Dear Startups, Only Monopolies Win (Even when there's competition).
Dear Startups,
Another short note on why you should be thinking deeply on building a monopoly (however small it may be) at all times. I've said this on my earlier note on the topic: For a given point in time/technology - a business problem has only one optimal solution, leading to a broader "monopolies win" philosophy.
The reality is that more than one company in an ecosystem usually reaches the same point in solutioning for a problem - inevitably leading to competition. The following sequence ensues:
- Significant spend into upstream marketing i.e. a marketing show of arm-wrestling
- Many loss-making decisions with a "long-term" market domination view
- Investment into larger sales teams (sometimes this = more offices)
- Price competition
- Margin erosion
- Eventual need for consolidation and inter-linked ecosystem
- Actual consolidation.
There's a way to avoid this value-destroying arm-wrestle:
Drop Steps 1-6, and consolidate early. Create a new monopoly.
In a masterstroke, we saw Uber do this in China recently, although they did embark on Step 1 before taking a call that it wouldn't be worth it. Recent news is of regulatory checks here, but let's not allow that to distract us from a strategic masterstroke.
Uber and Didi know the basic tenet of startups: Competition is for suckers.
nly Monopolies win.
