New Book Details the Competitive Advantages of Successful Challenger Brands

Every person who has ever heard the story of David and Goliath rooted for David to win. Nobody aside from the rest of the Philistine army the day he fought David has ever rooted for Goliath. It’s easy to become emotionally invested when an upstart, or more often a startup, underdog challengers whatever person, team or corporation that has been on top and taking it for granted for a long time.

A recent book, The Voice of the Underdog: How Challenger Brands Create Distinction by Thinking Culture First by Mike Sullivan, president and CEO of LOOMIS, a leading challenger brand advertising agency, and Michael Tuggle, an award-winning creative director and writer for more than 25 years, makes the case that startups have inherent advantages that dominant brands either lack or have lost due to sheer size. We sent Sullivan and Tuggle a few questions about the attrition rate for startups and what is different about the ones that succeed.

Grit Daily: You say there are the distinguishing characteristics of a challenger brand, but aren’t those characteristics mostly seen in hindsight? Since startups are almost by definition challenging bigger companies, and most startups flop, what characteristics are you referring to?

There’s no question challenger brands do have distinguishing characteristics – they tend to be smaller, scrappier, and undercapitalized. And true, those characteristics are fairly apparent from the jump. What may not be apparent until later is how a challenger brand leverages those characteristics to find success. Most often their success is predicated as much on HOW they are as WHO they are. At their core, challenger brands have to know three things – who they are (state of mind), where they stand in the market (state of market), and maybe most importantly, how ready they are to go to battle (state of readiness). Challenger branding is not for the faint of heart. And for all its potential glory, being an underdog is hard work.

Yes, most startups are by definition challenger brands and yes, most of them flop. Clearly there are a number of factors that cause those failures. But there are also those who fight their way through and succeed despite all the challenges. Apple. Chick-fil-A. Netflix. Red Bull. Southwest Airlines. Liquid Death.

To succeed, challenger brands need four things:

1. a challenger strategy – not for how to play the game better, but how to change it
2. a challenger promise – a promise grounded in authentic difference that the brand’s competitors cannot easily duplicate
3. a challenger statement – a clear line in the sand about who the brand is for and just as importantly, who the brand is NOT for
4. a challenger voice – a distinct, authentic voice the brand can own.

Most startups are so focused on product, or financing, or distribution that they never stop to get these things right first. At that point, failure is almost inevitable.

Grit Daily: You contend that challenger brands have “inherent advantages” when they try to take on the dominant companies in their category. Such as?

In our book, The Voice of the Underdog: How Challenger Brand Create Distinction By Thinking Culture First, we list a dozen distinct advantages challenger brands can take advantage of. Again, it’s up to the individual underdogs to leverage those advantages, but they’re all there for the taking. Here’s a quick summary of the 12:

Everyone Pulls For the Challenger: As human beings, something deep inside us is hard-wired to root for the underdog. And when the narrative includes a notion of redemption, or overcoming overwhelming odds, we root even harder. Smart challenger brands understand the masses are rooting for them to succeed, and they leverage that by giving consumers an emotional reason to connect. With the dawn of the digital age, the barriers to supporting smaller challenger brands have been removed. It doesn’t matter if there isn’t a brick-and-mortar store near my house. I have a phone and a credit card. All I have to do is walk to the mailbox. We have a collective desire to see the little guys succeed. In them, we see a little piece of ourselves, and we know that if their idea was ours, we’d sure want people supporting us. 

Competitors Underestimate Challengers: Call it overconfidence, misinformation, or hubris on the part of those at or toward the top of the food chain, but one of the great advantages to being an underdog is that competitors, and especially category leaders, almost always underestimate you. They can’t help it. When you’re on top, it feels like the world is yours and that you get to dictate the rules of play. There’s an ever present “We’re Number One” confidence that infuses everything. But what leaders forget is that while they’re catching their breath from reaching the summit, or resting on their laurels, their challengers are doubling their efforts to figure out how to bring them down. Brand leaders, in fact, often fail to acknowledge the real threats posed by their smaller competitors until those threats are knocking on the door catching them completely by surprise. Historically, it’s in that moment when companies make really bad decisions in response. It even happened to the biggest brand in the world. Remember New Coke?

It’s Easier for Challengers to Fly under the Radar: Corollary to big brands underestimating challenger brands is the ability of smaller companies to fly under the radar. How many times have you discovered a “new” company, either on your own, or on someone else’s recommendation, only to find it’s a huge deal? Long before they were part of the national consciousness, Uber, Camp Gladiator, and Airbnb were methodically and systematically going about their business, converting new fans, and quietly (at first) disrupting everything we know about transportation, gyms, and hotels. They were simultaneously small underdog companies trying to crack their way into difficult, competitive, expensive categories. They won by doing things so completely differently from their competitors that no one paid any attention. Their “state of readiness” wasn’t, “How do we win the game?” It was, “How do we change it?”

Challengers Can Be More Nimble: According to Newton’s First Law of Motion, the bigger and heavier an object is, the harder it is to move. In other words, if the Titanic had been a bass boat, the iceberg wouldn’t have been a problem. The same goes for brands. Often, the bigger they are, the more difficult they are to maneuver. More offices, more people, and more management levels require more effort, more planning, and more time. By contrast, smaller brands have less of everything and should be able to move much faster. Being small can be a big disadvantage when it comes to things like manpower and cash flow. But it can also be a huge advantage when it comes to moving quickly. If you’re small and not moving nimbly, something is wrong. Figure out what it is and fix it. Look at any situation where David beat Goliath, and you can be sure swiftness and agility played a role.

It’s Easier for Challengers to Build, Adapt, and Maintain Their Cultures: Building and maintaining an authentic, inclusive, sustainable culture is crucial to the success of your company and your brand. More often than not, uber-successful brands have and maintain a distinctive culture. They know who they are, and they live into that identity on a daily basis. Think Apple. Pixar. Chick-fil-A. Whole Foods. Those companies are four of the biggest disruptors in history, and each one has a culture that’s envied by companies everywhere. And here’s the secret: They didn’t build the company and then create the culture. It was there from the beginning. Because of their size and their concentrated leadership, it’s easier for challenger brands to build, adapt, and maintain their cultures. Too often, it’s an afterthought. But for those with the vision and discipline to build their culture from the beginning side-by-side with their brand, there are advantages that simply cannot be manufactured on demand.

Challengers Remember How to Hustle: One of the core tenets of challenger branding is that they find a way where there is no way. Underdogs are fighters. They’re tenacious. They don’t give up. The Greatest Generation called that “hustle” and it’s a concept most challengers are intimately familiar with. Because challenger brands don’t have the budgets and resources that category leaders do, they are forced to achieve more with less. That starts with smarter strategies and better creative work, but it also means making the most of the resources at your disposal. When you have to hustle for something, it makes you want it and appreciate it that much more.

Challengers Often Have More Consolidated Leadership: While not an absolute, more often than not, challengers tend to have more consolidated leadership than category leaders. When that leadership is strong, it can be a huge advantage. With every layer of leadership comes a need for more time, more communication, and more coordination to get anything done. Not only that, every layer of leadership puts employees one step further away from the brand leaders at the top. It’s not that smaller works and bigger fails. It’s simply a different dynamic requiring a different kind of leadership. Where the advantage lies for challenger brands is that smaller makes it easier to engage your people on a personal level. To help them see and understand the vision for your brand. To make them feel part of something special and bigger than themselves. The challengers who fly are the ones with smart, humble, passionate leaders who take advantage of their size by engaging their people personally.

Challengers Can Go Where Big Brands Can’t, or Won’t: One of the most fascinating aspects about challenger brands is that they often go where big brands either can’t or won’t. Part of that is due to the sheer size of category leaders. Some of it is due to their mindsets, a reduced appetite for risk, or the fear of what taking chances might do to the stock price on Wall Street. Truthfully, there are dozens of reasons why big companies tend to be safe, stodgy, and sedentary. And while you can justify all of them, those rationales also open the door for underdogs who are willing to take a chance. Think Apple leaning into home computing when IBM wouldn’t. Or Zappos selling shoes through the mail. Blockbuster: “Our customers love coming to their favorite rental store. They won’t do anything different.” Netflix: “Watch them.”

Challengers Attract Talent Who Want to Make a Difference: One of our favorite business books ever is a book by Simon Sinek called Start with Why (2011). In it, he explains that great and inspiring companies understand not just what they do, but why they do it. Challenger brands are all about questioning the status quo, thinking differently, and changing the world. Which do you think sounds more appealing to great thinkers, innovative leaders, and people with the kinds of mindsets you need to go after the category leaders? The disruptive upstart company looking for innovative thinking and new paths, or the established leader who’s just fine doing things the way they’ve always been done. Challenger brands attract people who want to make a difference, who want to make an impact, but only if that’s the kind of company you are authentically from your core through to your culture.

Challengers Have a “Change the Game” Mindset: One of the greatest commercials that has ever run (from one of the greatest campaigns) was a 1997 Apple commercial created by TBWAChiatDay called “Think Different.” In it, over a montage of the world’s most innovative thinkers and artists from Einstein to Gandhi to MLK to Picasso to Jim Henson, a voiceover says:

Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules and have no respect for the status quo. You can quote them, disagree with them, glorify, or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.

It’s no shock that this spot came from one of the great challenger brands of all time, or that it was Apple (and their agency’s brilliant creative team) who so beautifully articulated what it is that sets underdogs apart from the rest of the pack. Great challenger brands don’t sit around thinking of ways to win the game. They think about ways to change it. If you’re a challenger and you’re stuck playing your competitors’ games, you’re missing out on one of your key advantages. Find your way to break the mold and then commit to it.

For Challengers, Time Is of the Essence: When you lack unlimited resources, you can’t afford to sit around and take your time with things. Who are we kidding? When you’re the underdog, it’s always “Go Time!” And while that may tend to amp you up a bit, make no mistake–a real sense of urgency can be a big advantage. As much as we may not want to admit it, folks who work for us tack off of our behavior, our moods, our energy, and our excitement. If we’re all in, they will be, too. And as the underdog, we don’t have forever. Our competitors are too big, too well compensated and have too many resources. They can wait us out, buy us out, or smoke us out, and if we’re content to sit back and watch, there’s little we can do about it. For challengers, time is of the essence. If you really want to go after the leaders, stop dreaming, and start disrupting. And if you fail? Get back up and swing harder.

No One Expects Challengers to Win: Nobody expects the underdog to win. As spectators, we hope for it, we root for it, and we cheer for it. But in our hearts, we know it’s probably not going to happen. The same is true when our competitors look at us. They’ll pat us on the head. They’ll acknowledge we’re in the game. They might even pay attention to what we’re doing from time to time. But they’re not sweating a hostile takeover. And that’s right where we want them. As an underdog, one of your greatest advantages is being underestimated. Ask Buster Douglas. Rulon Gardner. The 1980 U.S. Men’s Olympic Hockey Team. In sports, we talk about teams “playing loose,” or “not playing tight.” In essence, playing like they cannot fail. When they so choose, challenger brands can take advantage of the same energy. Work hard. Be smart. Leave it all on the court and be good with whatever happens.

Grit Daily: How is company culture a fundamental challenger brand advantage?

For challenger brands that tend to be smaller, more centralized, and nimbler than the category leaders, building a great company culture can be easier and happen more quickly with the right leadership. For challengers who understand the power of culture, it becomes a brand asset that instantly makes them more competitive. Those who ignore culture do so at their own peril.

Here’s the thing – companies have a culture whether they think they do or not. Culture is like the air we breathe. We don’t always see it, and often, we can’t feel it. But in ways we can’t perceive until we physically feel its effects, culture can inspire us and fill us with the energy and heart to reach beyond our wildest limitations. It can also turn toxic and kill us on the spot.

Company culture is everywhere we work, affects everything we do, and it’s something from which we cannot be separated. When companies have no discernable culture to speak of, employees will note the lack of it and privately sense how much they wish their company had one. But when cultures are strong, people who work in them will describe the culture as palpable.

Great cultures don’t happen by accident. They’re intentional. And if you’re a leader of an agency, or a company, or a brand, or any other enterprise where people are working to realize a vision, it’s incumbent that you take the reins as the author of your culture. A positive, supportive, empowering culture affects everyone and everything it touches right down to your product, your delivery, your menu, and the relationship with your customers. Considering the cost to build a transcendent culture, the ROI is exponential.

Grit Daily: Realistically, what can leaders do to build and maintain a culture that strengthens its brand?

In the book, Chapter 12 lays out a detailed, step-by-step blueprint for how challenger brands can build an extraordinary culture from scratch. In short, there are seven elements we believe are essential to creating the kind of transcendent company culture that can help challenger brands compete and win against the category leaders. We call those elements “The Magnificent Seven.” Here’s a snapshot:

SAFETY: Every culture begins with safety. If your team members feel unsafe in any way physically, mentally, or emotionally at work, it’s very difficult for their hearts and attention to be focused on doing a great job for your company and clients. Safety isn’t about coddling people, building safe spaces, or making exceptions. It’s about creating a supportive, empathic environment where people can be the best versions of who they are. Why would you pay them what you’re paying them to be anything else?

VULNERABILITY: When you decide to create a strong company culture, know this: there is great value in admitting you don’t know everything. You are not required to have every answer. And if you’ve hired well, you should never be the smartest person in the room. You cannot build your company by yourself. When you are honest enough with both yourself and your team to not just lead, but empower your people to take control, drive the work, and receive the credit, amazing things happen. Your employees thrive and so does your company.

PURPOSE: Mark Twain once said, “the two most important days of your life are the day you are born, and the day you find out why.” Purpose is awesome. It’s powerful. Of all the elements a transcendent company culture comprises, purpose could be the most galvanizing. It’s also the one we tend to overthink. If the goal is building an enduring, engaging, inspiring company where people want to spend their careers, purpose is about discovering what lies at the heart of that for you? What do want to be known for? What lighthouse beacon of an idea would you be proud to grow your company around? When you invest the time and energy to figure out your purpose, you give your team something noble to align with. When you do that, you give them the chance to make the changes to the world they most want to make.

BELONGING: Everyone wants to belong. It’s a primal need that’s as important professionally as it is personally. Today, many companies want to shy away from getting personal. If that’s your mindset, you’re doing yourself and your team a huge disservice. The ONLY way your employees will buy into and help curate your company culture is if it is personal. Those interactions, those relationships, those unexpected, delightful collisions we experience at work are how we make sense of our belonging. Meaning at work doesn’t just come from tasks done well. It comes from relationships formed and the sense of belonging they give us.

CREATIVITY: How do you create a strong company culture? Get creative. There’s an unfortunate miscalculation in most organizations that the people who should do all the creative thinking are those who are formally trained to do so – the writers, the art directors, the designers, digital artists, illustrators, and photographers. Clearly, companies must have a division of labor and yes, your creative team should be responsible for the lion’s share of the creative work. But to build a great culture it’s imperative you empower everyone in your company to think creatively. Great ideas can come from anywhere.

CONNECTION: We live in a world of instant gratification. But that’s not how connection is built. Connection takes time. Commitment. Intention. And vulnerability. At a time when record numbers of people are resigning, “quiet quitting,” and looking to change jobs, connection is a lesson you must pay attention to if you have any hope of building a great company culture. Genuine connection is about physically doing life–and business–with people you love and trust. For many companies, that’s easier said than done. But when you get it right, people stick. Increasingly, young people come in the door wanting to make an immediate difference. Imagine a place where we foster inclusion and diversity and where we show empathy, and genuine concern for our coworkers. A place where we’re open, transparent, and when necessary, apologetic. People don’t leave companies where they feel connected.

LIGHTHOUSE LEADERSHIP: In challenger branding, we talk about brands having a “lighthouse identity.” An identity based on an authentic truth that burns so brightly even those not looking for it will see it. Lighthouse Leadership is what happens when self-aware leaders have crystal clarity about who they are, where they want to take their companies, and how they intend to get there. Your team doesn’t need a manager. They need a beacon of clarity. They need an inspired thinker. They need a champion who can build them up and lead them into battle with clear direction, conviction, and support. Every lighthouse leader should be the first person asking how to create a strong company culture. To actually create and curate it, your entire team has to take ownership. But it starts with you. It starts with a leadership vision and purpose big enough and clear enough to catalyze your entire team. You as a leader are not scalable. But your leadership is.

Grit Daily: You suggest putting HR and Marketing into the same office, which presupposes they even have offices, but that aside, what is the basis of your suggestion?

When they asked Chick-fil-A founder Truett Cathy how he trained such great employees, he basically said, “We don’t. We hire them.” In his seminal book, “Good To Great,” Jim Collins discusses the need to first “get the right people on the bus” before you should worry about where the bus is going. Hiring well is crucial to success and for challenger brands it’s even more imperative to get that right.

Whether it’s a restaurant, a shoe store, or an airline, the way customers feel about their interactions with the people serving them on the frontline is the heart of the brand experience. Each exchange either strengthens or weakens the customer’s bond with the brand. And what customers think about a company and the way it treats them has the power to make or break that relationship. Great products and smart advertising are potent marketing weapons, but the customer experience trumps everything. That’s why it’s so crucial that companies build great cultures and pay attention to their people.

The best advertising leverages something inherently true and valuable about a brand and delivers it to current and new customers in a compelling way. Advertising invites people to experience the brand and makes an implicit promise to deliver what it’s selling. If that promise is broken by a surly, inattentive, or otherwise disengaged employee, more harm than good is done to the brand. When the customer’s experience of the brand–his or her impression of what it’s like to do business with the company–fails to meet the expectation set by the advertising, it creates a disconnect. That disconnect is often irreparable, and in some circumstances, it has the power to create a passionately disaffected customer, otherwise known as a “brand terrorist.” Research on word-of-mouth communication suggests people are 10 times more likely to talk about a negative experience than a positive one. And social media makes it easier than ever to share that misery with the world.

On the flip side, great customer experiences have the opposite effect. An army of wildly satisfied customers can function as brand ambassadors or “evangelists” and dramatically reduce the need to advertise in the traditional sense. Starbucks, Harley-Davidson, and The Container Store rely almost exclusively on positive customer experiences to do the bulk of their advertising for them. And while Chick-fil-A is a heavy advertiser, the company’s high customer service level allows it to steer clear of promoting product discounts, a margin-erasing tactic that drives the rest of the industry. Instead, Chick-fil-A uses its advertising dollars to build and reinforce its already formidable brand and to create further identity distinction in a category consumed by parity. As a result, its legions of loyal followers are the envy of the industry as are the revenue and profits the brand generates per location. That’s what happens when you hire the right people.