Unfair Match?

"Size is the only thing that gives you power these days. Little companies have no chance."

– Richard Heckmann, CEO of sporting-goods maker K2

I question this view. Little guys do have a chance. But I don’t deny that Mr. Heckman’s view is widely shared by executives. In fact, I think lots of incumbent management teams make it the main part of their business strategy. The bigger we are . . .

As reported in the July 7 issue of FORTUNE, Mr. Heckman recently sold K2 to Jarden Corporation so that could play the game as though it were in fact big. Jarden is a holding company that collects overlooked brands, creates joint economies among the little companies it acquires, and injects its own guidance (control would be too strong a word). Jarden’s portfolio now numbers 19 companies so, if Mr. Heckman is right, K2 should be flourishing soon.

I don’t think that selling out to achieve administrative scale economies or greater negotiating power when facing mega-retailers is strategically imaginative. In fact, it sounds more and more like 'old school' growth strategy.

More important, it isn’t particularly successful either, judging from the record. Conglomerates tend to get broken up over time. Good Luck, Jarden. Maybe you’ll be the one to bring diversification back into vogue.

But I have an alternative for little companies. And it can work just as well for the K2’s of this world that have indentured themselves, or even for holding companies like GE that want their business units to be nimble again.

“Commodity” Mindset ........................“Differentiation” Mindset
Leverage scale-based power .......................Leverage unique value-based power
Consolidate operations .................................Innovate the customer experience
Create value upstream ................................Create value downstream

Most big players view their markets as commoditized and think on the left side of the table. It is precisely this old-school thinking that eventually gets them in trouble. They assume that’s the only possible game. But all it takes is somebody working on the right side to redefine competition from low-cost/low benefit to capturing customer’ attention, selection, imagination . . . and expenditures.

You don’t have to be big to approach customers in new, better ways. For that matter, you don’t have to be small either. Just value-oriented and differentiation-minded.