For small companies a lack of resources can actually be an advantage

scott dilloff tighten-money

I have worked in several small companies with limited resources. Occasionally, I’ve found myself lamenting that as a problem. Sometimes it is, but when I think about the times we made meaningful progress, pretty much none of them had anything to do with spending money. In fact, it has usually been the opposite – our biggest improvements were born of constraint, urgency, and necessity. Carter Cast and David Schonthal’s Kellogg Voice article “What Corporations Can Learn From Startups” on helped me recognize that being resource constrained might actually be an advantage. When smart people have access to significant resources they, rationally, try to minimize risk by engineering it out upfront. They do this by putting in place process — hiring people, doing market research, and collecting and analyzing data — but that might not be the most effective approach. One issue is that process can create distance between decision makers and customers. When you lack resources, you have to experiment and figure things out quickly. The only way to do that is to take chances to see if something works. A lack of resources also inspires a sense of urgency, which is essential to progress, but hard to fabricate. The article outlines three principles start-ups embrace that can be applied to any company, regardless of size:

  1. “Go Native” – Many big companies rely too heavily on data, and not enough on information gained directly from customers. Engagement with customers in the actual buying environment can yield higher quality information more quickly. My take on this is that getting to know customers is not the same as understanding them on paper. You can’t know someone unless you spend time with them in person in the environment where they are going to decide whether or not to buy your product.
  1. “Embrace Experimentation” – The ethos of the “lean startup” mentality is to figure out the right questions, launch a “minimum viable product”, get market feedback, and use that information to iterate. Too often, larger organizations try to go to market with a finished product. I think part of the reason for this is they are afraid to risk what they already have, namely their brand, but they might actually be creating a bigger risk by going blind. The key might be to figure out ways to hedge brand risk by experimenting under a different banner while applying the same principles.
  1. “Show, Don’t Tell” – Start-ups  “…embody…questions in the form of prototypes.” Again, rather than spend a lot of money trying to answer questions through surveys or other types of secondary research (even asking a customer directly is a form of secondary research), get to market quickly and let the knowledge gained from observing natural, unfiltered reactions dictate the next step.  

For people trying to innovate at large companies, Cast and Schonthal’s article offers some good insights that can be applied from the start-up world. For those of us working at small companies, recognizing that a lack of resources can actually be a competitive advantage is a constructive paradigm shift that helps fuel the inspiration needed to persist through the challenges of early stage ventures.