“Do Not Pass Go”
Rolling the Dice on Modern Monopolies
By Mike Dea
President John F. Kennedy wasn’t addressing business when he spoke these words, but they have more weight in today’s economy than ever. It’s been reported that America is currently undergoing a “Competition Crisis” — one that has made the economy less dynamic thanks to the dominance of major corporations. Monopolies are on the rise as mergers are happening more and more frequently, and that consolidation makes it increasingly difficult for smaller and younger firms to survive.
Consolidated markets set the rules of engagement for younger firms, usually to the younger company’s detriment. Oftentimes, an upstart touts the benefits of its new products, or invests in a sophisticated and glamorous marketing campaign to build brand awareness. These tactics are pulled from the playbooks of the behemoths new players are trying to unseat, but several problems arise when it comes to trying to beat the Titans of Business at their own game. Smaller firms are at a disadvantage hiring talent, deploying marketing campaigns, in pricing, and certainly in M&A activity, but the fundamental problem disrupters face is they’re following the right of way carved by their direct competitors.
As markets become increasingly concentrated, and consensus grows that the system itself needs to be revamped, building a company whose goal is to compete needs to change the rulebook of their industries.
Companies operating in consolidated markets are able to set the rules of the road precisely because they don’t have a lot of competition. Comcast is a poster child for how American companies have rapidly expanded via consolidating their industries, and can then proceed to operate without real thought because customers don’t have many alternatives. The regional cable operator transformed itself into the dominant national provider by vacuuming up competitors, and has sought further dominance over the entertainment ecosystem through the purchase of businesses as far ranging as Hulu and NBC Universal.
Comcast is the dominant force in the market, and aware that the optics around this aren’t always positive. When an Atlantic writer made an offhand comment about tech consolidation in his area, the firm responded by delivering ten pizzas to his door. The writer thought this was manipulative, and he wasn’t wrong; Comcast attempted to appear responsive to its customer base by throwing money at a problem whose root cause was much deeper than just a few pizzas. Comcast ultimately cares little about fixing their 2.7 star customer service rating because there are only a handful of options its customers could flee to.
Comcast may be able to indulge the fad of corporate anthropomorphizing, but other companies have been able to expand into new, competitive markets because of their willingness to change the conversation. PhillyWisper, a fixed wireless provider operating in Philadelphia, is still small with customers numbered in the hundreds, but instead of trying to compete with Comcast (also based in the City of Brotherly Love) on expensive infrastructure, it changed the model. The company doesn’t rely on deploying cable to its customers the way Comcast does, but instead establishs connections through a wireless network that provides reliable internet connection over a given area. And PhillyWisper isn’t the only startup to growing in the restricted market of telecommunications; companies like Starry and Common Networks are also utilizing this system, which has been so successful that even Verizon has sought to implement some of the changes these companies are making to the telecom industry. Big players might have the advantage of the fiber backbone, but they lack the nimbleness of an upstart willing to embrace new technology.
Young companies must be both highly personalized and willing to take risks that companies in consolidated markets don’t have to. Beyond Meat, for example, began as an idea to change the public’s relationship with animal-based proteins by offering a substitute that behaves and tastes like meat, but lacks the damaging effects of cholesterol and CO2 creation that accompanies traditional beef production. The market for both vegetarian burgers, and traditional animal proteins, are crowded and established. Rather than allowing Beyond Meat to be positioned as a vegetarian option, the company’s founder sought to ensure that people knew Beyond Meat was a true meat product by turning down a partnership that would have relegated it to the vegetarian section of the supermarket, as such a decision would have undercut Beyond Meat’s mission, and negated its most important advantage.
The company’s popularity has caused it to exhaust its supply multiple times. Beyond Meat has changed the rules for the $1.4 trillion meat industry; Beyond Meat wasn’t a slaughterhouse, had no farms where cattle were raised en-masse, but it still considered itself “meat,” and consequently refused to generate the short-term gains that would have come from selling its product in the vegetarian section in favor of building partnerships that understood what Beyond Meat was trying to accomplish. Further, Beyond Meat makes a point of emphasizing that it is not part of the vegetarian and vegan crowds, but rather positions itself as a company that believes more sustainable food choices should be something people can accomplish given how far civilization has come. It challenged the meat industry head-on….and won.
A direct challenge to these established industries is undoubtedly difficult. Changing the game may require a simple recognition of the design gap that arises when a company becomes too set in its ways.
Ford does not fit the profile of an upstart looking to disrupt things. It is a larger company, and the oldest firm in the concentrated auto manufacturing market. As Ford began to run into trouble as a result of the “Carpocalypse,” the company wisely thought of itself as a new entrant with unique advantages. It addressed the previously-mentioned design gap by hiring a furniture maker as its CEO; this unusual move gave the company an infusion of new creativity and innovation as Ford’s leadership was forced to consider not just what new features might be possible, but how these features would shape the end-user’s experience of the product and the signal that would send about Ford’s brand. Ford is very good at making vehicles that meet the needs of its most loyal customer base, but new features alone aren’t enough to satisfy and grow Ford’s pool of potential customers. Ford’s pivot to the future has led to them discontinuing the vast majority of their passenger cars — a heavy bet on their core market of trucks for stability, and innovation to carry them into the future.
Growing a company in such a restricted economic climate requires looking for the areas where the Business Barons have grown complacent and subverting those rules to level the playing field. The status quo that benefits titanic companies like Comcast, Ford, and the entire meat industry may afford each of them outsized power over pricing and shaping the economic landscape, but none of them can control when the rules will change.
Breaking through these barriers requires a nascent company to tell a compelling story to convince customers that they are missing out on a better world — not a better product — if they forgo the chance to become a customer. Customers may not be happy with the status quo, but if it’s functional and nothing else is presented to them, then a company working within the suffocating boundaries of the norm will quickly have their entrepreneurial light snuffed out.
Monopoly might have been fun when played around the family table, but they’re no fun when astronomical barriers to entry prevent a great idea that has the potential to transform an industry from doing so. But, each trip past “Go” makes the next round a bit easier — and forges an even more compelling story to tell.
Mike Dea is an associate at Woden. Whatever your storytelling needs may be, Woden can help. Read our extensive guide on how to craft your organization’s narrative, or send us an email at firstname.lastname@example.org to discuss how we can help tell your story.