VC Deal Lawyer

I don’t care if your company is bigger than the competition or has what some like to call the “first mover advantage,” beating out the competition is all about differentiation and playing to your strengths.  What recently got me thinking about this was an older podcast I was listening to from Stanford University’s Entrepreneurial Thought Leadership program.  The speaker was Greg Ballard, CEO of GluMobile, and his talk was titled “Confessions of a Serial Silicon Valley CEO.”  Amongst many of his other great points, Ballard made the following comment – “early bird gets the worm, but the second mouse gets the cheese.”  It took me a moment to realize what happened to the first mouse but, once I did, the concept stuck with me.  

Being first or holding the No. 1 market share isn’t always an advantage.  I think many in the top spot spend a lot of time looking over their shoulder.  They know they are running with a target on their back.  Very often the “first mover” takes all of the risk associated with creating a new market, allowing their soon to be competitors to study, and avoid, their mistakes.  Some bigger, more entrenched companies that have held No. 1 market share for a long time become complacent under their success.  Either way, nothing takes more time away from building a great company, or maintaining one, than constantly wondering how you will defend yourself from competitors.  Some classic examples come to mind Avis versus Hertz (see below), Hulu versus Joost and Dynamic Logic versus MB Interactive.

Some choose to ignore the competition and play to their strengths, like Tony Hsieh, CEO of Zappos.com.  Zappos focuses on the three C’s:  clothing, customer service and culture.  The company espouses 10 core values that lay a foundation for the three C’s.  Hsieh believes if he gets all of these right, everything else falls into place.  They must be doing something right, in 10 years their revenue has gone from $0 to over $1 billion and another e-commerce behemoth has committed to purchase them.

In trying to compete against the long-standing top rental car company (Hertz), Avis launched in 1963 its infamous “We Try Harder” campaign.  Avis got right to the point and said it’s okay to be No. 2 and then used that as a basis to convince customers that was why they should rent from Avis.  Here’s some of Avis’ tag lines from that campaign:

• Avis needs you.  You don’t need Avis.  Avis never forgets this.
• Avis is only No. 2.  But we don’t want your sympathy.
• If you find a cigarette butt in an Avis car, complain.  It’s for our own good.
• No. 2ism.  The Avis Manifesto.

Here’s one of their entire campaigns:

Avis is only No. 2 in rent a cars.  So why go with us?  We try harder.  (When you’re not the biggest, you have to.)  We just can’t afford dirty ashtrays.  Or half-empty gas tanks.  Or worn wipers.  Or unwashed cars.  Or low tires.  Or anything less than seat-adjusters that adjust.  Heaters that heat.  Defrosters that defrost.

Obviously, the thing we try hardest for is just to be nice.  To start you out right with a new car, like a lively, super-torque Ford, and a pleasant smile.  To know, say, where you get a good pastrami sandwich in Duluth.  Why?  Because we can’t afford to take you for granted.  Go with us next time.  The line at our counter is shorter.

I particularly like the bit of humor right at the end at their own expense.  But there’s no arguing with the success of the program.  Right before the campaign started, Avis had $34 million in sales but lost $3.2 million.  One year later, they had $38 million in sales and for the first time in 13 years, Avis turned a profit of $1.2 million.  In four years, Avis’ market share grew from 11% to 35%.  You can’t argue with that.  As Avis showed, there’s enough cheese for everyone – even if the first mouse doesn’t die in the process!