Business Lessons from California Chrome’s Win in the Kentucky Derby

CaliforniaChromeSteve Coburn and Perry Martin laughed all the way to the winner’s circle this last weekend as their horse, California Chrome, made history as the first California horse to win the coveted Kentucky Derby title since 1962. This horse did not come from horse-racing royalty. Perry, a press operator at a small Reno company that makes magnetic strips for credit cards, and Coburn, who helps run an equipment test lab, were mocked by peers and called “dumb asses” when they bought Chrome’s mother, a supposedly worthless mare. Not to be deterred, Martin and Coburn promptly named their venture “Dumb-Ass Partners,” or “DAP,” and employed an 80-year-old trainer–the oldest trainer in the history of the Kentucky Derby. California Chrome won Saturday’s $2 million Derby by a length and three-quarters in front of the second-largest Derby crowd of all time.

This was a victory of David over Goliath–uncommon in the horse racing industry, but surprisingly more common in business. As I reflect back on my work of nearly 35 years in the computer industry, I am struck at how many times a smaller, seemingly disadvantaged company, has risen to the top of the industry.

By the way, don’t confuse California Chrome with Google Chrome despite the fact that they were both born in California. The horse, California Chrome, is not Google Chrome – the dominant Internet Browser. No, that Chrome was born and bred by an acknowledged Champion – Internet royalty one might say – Google. Chrome owns nearly 50% share of the Browser market.

The lesson from California Chrome is this: Don’t listen to the critics who say it cannot be done. Remember this: “Whoever is trying to put you down is already below you.”

The challenges that a big company has in innovating in new markets and winning are numerous. Clayton Christensen writes about this in his book game-changing book, The Innovator’s Dilemma, where he explains that successful companies have to put too much emphasis on their current customer needs and fail to adopt new business models. 

Other problems that I have observed in large companies which make them innovation poor include:

  • They have difficulty managing all of their people. Herding cats is no easy chore.
  • Their products are subject to sprawl because so many people are working on them.
  • There is an inherent distrust in larger organizations. Nobody feels comfortable creating the next great technology.
  • They are lazy in their approach to the market in finding emerging market trends.
  • Someone once said that there is inverse relationship between the size of a company and its speed to market.

Even Mark Zuckerberg, recently stated:  

“Facebook is growing up, swapping its grow-fast, fix-it-later mentality for a more mature business strategy. We’ve changed our internal motto from ‘Move fast and break things’ to ‘Move fast with stable infrastructure.”

But a warning to Facebook: Never lose that small company innovation mentality.

Smaller companies have at least five distinct advantages: 

  • They can have a laser focus. When you are California Chrome, you are the only horse in the stable and you are going to get a lot of attention.
  • A small company can truly build its products to address very specific market needs. They are not weighed down by larger systems and legacy programs.
  • Smaller businesses can adjust on the fly and change their business model overnight to adjust to emerging market trends.
  • Through the use of technology, a small business can look and feel like a larger one to potential partners or customers.
  • Small companies can fail quickly and move on. Their ability to iterate on new product innovations is vastly superior to a stodgy behemoth.

So, next time you feel like the world is against you and you don’t have a chance, remember you, as a small company, have a number of advantages. Go ahead. Persevere. Think of the newly acknowledged world champion of horse-racing California Chrome. You can build a company or a racehorse from virtually nothing and still win. I once heard that in the end, we only regret the chances we did not take.

Congratulations to Martin, Coburn, and California Chrome- they are the little guys who dreamt big and pulled it off. 

Posted in Posted in Entrepreneurship, Lessons Learned, What I Learned From  |  0 Comments

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