When laying down the plans for a new business, many entrepreneurs tend to make the mistake of planning too far in the future. Creating long-term plans when you barely understand the market will not only result to misleading plans, but consume too much time and effort which could otherwise have been used on strategies that have a more immediate effect.
Planning is always a good thing; don’t get me wrong, being ambitious even better – but wasting your time focusing on minutiae for events that will be relevant 5 or 10 years in the future can really hold you back. Time is of the essence when starting a business; so many ventures have failed without even touching the ground because of wandering around aimlessly and creating irrelevant plans.
The most important thing in the early days is to do everything necessary to get off the ground and gain rapid momentum. That means focusing your energy on meaningful short-term plans.
If you intend to someday become a big fish swimming in the big pond, it is advisable to first start by laying down the plans for dominating the small pond. Once you have a profound understanding of the market, the consumers, and your internal operations – then you can start looking much further ahead. To avoid any confusion:
Large pond = A mainstream market where most consumers can be found
Small pond = A small and targeted niche
Would you rather be a big fish in a small pond, or a small fish in a big pond?
“If you are the smartest person in the room, then you are in the wrong room.” – Confucius
Many small companies want to swim with big fish in the big ponds, but that is not a realistic short-term goal. The big ponds have other fish that are far better established, have incomparable resources, and can swallow you at will. It is not exactly the best place to swim as a newbie. Smaller ponds, however, are usually much easier to navigate and establish a dominant position.
Standing out in the large pond often requires enormous marketing budgets which many startups and small companies do not have. The advantage of a smaller pond is that consumers are often concentrated in one area. That means that not only will marketing expenses be much lower, but it will also be easier for your messages to spread through word of mouth.
Word of mouth is by far the most powerful form of marketing, but it only spreads like wildfire if you are selling wholeproducts – as described by Theodore Levitt in a 1980s publication of a Harvard Business Review article.
Would you rather be the smartest person at a local college, or the dumbest person at Harvard?
“In a crowded marketplace, fitting in is a failure. In a busy marketplace, not standing out is the same as being invisible.” – Seth Godin
Malcolm Gladwell, author of the bestseller ‘David and Goliath’ is famous for his stance against doing things just for the sake of prestige. He believes that people are better off choosing to be part of smaller institutions where they will have greater chances of standing out.
The concept he draws upon in ‘David and Goliath’ is called ‘relative deprivation’ – originally coined by Samuel Stouffer, to describe how people measure themselves against other people around them.
We always compare our failures and successes to the failures and successes of the people in our circle. Harvard students will compare themselves to their Harvard peers, and that will ultimately make the students in the bottom third feel stupid and unsuccessful. Such demoralized students would most likely be top-tier students on less competitive grounds.
Malcolm says that choosing something just because of its name or reputation is often like choosing to be a little fish in a big pond, where only a select few will shine among the best.
The same goes for startups which are trying to compete with more established companies in the large pond. Their inability to compete can make them lose their drive and ambition.
It is instead wiser to first establish a small and highly targeted niche which is easier to dominate, and then focus all your energy on winning it over. Once you have acquired it, then shift your focus to an adjacent niche, then another. That is how to successfully grow a small business.
It is the same strategy that many tech startups often implement. For instance, Uber started out by focusing all their early efforts on winning over early adopters during events in San Francisco. After acquiring that niche, then they moved on to another city and did the same. Uber is now active in more than 633 cities around the globe, but they started out by swimming in a very small pond.
Aiming to be a big fish in a small pond makes you the crème de la crème of the niche. It is much easier to scale to adjacent niches from such a position of power, and over time, become big enough to thrive in the large pond with other big fishes.
