“Could a giant do what we do? It would be difficult because it’s not what they’re good at. They’re good at mass producing, very cost effectively, beers that appeal to the mass market… it’s not outside their capabilities, but it’s like McDonalds… could McDonalds make filet mignon? Sure, but it’s not the business they’re in. For them to what we do, it would be an initiative. At a big company, this kind of thing would be a six to twelve month project for an assistant brand manager on their way to trying to run the real brands in the company. At The Boston Beer Company, this is our life’s work. This is my life’s work.”
This, from Jim Koch, CEO and Founder of The Boston Beer Company. Jim gave me dozens of nuggets of wisdom in our talk, but the one insight I want to bring up here is this: giants evolve over time from companies that make a product well to organizations that make lots of whatever it is they make as efficiently as possible. And there’s a world of difference between these two points.
At one end, you’re a craft brewer and at the other end you’re a supply chain. You start with core competence in brewing and end with expertise in purchasing and logistics. Things change as you get bigger, and with these changes certain shortcuts come into play, creating opportunities for those willing to develop and maintain expertise lower on the value chain.
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. As giants evolve, their core competencies evolve. When you work for a giant, your job is to grow your brand and get promoted into a bigger brand as quickly as possible – it isn’t to live for an extended period in the shoes of your customers and develop the kind of deep understandings that only come from time and experience.
. When you become a giant, your problems change. Managing people, supply chains, purchasing, cost containment and economies of scale becomes more important that single-minded focus. You can’t afford to spend too much time on niche markets when your mass markets are calling for your attention. It took Sam Adams 25 years to get as big as they are, and AB is 150 times their size. Would AB devote the time and resources to add half a percent to their size it if took 25 years to do it? Unlikely. There are things a giant simply can’t afford to do anymore.
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Does this only hold true for the craft beer segment? No. This is as true in technology as it is in detergent, and even transportation. If it weren’t, you wouldn’t have companies like Classe producing high end audio components, Method creating ecologically sound detergents that actually smell nice or Jet Blue providing a high touch and “more human” travel experience. More on these companies over the next few posts. Suffice it to say that each has created a sustainable position for itself in a field dominated by massive competitors who, on paper, should be able to roll over them.
When you compete against a giant, your first order of business is to understand what a giant has no interest in contesting. Create your defendable ground – your brand fortress – in a place where they simply won’t bother or can’t afford to go.