Most people know the story of young David who felled the giant soldier Goliath with a single well-aimed stone from his slingshot. The story has given hope to many people in many situations - the little guy really can win. The little guy can take on a "giant" and win, despite the apparent impossibility of winning. This story can also tell us something about how the small firm can win in competition with big firms by creating a micro-niche or boutique business with which other firms - including big firms -- cannot directly compete.

David and Goliath

Everyone knows the story of little David fighting Goliath. Clearly, the situation favors the giant, who is well armed and wearing his typical soldier's armor.

When David stepped onto the field of battle, everything about the competition changed.

• First, David did not need to be in close physical proximity to Goliath in order to strike a blow - he could remain on the edge of his stone-throwing range.

• Second, he changed the weapons. Who would ever have thought you could win a war with a slingshot and a single stone?

• Third, David had the element of surprise on his side. Goliath probably laughed when a smaller man with no armor and no apparent weapons stepped upon the field for battle.

• Finally, David defeated Goliath because he "changed the game," so to speak. He did not engage in direct combat on Goliath's terms. David stepped outside direct competition, introduced a completely new element with which Goliath could not compete (because his weapons required close combat) and carried the day.

What Small Firms Can Learn

Small firms can compete successfully against big firms by sidestepping a direct competition in which they cannot hope to win. Small firms can win by setting themselves apart from the crowd of their competitors by building micro-niches or by creating boutique businesses within their firms. The point is to create some unique niche or micro-niche business with which your competitors cannot compete. Learn from David.

For many years, businesses have been creating success by building a micro-niche that meets a clear client or customer need and also offers value to the client. By listening to clients and understanding their needs and discovering their pain points, it is possible to build a micro-niche that can become the boutique business that brings in clients for all of the firm's services.

Principles of Micro-Niche Building

1. If there is no customer need, there is no need for the business.

2. Innovation is a new response to client needs that opens new and focused opportunity.

3. Many customer needs are "pain points." These are conditions, products, or services that cause frustration or pain. For example, a customer pain might be the time they must wait to realize the benefits of a service you provide. A customer pain might be that they do not like the way a report is formatted.

4. Developing an innovative service, delivery method, etc. in response to customer pain creates higher customer value. Customers will pay more for high value products and services.

5. Creating unique or distinctive capabilities (like a boutique business within your firm) will draw clients who need those distinctive capabilities. The more difficult it is for your competitors to replicate the knowledge or experience that enables the new capability, the more specialized clients you will win.

6. Clients will pay premium prices for innovative solutions that meet their needs - eliminate their pain - and cannot be found elsewhere.

When you can define a client need that is shared widely enough and that you can meet by building a niche through an innovative service, method of delivery or other characteristic that directly responds to the client pain or need, you can create a premium boutique within your firm that will bring new clients and that will sell the premium service to some of your existing clients.

By stepping outside the usual range of competition, by changing the nature of the competition, and by competing on the basis of your unique strengths, your small firm can win the new clients you need with your new micro-niche. By listening to your clients, you can identify their pain points. With some creativity and imagination, you can develop innovative responses to alleviate or remove the pain. Then you can charge premium prices for boutique products and services while also cross-selling and up-selling other products.