Taking on giant corporations isn’t easy. Established companies always have a few home turf advantages: years of experience, a well-trained workforce, and brand recognition, among other things. Imagine how daunting it must have been for companies like Sony and Fuji to take on photo giant Kodak. How tough was it for Google to carve out its own niche while competing with Microsoft?

And while everyone may love a David-and-Goliath story, the facts don’t always match our perceptions: Only about 50 percent of businesses survive their first five years, while only one-third make it to their 10-year anniversary. If anything, the playing field seems stacked against the newbies. 

But you don’t need a degree, or even relevant experience, to start a company. Maximus Yaney knows this firsthand. In 2010, he founded Titan Aerospace to produce high-altitude solar drones; at the time, he had no experience other than some fond childhood memories of flying planes with his father. He also had little in the way of capital. Four years later, however, Titan was sold to Google’s special projects division.

First-time entrepreneurs’ chances of success hover around 18 percent. While success or failure at one venture can boost a tech entrepreneur’s likelihood of success with another, Yaney has recommendations to help other underdog entrepreneurs beat the odds the first time around.

Adapt or die. Your greatest advantage as a newcomer, Yaney says, is agility. Older, established companies are profitable — and, therefore, comfortable. This means they’re far less likely to embrace a new technology, radically change their business model, or tinker around with their golden goose. While large companies have many resources at their disposal, they also have a lot more to lose, making them risk-averse — often to their own detriment.

Companies don’t live in a bubble; society will change, and quickly at that. Look at what happened to Kodak Eastman. In its heyday, Kodak produced Kodachrome, the iconic color film that captured key moments in human history, like the first summit of Mount Everest and John F. Kennedy’s assassination. Kodak also manufactured the Brownie, the first mass-market camera (and possibly the best-selling camera line of all time).

Today, Kodak is gone because executives pooh-poohed the threat of digital. Rather than shift to digital cameras (a technology Kodak engineers invented, by the way), the brand clung to its legacy business, movie and camera film, partly because it didn’t think the new technology would catch on like it did, and partly because it was so profitable — until it wasn’t. This left the market wide open for upstarts like Panasonic, Sony, and Fuji to come in and sweep the digital camera space.

Use first-principles thinking. Similarly, established companies can’t always develop innovative solutions, simply because they’re stuck in the old way of doing things. But as an underdog, you bring a fresh perspective to the situation: You (and your company) aren’t locked into the same ways of doing business that older organizations are.

Case in point: In the early stages of Titan’s existence, Yaney polled many aerospace experts on how feasible it was to build a high-altitude solar-powered drone that could fly at 65,000 feet and transmit internet globally. He was laughed out of more than one office; not a single expert thought it could be done, and more than one mentioned that if it was possible to build such a drone, corporations like Lockheed Martin would have done so already.

That’s where first-principles thinking comes in. The vast majority of us reason by analogy: Essentially, we predict the unknown by relying on existing examples. For instance, if Microsoft has always made money on its Office suite, it can expect to continue making money on the product line; all it needs to do is upgrade the features and put some marketing fuel behind it.

Unfortunately, reasoning by analogy has one big flaw: Just because something’s always turned out a certain way doesn’t mean it has to be that way. That’s why Microsoft Office has been losing ground to cloud services like Google Drive.

Instead, consider how Elon Musk uses first-principles thinking to question the most basic assumptions people have. When Musk was creating his companies, one bottleneck was the price of batteries, which came in at $600 per kilowatt hour. Instead of agreeing to pay that price, Musk and his team broke down batteries into their component parts and redesigned them from the ground up; they were able to get the cost down to $80 per kilowatt hour. 

Musk would never have been able to accomplish this had he not torn down his assumptions and attacked the problem, starting with its foundation.

Design, iterate, fail, repeat. In corporations, “failure” is a dirty word, but it shouldn’t be. In fact, Silicon Valley’s greatest legacy may be the idea of failure as a step forward and a necessary part of the innovation process.

By casting failure as progress, companies can change and alter products far more quickly than traditional incremental testing allows. The biggest advantage of a “failure is good” mindset is that it encourages experimentation and banishes stagnation. If your team can design, rapidly iterate, learn from its mistakes, and doggedly repeat this cycle, you’ll have a lean, streamlined business. More importantly, your team will be willing to take risks — something bigger companies may be reluctant to do or may punish their employees for, hindering both their employees’ development and their businesses’ prospects.

One caveat: This is not the same as failing fast. Instead, failing forward means you can harness your losses and pull out the lessons inherent in them. Otherwise, you’re just failing without learning, which is expensive and painful.

In order to drive your underdog business to wunderkind status, your organization needs to be bold, willing to take risks, and able to fail forward. Otherwise, your company will become just another statistic discouraging the Davids from taking on the Goliaths.

Brad Anderson

editor

Brad is the editor overseeing contributed content at ReadWrite.com. You can reach me at brad at readwrite.com