Evolutionary Economics & How Small Business Can Survive Among Giants

Building my company has made me think a lot on how a potential entrant to a market dominated by giants should position itself. After a couple weeks of pounding my head against the wall, I thought of a Discovery special that I saw on the rain forest, where the canopy created by 300 ft trees stifled the growth of life on the ground. This seemed to be a perfect analog to my conundrum, and two questions came to mind: 1) How did certain species evolve to position themselves for growth when no sunlight was available and 2) In such a stifling environment, how did the Amazon become one of the most diverse ecological systems in the world?

Here were some of my findings (I came across a U.Michigan website that summarized some fascinating studies on competition in the evolutionary biology context):

1. In answering the first question, it seems natural selection offers two answers. Some plants did not compete with the big guys, simply adapting to living on the forest's floor with less sunlight. Other plants actually used the gargantuan trees, and climbed up them towards the bright sun over the canopy. These very elegant solutions reminded me of small business either positioning in a niche market or partnering with larger firms to leverage their distribution channels.
   
2. The answer to the second question proved much more interesting, as it went to the heart of the studies summarized in the aforementioned website. Findings showed that whenever competition over limited resources existed within any system, all interactions were destructive (ie: no two species could co-exist). The dominant species always exterminated the subordinate one. The key to survival in competition was always adapting to position a species in a way that minimized overlap in resource consumption with the dominant ones. This suggests that adaptation is not a way of survival but the only way to survive, and that diversity is an inevitable state in any perfectly competitive environment.
   

The lesson from this analog, in my opinion, seems to be that going after Microsoft P&G or any competing giant is suicide (no kidding!). Yet evolution does seem to offer one glimmer of hope for small businesses that cannot afford an outright war with the big guys: the vine. Nature's solution to our problem was to adapt in a way that made partnership with the dominant player possible, and this should be a key option for any small business entering a multibillion dollar market should consider before taking the niche approach.

The Consulting Question or the Entrepreneurial Question?

Over the past few weeks I'd been working on a business problem with someone who had decades of experience in the consulting industry. Our approaches towards solving the problem seemed to be notably different for the first part of the discussion, but at the end of the day the data uncovered by each ended up being the ying to each other's yang. From this experience came two conclusions: 1) That the consulting and entrepreneurial mindset were different and that 2) neither necessarily proved superior to the other. This made me wonder what it was that made our approaches so different, how our experiences played into it and whether a start-up or consulting practice could possibly survive without having both mindsets in the game. These were some observations:

1. Consultants are problem driven while entrepreneurs are opportunity driven. Consultants are ready to delve into mountains of data until they start finding some kind of pattern and go from there. It's guaranteed to work every time but risks missing out on the big picture. Think tuning an engine (figuring out the fuel to air mix, timing of each stroke, etc) instead of asking whether it's the right engine for the car, whether it's the right car for the user and what an alternate engine might be. The entrepreneur is much more opportunity and customer driven and is eager to go out and start talking to customers, understanding the potential of the product and then looking at the numbers to see if their findings make sense. Think of a multi-function product like compressed air; sales to existing clients may be stagnant due to a price point issue but what else can you do with it?! The downside: it can be hit or miss and might fail to consider small changes that can have big impacts (ie: changing the price would be so much easier/cheaper than chasing a new market.)
2. At the end of the day a winning solution is an innovative idea that is supported by evidence (or perhaps evidence that is supported by innovative ideas). It is unclear to me which way of thinking is more likely to succeed but I did learn something very useful last week: That the creative tension that results from having both on a team can not only be highly productive but essential.