I love to build things that help people become more informed, make life a little more convenient and make money.

It’s not hard to see why my list of employers and investments all operate in search, news, finance, local, semantics, etc. The common thread is that they all support my personal mission above.

With that mission (either implicitly or explicitly) in mind I have constantly sought companies and situations that will give me the best chances for making an impact. So, I have worked in both big and small companies.

That’s the catch 22, it’s always a tradeoff

Big companies have resources but they’re difficult to mobilize. Small companies are flexible but often lack even the most basic resources.

All things being equal, those tradeoffs of size vs flexibility balance themselves out and there is opportunity on both sides. For the foreseeable future, the pendulum is going to swing toward the small/medium company. Resources will be harder to deploy in the big guys. Here’s why:

1. Increase in government involvement in large business. Bailouts, increased organized labor, Sarbanes Oxley – all of these things pull Uncle Sam into the board room. He’s already had a board seat, now he’s aiming for locking up voting rights.
2. Market pressures. Large public companies have big fish to fry… like solvency, unsettled shareholders and executive retention. I think only Steve Jobs can claim the honored place of focusing on building great products for customers when the company is under fire. Most others succumb to distractions of re-org, unfocused cost-cutting and seeking media favor. That can lead to greater constriction on resources.
3. Availability of capital. When you’re big and challenged, there are only a few honeypots big enough to borrow from. Uncle Sam (see above), your competitors, China… You get the picture. The key thing about this situation is that each possible source has highly unfavorable conditions attached. Strings all over the place. Not that it’s too much better for small companies seeking capital, but at least your backers’ primary motivation is your success.

“The ball’s coming your way!”

How can small and medium business take advantage of this? In my “Winterize” post I laid out the idea that it’s good to prepare your resources for opportunity. This is the general picture as I see it: Traditional market leaders are going to be distracted and unable to respond to advances by companies that are more nimble. Why? Their great advantage, resources, will be locked away.

It’s a real David and Goliath situation.

To make this concrete let’s take one of my favorites, the Auto Industry. The big US manufacturers are distracted. Sales are lagging, they have old technology, huge balance sheet burdens and increasing pressure from unions. GM has an ace up its sleeve in the form of a new mass market green lineup. The catch is that they, along with the other US mfrs only need a small amount of $50B from the US government to go after it. (Truth: $25B of that $50B is actually slated for pensioners). This is MESSY.

Enter Tesla. This company has the opportunity to bring green cars to the US. I really hope they get their winterizing plan in order because the future of the US auto industry may depend on it.

Does this apply to the Internet and technology (non manufacturing) industry? I think so. This principle operates on a continuum. Big is relative. For example, Yahoo is distracted. The door is open for competitors to create and market a better photo sharing service than Flickr. Or a better finance site than Yahoo Finance. Those are both powerful leaders, but it’s pretty clear that Y! would have some trouble investing in their product heavily and quickly enough to protect those businesses if a new site gained momentum.

These are the kind of upsets I believe we can and will see in the coming couple of years.

Is Googoliath distracted? Is there the same opportunity there? Certainly not like GM and Ford, but it’s clear that there is a lot of activity going on and focus seems to be fuzzy at best. I’d love to see someone make a bet that they are distracted, at least in delivering the next generation of core information search. That one is a good bet for a future competitive beach head.

I said small was good, what is this about competing with big businesses? Remember, small is not a measure of revenue – it’s a measure of clarity, strategy and operating focus. Upsets are frequently led by the single-minded company on a mission. IBM was distracted and both Microsoft and Apple were born. AltaVista and Excite were distracted and Google was born. Who’s next? If your company, division, or project can follow the Small principles you’ve got a shot.