble experience in the face of Amazon’s onslaught. The very brand, physical presence, range of titles, well-trained employees and deep pockets could not stand a chance in the face of the Internet storm. Even when Barnes and Noble tried for an online store or an e-book reader, its asset base stood in the way of the transition and Amazon, with no such legacy, soon assumed the primal spot.

One of India’s global leaders, Anand Mahindra, calls the current economic situation as “a crisis we (India) mustn’t waste!”

It’s at the time of crisis that the less endowed can strike hard and yet entrepreneurs often miss out on such occasions because they love to think like Goliath as it offers emotional comfort. Malcolm reminds us that “Underdog strategies are hard. To play by David’s rules you have to be desperate. You have to be so bad that you have no choice,” and nobody likes to be bad.

Don’t let scale come at the cost of complexity

So far, the entrepreneur has done well in exploring, emerging, and exploiting the liabilities of the present occupant but to outgrow them is risky. To achieve a certain size and viability, the entrepreneur must make compromises. Investors would want their returns, employees would seek career growth, customers would look for broader offerings and better value for their money, and the competitors would be keen to chip away the lead. The very premise that allowed the start-up to emerge at the first place becomes an impediment to growth – the David now behaves like the Goliath.

The sociologists Paul DiMaggio and Walter Powell call this as ‘isomorphism’, which they define as “constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions.” Such environmental conditions around product markets and factor markets (land, labour, capital and technology) often force the start-ups to mimic the establishments, in terms of their people practices, operations, external posturing, recruitment practices and, eventually, the overall strategy. The late entrants derive legitimacy out of such imitations and they end up becoming more of the same. For instance, while Vistara was a late entrant in the Indian airlines market, it has become almost like Jet and h Air Asia which has become more of the same of the prevailing low-cost flyers.

How to arrest this isomorphism? Three hints.

Firstly, defend your niche fiercely. That’s what Royal Enfield has been doing all these decades or for that matter, fabindia has emerged champion in the face of online and offline commerce of garments. They have maintained their product quality (largely), brand promise, price points, customer service and cult status. These companies could do it because they resisted the temptation of being all for all.

Secondly, be customer obsessed and not competition obsessed. In an interview with David Rubenstein Jeff Bezos shares that of the several business leaders that he has come across a very few are truly customer focused, most are rather competition focused. By mapping and following your competition too closely, just like checking an opponent in a football match, you lose sight of the bigger picture and are always a step behind your competition. Instead, being obsessed about your customers, of the present and future, you can leapfrog your competitor’s best laid plans. That’s what Tata Motors could do to Ashok Leyland with the introduction of Tata Ace – a category creator and a major hit.

Lastly, have a day-one mentality. Another favourite of mine from Bezos – the ‘Day One’ mindset – the mindset of the underdog and what Steve Jobs famously called as ‘stay(ing) hungry and foolish’. A sense of entitlement might be the onset of irrecoverable decay. You need to ensure that your enterprise has the spirit of a start-up, even if it has hundred thousand employees and a position of market leadership. Take for instance how the venerable Korean chaebol Samsung maintains a perpetual sense of crisis to ‘push’ its employees and partners towards the unlikely. “Change everything except your wife and kids”, said Lee Kun-hee, the former chief of Samsung, and it remains the company’s guiding philosophy. Samsung is as much a disruptor as it was almost half-a-century ago and so can you.

In summary, being disadvantaged, a late comer or being an underdog is not necessarily bad, provided you know how to turn your shortcomings into your advantage and these calls for skills, chutzpah, and luck. The obvious weaknesses could well be desirable difficulties, such as dyslexia or loss of a parent in early childhood or an adverse upbringing – common in many successful entrepreneurs. Malcolm sums it all up very well stating, “The unexpected freedom that comes from having nothing to lose... the trickster gets to break the rules.”

David was a trickster. Are you?

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