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July 11, 2018

The biggest secret on beating an industry monopoly.

Britannica, the most successful encyclopedia business for 244 years failed, not to World Book, but to the internet.
Yellow Cab, failed not because of their competitors, but (likely) to Uber / Lyft.
Walmart closed stores, not because of K-Mart / Sears, but because of Amazon.
Ted Levitt (the Harvard profession that coined the word ‘globalization’) says the railroads are failing because they think they’re in the railroad business, instead of the transportation business.
Phillip Morris isn’t losing to Kool or Camel, but to vaping.

Sometimes you can beat monopoly going head to head (Facebook vs Myspace, Walmart vs Sears, VHS vs Betamax).
But it may be easier / faster to beat a monopoly by competing out of their industry.

Sometimes these are the easiest wins because:

a) there’s not as many businesses competing with monopolies from outside the industry and
b) monopolies have become monopolies usually from being exceedingly focused on their competitors, and don’t see treats from outside the industry. There’s many stories like Walmart saying Amazon was a blip and was in a different industry than brick and mortar retail, UPS and FedEx have said Amazon Logistics is in a different industry (we don’t know what will happen here), Britannica said Microsoft’s desire to distribute the books on CD-ROM wasn’t their competitor.

Businesses that beat monopolies either start with a more specific customer, or a much broader one.

More specific:
1) Twitch took the gamer segment of YouTube
2) Facebook started with college kids only before expanding to compete directly with MySpace

Broader:
1) Railroads vs Transportation in general
2) Cab companies vs public transit / Uber
3) Wikipedia’s product was education for everyone vs Britannica that wanted to provide a product for the wealthy

If you’re looking to compete with a monopoly, the question becomes not so much “how can we be better” as much as it’s, “How can our market be more broad, or more specific, or what outside industry could we compete from?”

 

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