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Startups change the world. But what happens when big brands bite back?

In April, news broke that British chip designer Imagination Technologies was losing its biggest customer. Apple, which has used the firm’s graphics technology for years, has been developing its own independent graphics design and expects to stop using Imagination’s technology within two years. Reports suggest the firm is braced for a battle over its intellectual property rights and is discussing alternative commercial agreements with Apple.

While David Harold, a director at Imagination Technologies, can’t talk about the Apple situation, he’s happy to lift the lid on his company’s pragmatic attitude to competition. “In 1999 when we said we were going to do graphics for mobile phones I remember being told by our competitors [in games consoles], ‘Goodbye, we’ll never hear from you again’. They were wrong. We decided there was an opportunity for disruption and we reaped the benefits.” And now, he says, Imagination is looking at more new markets – the internet of things and autonomous cars, in particular.

Those small business Davids brave enough to disrupt markets dominated by big corporate Goliaths give every entrepreneur hope. But what happens when the established players fight back with all the well-funded weapons in their arsenal?

“The nature of the competition disruptors face has changed,” says Adam Morgan, founder of strategic brand consultancy eatbigfish. He says there are three kinds of competitive response: suppression, equalisation and progression.

Suppression is the establishment’s attempt to kill a new player, and equalisation happens when established companies launch their own versions of a product or service. The sector might also respond by developing the idea into a new area that offers added value to the customer (known as progression). “We have seen bricks and mortar stores do this to fight back against online retailers,” Morgan adds.



The Flash Pack organises trips for solo 30- and 40-somethings. It wasn’t long before other operators followed. Photograph: Flash Pack

For entrepreneur Lee Thompson, founder of travel company Flash Pack, it was equalisation that he faced from traditional players in the industry. When Flash Pack started in 2014 it targeted a huge gap in the market – solo travellers in their 30s and 40s. But after a successful three years, Thompson noticed bigger travel companies focusing on the same demographic. His answer? Innovation. “We’re three years ahead of the competition but it’s important we keep growing our range of holidays and diversifying our product range – our most recent venture is supper clubs where customers can meet over dinner in a chef’s home.”

Dana Tobak, CEO of fibre broadband provider Hyperoptic, has had a similar experience. The business runs its own fibre optic cables into buildings, bypassing the traditional copper-based infrastructure of the market, effectively creating the UK’s first fibre-to-building network. As its popularity has grown, Hyperoptic has seen competitors such as Virgin Media and BT respond by offering similar services.

But it’s too late for them to catch up, Tobak says. “Whereas their FTTP broadband won’t be available for years, our services are already available across 20 cities and towns across the UK and growing all the time.” And like the Flash Pack, Hyperoptic is looking at ways of diversifying its offer to stay one step ahead – for example, by broadening its range of packages.

“If you disrupt and cause market realignment, you are achieving leadership,” Tobak says about fighting off the competition. “Focus on how you can provide leadership that the incumbents can’t provide, for either financial or organisational reasons. Figure out how you can be better and faster – but don’t be afraid to scale while maintaining your entrepreneurial spirit.”

Sticking to your guns is vital for a disruptor, says branding expert Richard Williams, co-founder of Williams Murray Hamm, who has worked with big brand such as Jaffa Cakes and Hovis, plus startups like Prismologie and Jing Tea. He says being first to market is important, but so is staying true to your values and culture.

When big companies try to mimic a disruptor’s ideals, it often feels disingenuous, which customers see through. It’s a tactic he saw when organic Fairtrade brand Clipper Teas first launched. “When the [established tea brands] of this world came along and tried to mimic them they weren’t really that credible,” Williams says.

But while unswervingly sticking to what you do best is to be admired, moving on to a different disruption might be the only way to stay ahead. Williams cites Will Chase, the creator of Tyrrells crisps, who moved on to vodka after selling his business for £40m. “He’s a classic disruptive entrepreneur. You keep on disrupting but you might stop disrupting in the way you were before and move on to [do that] somewhere else.”

For Harold, while some big companies will respond fiercely, it’s rare that the whole market will. “We are used to losing big customers but that doesn’t push us out of that market, because by the time that customer is thinking, ‘Maybe I should do something else, or do it myself’, we are selling to other companies.”

His advice? “You have to think, ‘Where am I going to go? If my company is based around disruption, how am I going to look at those new opportunities?’ Because if you don’t do that, your customer will overtake you.

“It’s essential to decide what kind of company you are – you’re either a company that does one thing and you have to believe that market is going to be big enough to make a lot of money. Or you need to be a company that’s constantly moving and disrupting. That’s in the genes of the company. Some companies move and adapt really well, others don’t.

“And the ones who don’t, quite frankly, disappear.”

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