Smaller firms succeed through good sense

November 5, 2001

BY MICHAEL KRAUSS

I've been giving a lot of thought lately to size -- you know, in a David and Goliath sort of way.

Truth is, I was asked to give a speech to a group of marketers at an upcoming meeting of the Information Technology Services Marketing Association (ITSMA) as part of a point-counterpoint presentation. My friendly adversary in this undertaking is Teresa Poggenpohl, a partner with and chief architect of Accenture's highly successful global advertising and marketing campaign. Teresa is to go first and outline Accenture's $ 175 million-plus branding program that established Accenture overnight as a household name, successfully transferring the brand equity of Andersen Consulting to the new name. And she paved the way for Accenture's IPO that raised $ 1.4 billion for the firm in a declining IPO market. I am to go second and explain what you do when you don't have all that cash or global scale.

So I started asking myself, does a company's size matter? If you're the biggest, does that automatically translate into a sustainable advantage? Internet technology was supposed to be the sling that small entrepreneurial Davids could use against the larger, market-leading Goliaths. Yet the landscape is littered now with failed start-ups, and even large companies are struggling to stimulate demand in today's recessionary environment.

Are the victors simply going to be the big organizations, or do the entrepreneurial firms still have a chance?

I started doing my homework, checking out Jay Levinson's Guerrilla Marketing Handbook and rereading Sam Hill's Radical Marketing and the Business Week cover story on "Buzz Marketing." I gleaned nothing new from these sources; nothing resonated.

That's when Jack Welch appeared on my desk, grinning up at me from the dustcover of his autobiography, Jack, Straight from the Gut. I started to read, seeking to leverage the secrets of the ultimate Goliath. And I found that he had plenty to offer the little guys trying to take on the GEs of the world.

Welch is known as the guy who said if you couldn't be No. 1 or No. 2 in your category, you should "fix, sell or close" the business. He is also known as "Neutron Jack" because of all the heads he trimmed in various GE downsizing initiatives. Less well-known is his strategic intent upon taking over as CEO in 1981: Welch's aim was to "put a small company spirit into a big company body."

Welch originally made his name at GE by building up its plastics division. While most of us think of GE as a behemoth, Welch reports that in plastics, the company's operations were "second-class citizens with a second-class product." He was up against the big chemical companies -- the Dows and DuPonts of the world -- and badly outmanned. As Welch tells it, DuPont had 40 people selling to the all-important auto industry while Welch had a five-person team.

What he did then was reformulate the product, concentrate on his homework and analyze his market, and he started "promoting the plastics business as if it was Tide detergent." He hired St. Louis Cardinals pitcher Bob Gibson to pitch the product. He ran radio ads during drive time when engineers from GM, Ford and Chrysler were stuck in their cars. He posted billboards around Detroit. No one had ever promoted an industrial product that way before.

Welch more than doubled GE's plastics business in less than three years. He says, "We took on the big chemical companies and did well because we could outrun them."

Welch paid special attention to personnel. He looked for highly intelligent performers who were enormously competitive, individuals with clear passion and emotion. He fired nonperformers early. And he welded together a team and built a sense of family and community among his managers. They worked hard and played hard together.

Another factor in Welch's success was management's trust and faith in him. In Welch's early days in the plastics business, he literally blew the roof off a pilot plant while testing a new commercialization process. Many companies might have fired the young engineer, but his bosses at GE trusted and promoted him.

So, the message for small companies going up against big companies is a bit of commonsense thinking that nevertheless is difficult to execute:

• Make sure you have a solid product. It has to meet a buyer need, and if it doesn't, improve it until it does.
• Build a team. Your management team is the next most important factor to success.
• Be analytical and emotional. Use rational analysis to assess the business, but be emotive and passionate about competing and winning.
• Use creative marketing tactics. Bold, creative, pragmatic approaches are the answer.
• Have management's trust, or leave.

Jack Welch says he spent 20 years trying to put the small-company mindset into the big-company body that is GE. In that time, he increased GE's market cap by more than $ 450 billion.

Technology can definitely help level the playing field between big and small companies; so can effective marketing tactics. The real point is that you have to have the confidence, the passion and the will to compete and win. You have to put together a team that can deliver.

That's what Jack Welch did at GE. That's something Teresa Poggenpohl and her partners at Accenture have done well for years. And it's something many small companies do equally well.

I don't think size matters in business success. We'll see if Teresa agrees.

Michael Krauss is a partner with Chicago-based DiamondCluster International. He can be reached at news@ama.org.