Own Space, Not a Sustainable Competitive Advantage
Lele claims that ownable space over a period of time is at the heart of every successful business, not “sustainable competitive advantage” (SCA) as Michael Porter expounds on in his book, Competitive Strategy.  Lele sites that business success is not derived from unique products, strong brands, large scale, low costs, but that these factors are a means to an end, with the monopoly of capturing the marketspace for a given period of time being the true end.  Starbucks, until recently, had a dominant “good-tasting-cup-of-coffee” monopoly without any SCA.  Contrary to everyone’s assumptions, Southwest does not have a SCA of being a low-cost producer.  It does, however, have a “cheap seat” monopoly, and thus it owns the budget traveler space.  The high barriers-to-entry in the airlines industry have allowed Southwest to hold this monopoly for as long as it has.  Wal-Mart’s original strategy and success was derived through being a “local monopoly,” and its large investment in small towns raised its barrier-to-entry into that area.

The Monopoly Kaleidoscope and the Dollars and Cents Value of Monopolies
This critical deduction in Monopoly Rules changes the way you can view business and what should be addressed to be successful.  It is an important strategic paradigm shift, and the key strength of the book is how Lele explains his point effectively and simply through these examples.  He also invests time explaining how monopolies develop through three key factors of a monopoly kaleidoscope: industry shifts, competitor shifts and customer shifts.  To illustrate a company’s market value is often much higher than that of competitors in a monopolized space, he uses a simple formula of revenues per share versus share price to develop a ratio.  Companies with a ratio of 3.5 or higher typically have monopolized marketspaces.  In 2005, he sites Microsoft’s ratio at 8.0 and Coke at 4.5.  He contrasts their success with the struggles of Revlon during this period which is reflected with a ratio of 0.61.  As a University of Chicago Business School grad, I liked his quantification of the real dollars and cents’ effect a monopoly has in terms of a company’s value in the marketplace.

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Mike Bolden marketing expert and blue ocean strategist – writing to inform, enlighten, and inspire.  Author of forth coming book, “Owning Marketspace”.  Available for consulting and speaking engagements.

Monopoly Rules Milind Lele Sustainable Competitive Advantage SCA Monopoly Kaleidoscope Monopolies Turbo Tagger