A monopoly is simply an advantage you have for a temporary period of time. You could be the only grocery store within a 10-mile radius or the only process consultant or the only financial consultant who is an Italian (not in New Jersey) that belongs in the local chamber of commerce. Think of yourself and your business. There are unique things about you and your business that give you a monopoly.
No, that’s not a bad word. Most people think of illegal monopolies, this is a legal one. It is simply an advantage until another grocery store pops up or another process consultant joins the chamber or another Italian financial consultant joins the chamber. What is your monopoly and how are you taking advantage of it? For insight, you can watch my interview with Milind Lele, author of ‘Monopoly Rules’ He discusses how to analyze your business to find hidden monopolies.
Some people have spent the time to identify their unique selling proposition. That USP is often their monopoly. Of course, all monopolies have a unique selling proposition--their monopoly.
By definition, if you operate in a niche, you are serving the special needs of that segment. And, chances are the customers in that niche see you as the only supplier or as one of the few suppliers capable of providing the product or service. Over time, they come only to you for your product or service and are willing to wait because they want your product or service. At that point, you have a monopoly. Over time, they also become price insensitive, enabling you to have sustained revenues and high margins.
Huge profits come from creating breakthrough value propositions. And there are many ways for midsize companies to become the only game in town, says Milind Lele, author of Monopoly Rules. Lele cites Panera Bread as an example of a situational monopoly, by bringing together several commonly available factors in a way that creates a unique niche in the marketplace.
The threat to your monopoly comes from your arrogance – when you don’t keep those niche customers happy. Once unhappy customers find alternatives, they will flee and not return. Another threat to your monopoly may come from competitors whom you ignore–generally somebody doing a portion of what you do, a cheaper version of what you do or serving a different market.
If you currently enjoy a monopoly, remember that it will only last for a finite period of time. Enjoy the predictable revenues and outsized profit margins while they last. A good investment of some of those profits will be in R&D, to find your next monopoly.
Ram Iyer is the founder and president of The Midmarket Institute.