Monopoly Rules: Seminal Ideas and New Paradigms for Strong Profits

Two Key Dimensions of Monopolies: Space and Time
Milind Lele’s Monopoly Rules (2005) has very strong and applicable ideas for any business aiming to gain high profits in a given set of industry circumstances.  It touts the concept of creating a “legal” monopoly through opportunistically exploiting shifts in an industry or market and competitors’ blind spots.  The book’s major tenet? “A monopoly is an ownable space for a useful period of time.”  Lele’s recognition of these two dimensions of space and time as the key to a monopoly is simple, powerful, and extremely useful to any business or organization.  For this idea alone, the book is worth reading, and worth its weight in gold.

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.

I am willing to talk with blog participants live via phone for free consultations.  I am also available to companies, businesses and organizations for consulting engagements and speaking opportunities.  For any of these request, E-mail me .  I will help my readers in any way possible – I want to share my knowledge and expertise.

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.

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