Many of the big web hosting companies have a reputation for being invulnerable, but in fact it’s very possible to compete against the Yahoos and 1&1s and still win.
The key to be successful is to remember that these big companies are not a one-unit business, but rather are made up of many business units (Yahoo: Search engine, web directory, web hosting, email, advertising and, and, and). Some of those business units are highly effective, others are more vulnerable to competition.
Let’s take Microsoft as an example: One company that successfully competes against Microsoft is Logitech, which competes by focusing on technology that Microsoft doesn’t consider strategic: computer accessories
The situation of Logitech: Staying focused Microsoft is a software and tools company, but it also used to dominate the mouse and keyboard market. Microsoft then started producing gaming equipment, such as joysticks, and steering wheels. It even sold speakers. It made great products but it did not become market leader in these areas and never made the final push against the competition like it did with Netscape.
Microsoft pulled back into the mice and keyboard markets after becoming to wide-spread and after becoming not focused enough. Logitech continued to offer a broader range of products which could be combined with each other in retail packages (wireless mouse and keyboard). While Microsoft continued to build quality products, Logitech started dominating this segment with a broad line of accessories including mice, keyboards, cameras, and speakers – all of great quality.
Logitech could grow to become market leader because they don’t go around pointing out that they are beating the crap out of Microsoft. Executives often want to brag about beating the crap out of Microsoft, but it only motivates Microsoft to want to squash the competition. They stayed silent in the background and concentrated on making great products and to market those. Logitech also stays very focused. Microsoft has to watch markets that are much more strategic than peripheral hardware, but Logitech can fully concentrate onto this one segment of the market.
This is one of the best ways to go after a dominant company: find the areas where the giant isn’t focused enough, and quietly slip from behind in and start taking market share. Inside the big and dominant company, the business unit you compete with will see declining revenues over time. It’s not a large decline in a short period. Employees won’t want to take jobs in that business unit–and, once there, they’ll either be treading water or looking to get out. Once the sleeping giant realizes that you have taken over a large share of that specific market it might start acting against you, but if you play your cards right you have a great position to fight back and to keep your share of the market. Or the sleeping giant just stays where it is and holds on to the market share that it has – no retreat but also no attack. It depends on how important that market share is in the strategic planning. The 3rd option might be that the giant gives up this market segment and concentrates on its strategic important products. Example: Microsoft stopped offering broadband products like wireless routers not too long ago. It had a great product but the competition did not had to concentrate that much on other products and was (is) more focused.
Following the tactics Microsoft used 10-15 years ago, Logitech has been able to establish itself as a market leader in the accessories segment. Job well done.
Large competitors often have two big weaknesses. 1) They often have an image problem, which they refuse to even acknowledge. As a result – the leaders and upper management lose contact to their normal customers. Hereby forgetting that this is often the customer segment that made them big.
2) Large businesses also toss people into jobs without properly matching skills and position. Like many big companies, they have executives leading core units who took the job without formal training. People get the title of a CEO, and they start acting as if that instantly makes them an super manager, when in fact they simply don’t know what they are doing. This can be a real problem for a business – especially during times of extensive growth. The web hosting industry has many folks employed that have great technical knowledge but when it comes down to having proper business skills the business hits a big bump.
Large companies are very vulnerable to competition from a small, but smart company that goes after a certain market segment. Strategies for successful competition against large hosting web hosting businesses include finding a market that they consider non-strategic, and you can even partnering with the competition in areas where the companies don’t compete. You can play against the giant without getting crushed.