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David vs. Goliath

Paul's Posts — 24 December 2011

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David vs. Goliath

When I meet new people I am often asked how is it we even dare to compete against the giants in our industry like Sony or Harman?

There’s a simple answer and then a more complex one.

The simple answer is we’re not – never have been.  Our market is the high-end, Sony and Harman don’t even have that on their radar.

But the more complex answer is interesting because it really goes to the core of innovation.

Perhaps the real question is “the big guys have all the R and D money so what you make must always be just a pale copy of what they invent.  How do you survive and why do people purchase your products?”

Fact is most innovation comes from smaller entrepreneurial companies, not the big guys.  The reason this is true is that smaller companies have less to lose than the bigger guys and are driven out of necessity to make some noise with their product innovations to be noticed.

Bigger companies are more cautious, have many more layers and don’t need to have their products make the noise – they have well financed marketing divisions that do that.

So how does David beat Goliath?  He doesn’t even try, all he needs to do is win his own game.

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About Author

Paul McGowan

Paul McGowan is the CEO and co-founder of PS Audio Inc. a Boulder Colorado design and manufacturing company of high-end audio products and services. McGowan has been designing and building high-end products for nearly 40 years. Hobbies include skiing, music, hiking, artisan bread baking, kick boxing and cooking. He lives in Boulder Colorado with his wife Terri and his 4 sons.

(8) Readers Comments

  1. Adolf

    December 24, 2011 at 3:27 am

    Dear Paul
    Despite your explanations, I’m convinced that there is an emotional competition and that is brand based.
    The brand is not a matter of size of a company but more the confidence of the consumer to get from that brand, what anyone expects or likes much. It’s quality of life!!!!!
    I myself are a fan of psaudio since 6 month. I’ve been looking for some month for a convincing CD Player. By incidence I meet your homepage. And I have felt spontaneously that psaudio meets my individual requirements of quality. Why such quick decision? The product concept is convincing and sustainable and there is a very trustful communication with the you and your company. I think service and information is at least as important as good products or money, to suceed in the market.
    You are right, that big companies have a lot of money. And they need it to compensate there weakness in detail.
    Finally small innovative companies are much more efficient than big companies.
    There is done a lot of bull-shit by big ones only for quick money. Sustainability is more a matter of small companies.
    Looking forward getting a lot of interesting ideas and philosophical disussions, that makes high end life worthwhile.
    Merry christmas
    Adolf from Germany

  2. Soundminded

    December 24, 2011 at 7:39 am

    “Fact is most innovation comes from smaller entrepreneurial companies, not the big guys.”

    I think that’s a dangerous generalization that breaks down on careful consideration. For 12 years I worked for the largest research consortium in the world. They developed many of the technologies incorporated in communications networks we now take for granted. Some include video compression technologies, most of the software that operates the telephone network, and many others. Bell Labs itself produced on average one patent a day year in and year out. The digitial compact disc was invented by Philips and Sony (some would say that is not an innovatoin they like.) AT&T was obsessed with videoteleconferencing and VOIP.The US army developted what evolved into the internet itself (originally called the Arpanet.)

    Buit small guys can beat the giants? How? it is instructive to see what those who succeeded had in common. Their products were genuinely innovative, not merely tweaks of older ideas. They created them in the right place at the right time for a market that was waiting for them. They were built to very high quality standards and were backed by the most generous service policies and guarantees in their industries assuring customers they would work or be repaired or replaced quickly if they failed in service.

    Who are some of the innovators who started small even if they grew and succeeded? In this industry Acoustic Research, KLH, Advent, Bose. In other industries Apple Computer, Microsoft come to mind. But they can grow big, become complacent, and die of their own success. When Apple got rid of Steve Jobs because it became too rich, too conservative, too successful it nearly died floundering on the shoals of mediocrity, me-too ism, and lack of continued innovation. Windows and PCs caught up and surpassed it. Only when Jobs came back did it begin to think radically about new products again. Bill Gates worries that Microsoft could go the same way and takes every step he can think of to prevent it knowing that Davey killed Goliath because Goliath became complacent, was slow to react, was unaware, was too smug and self assured. Sony is a corporation in serious difficulty. It has become Goliath. It was built on the success of one product that was the industry standared for 40 years but is now obsolete, the Trinitron picture tube. Listen to Charlie Rose’s interview of Howard Stringer on Rose’s web site. (Stringer is Sony’s CEO) You will see just how precarious Sony’s existance really is. Then look at its financials, its balance sheet’s track record. It’s a giant heading for a fall. Mostly what sustains it at the moment are its video games where it has much competition. In other areas there’s hardly a product category where you can’t buy as good or better for less.

    • December 24, 2011 at 11:52 am

      Well, I would still stand by my generalization about small groups innovating. Perhaps what was off-putting was the word
      small companies

      rather than
      small groups      .

      Think of most of the big inventions, from the tube to the transistor – all done by a small group or person. Indeed, the transistor was from Bell labs but within Bell Labs there were only three guys that invented it – the fact they were employed by a big company misses the point. There are big organizations that can produce innovations but most come from either small groups from within an organization or small companies.

      Sbrinck brings up Apple – that’s a great example. Apple rarely invents anything – they’re particularly good at polishing. The Walkman turned iPod came as a result of Apple purchasing a company who had most of the software finished – same with their touch screens, same with their introduction of the mouse, the icon, Windows-like programs, the ability to move data from multiple applications within one computer, the graphical user interface we’re all using right now. Most of these were from a small group of people that worked for an offshoot of Xerox. Big company, small group.

      In high-end audio almost all innovation comes from small companies or groups.

      Fact is, large group projects bog down, have little to offer in innovation and are the exception rather than the rule.

  3. sbrinck

    December 24, 2011 at 10:31 am

    Gee Paul
    I seem to recall Sony inventing the Walkman and the people at Apple making that idea into a phenomenon !
    Doesn’t Harmon now own Mark Levinson does that mean they will cease to be an innovator ??

    Have a Merry Christmas & an another innovating New Year !!

    • December 25, 2011 at 1:40 am

      The fact that Harman Group acquired Mark Levinson’s company and brand in the first place PROVES Paul’s point!! Just like they acquired Infinity from Arnie Nudell and Cary Christie and a dozen other formerly freestanding brands..

      Large companies headhunt talented engineers when they can, and acquire smaller companies when they cannot. There are easily a hundred examples of this in the history of the hi-fi business..

  4. Adolf

    December 25, 2011 at 4:31 am

    There is another issue between big and small companies. Big companies have to set priorities and behind of all there is a lot of politics. Many good ideas are slaughtered by strategy and politics. Small enterprises have small and very effective structures in research, development and sales. And they are capable to risk much more than the big ones. Many of them fail and no one talks about that. But some of them suceed and take a part of the big cake such as psaudio.
    So one can conclude, that the price, big companies have to pay for their size, is the more complex structure of the company, the fear to loose money(esp. in terms of share holder value) and last but least priorisation of to much different interests. Big ones are mostly not as mobile and flexible as small ones.
    I’ve read the story about cisco, that is a nice template of countless others. Microsoft as well. Such small groups or companies(as startup) have had visions and they had taken a lot of risk to realize them. The story about Cisco “in the eye of the storm” gives a very lively description of such high innovative small groups, the up’s and down’s, the tendency of self destroying but finally a happy end at least in terms of size. But Cisco went the same disastrous fate like others to suffer from “giantomania”. They bought countless companies. “Kiss-technology” has been one of them. After the integration of that small high innovative company the innovative power of “kiss-technology” was over. Pricce of strategy and priority????? So I absolutely agree to to 2ndRick. Make or buy is strategy of big ones. They have enough money and buy. Small companies have less money and have to “make”!!!!!
    Another issue is the weight of marketing. The bigger the company grows the more influence moves to the “marketing”, which is more or less some like “economic politics for consumers”. I think Apple has kept its profile of a small company, at least in the aera of Steve Jobs. Small creative group inspired by the CEO are the typical profile of a “small” company (like psaudio). Together with the money of the “big” Apple there is a huge synergism. But the “small” company of Apple may be lost with the loss of SJ. That’s the typical problem a small company: It has lack of a suitable successor. I fear Apple will suffer from the same fate like many other really small companies, who lost their “brain engine”.

    Happy new year to all and a best wishes of health for Paul and his team
    Adolf

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