The Hindu Business Line : It's not about competition, it's about monopoly

Conventional wisdom about winning in business is this: "The best products at the lowest prices, a great brand, superior management, and the lowest overhead."

That may just be the ideal combination you could be dreaming of. At least, till you listen to Milind M. Lele. "All are obviously of great importance, but in actuality anyone can achieve them," he points out in Monopoly Rules, from Crown (www.CrownBusiness.com) . To win you need a different approach.

What you need are `step-by-step guidelines for success in a world in which the mass market is in tatters', and the book tells you `how to find, capture, and control the most lucrative markets in any business.' How? By turning conventional wisdom on its head and saying that business is not about competition, `but about monopoly'!

You may shake your head and scream, `It can't be!', remembering your economics teacher who taught you that monopolies are `unnatural, illegal, and rare.' Wrong lessons, rues Lele. "In fact, monopolies are often natural, usually legal, and surprisingly common." He offers a range of `monopoly' examples, from Hilton near the O'Hare airport in Chicago, to HP ink-jet cartridges, where customers have only one choice - "to pay the price demanded, or go without."

Focus on ends, therefore, rather than means, urges Lele. "The business leader needs to ask the fundamental question, `What kind of monopoly can our company own?' rather than concentrating on strategies for product development, finance, marketing, or sales, in hopes that they will (somehow) lead to profits."

The difference between the two approaches is taking `a shot at earning good profits for the foreseeable future' versus becoming `someone else's dinner - probably sooner rather than later.' Well, if you don't want to end up as the competitor's meal, it is better to start from the basics. Such as: what is monopoly? "By monopoly I mean simply a company or a business controls an ownable space for a useful period of time," defines Lele.

Thus, space and time are `the two dimensions of monopoly.' Space can be tangible, as on a supermarket shelf. Or, it can be intangible, as in the case of Standard & Poor's, with `a long history of dominance that has made its brand practically synonymous with the product or service it offers.' Space can also be defined as a geographic exclusive, product or service uniqueness, price difference, custom, or intense emotional involvement. The other dimension, time, "must be long enough to give you a reasonable chance of recovering your investments," he explains.

Monopoly, according to Lele, need not be large as painted by `economics 101'. A prominent example that he cites is of Honda: the company could capture one-third of the profits, even while controlling less than 10 per cent of the US minivan market, because the Odyssey had seats that folded flat.

"Monopoly is at the heart of every successful business," declares Lele. "Pursuing it is not only moral but essential for anyone interested in creating a company with lasting value." This is not about SCA or `sustainable competitive advantage', clarifies the author, because SCA "does very little to shed light on some of the most startling success stories of the last dozen years," including Starbucks.

The end of the book addresses a crucial question, "What to do when the monopoly ends?" You have two choices, says the author. One, "create a country club with a few rival firms fighting genteelly for market share - with your own company in the role of industry leader". And two, "slash-and-burn", meaning you begin `cutting costs and prices ferociously' to ultimately `create a desert, and call it peace,' because, in the process, you would have commoditised your own products `rather than wait for someone else to do it to you'.

Insights of immense value.

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D. Murali