Size does matter

Voltage is known for its innovative technologies. We're also a small company. It turns out that that might not be a coincidence. I learned this while reading "Entrepreneurial Risk and Market Entry," by Brian Wu and Anne Marie Knott. This paper talks about two things that I found interesting. The first relates to how risk-averse entrepreneurs are. The second relates to how big companies behave differently that small ones do.

One of the common misperceptions about entrepreneurs concerns their willingness to accept risks. It turns out that entrepreneurs really don't like to take risks – they're actually more risk averse than average. This is apparently balanced by their overestimation of their own abilities. They think that they're smarter than they really are. This means that they'll do things that others wouldn't think to do. They don't do these things because they willingly accept risk. Instead, they accept the risk because they don't know any better. Economists call this the difference between "demand uncertainty" and "ability uncertainty."

When it comes to big companies versus small companies, it turns out that there are three big differences in how they behave. Big companies tend to have broad and general strategies, which leaves parts of markets under-served. Small companies tend to take advantage of this and go after the under-served parts. Large companies tend to engage in slow and gradual innovation, while small companies tend to engage in more radical innovations. And when big companies do innovate, they tend to abandon their innovations because they don't fit well with their existing plans. Small companies don't do this.

Not surprisingly, this sums up fairly well how Voltage has succeeded. Larger security companies have broad product strategies in which encryption is just a small part. These strategies didn't create products that made secure email easy enough for most people to use, which left the opportunity for Voltage to succeed with its SecureMail products. The ease of use of SecureMail is based on identity-based encryption, a fairly radical innovation that makes encryption simpler and easier to use. Just to show that we follow all three of the differences that Wu and Knott list, I could mention that we don't have any plans to abandon our IBE technology, but that should be fairly obvious.