The great thing about playing the board game Monopoly as a kid was that you could buy up everything, collect rents all over the place (or get slaughtered if say your older sister was just a better player) but when the game ended, it was over.
We’re now living a real life monopoly game that’s crept up on even the strongest free markets.
In 2017, 75% of the beer market was cornered by three monopoly companies and one, Anheuser-Busch, held more than 40% alone. In the online search industry, one company monopolized the market and held 91% of market share and 98% of the cell phone market is concentrated among the four largest companies, with 70% being split between Verizon and AT&T alone. Even seemingly trivial things like peanut butter, coffins, and adult websites are all controlled by only a couple of firms.
Monopolies and oligopolies choke the life out of otherwise healthy markets. Economists agree that the negative effects of a monopolies run rampant. The problem with monopolies is that they weaken competition due to enormous market control. The monopoly market results in subpar products and services and other consumer abuses when, ultimately, there is very little to no consumer choice. Think of the hours you spent on the phone with customer service with your cell phone or internet provider, of soaring pharmaceutical prices, of unchecked data collection by firms like Experian that then fail to protect that data or take any real responsibility after the inevitable data breach.
Market concentration provides the raw material to be able to manipulate the market at the cost of productivity, innovation, and economic stability. Look to mergers and acquisition activity to see how the business monopoly epidemic is being driven in the US. There were 50,000 mergers and acquisitions completed each year from 2015 to 2017 and by June 2018, nearly $2 trillion had been spent on M&A activity.
Mergers and acquisitions aren’t all bad. M&A can create great value when a larger, strategic firm takes over a smaller niche player or product. That’s a great outcome. The problem is with larger businesses that could be viable and independent but suffer from lazy or greedy leadership ― leadership that doesn’t have the guts or foresight to invest profits boldly for growth, for new markets, or for new innovative business ideas.
Many boards and management teams lack the creativity and conviction to use the massive amounts of capital and resources that they control for bold long-term innovation goals, product development, and far richer rewards to shareholders and stakeholders down the line. Instead, they choose to sell out for a short-term game.
Capable and dynamic leadership could double-down and reinvest into new and improved products, services, and R&D moonshots. One of the reasons Warren Buffett and Berkshire-Hathaway is so remarkable is that they just stay in the game, continuing to invest, nurture, and grow. There is no endpoint in sight.
You would think the winner should always be the market dominatrix, with unlimited cash and manpower. But tides have turned as we see time and again with the scrappy, nimble startups that do an end-run around the big guys. In one survey, 40 percent of executives interviewed were being disrupted by startups. While most small companies embraced risk and quickly pivoted or reacted to the marketplace, 57 percent of those surveyed said that large companies make things harder on themselves by being resistant to change.
Smart business owners and executive leaders are taking steps early to avoid the lethargy and arrogance of corporate titans who forgot their innovative roots. They are surrounding themselves with innovative doers not afraid to take the reins and make a real change from the inside out. Rather than take the easy way – selling out early – bold leaders take a forward-thinking approach.
Interim executives are a go-to leadership solution and bring a fresh perspective while separating themselves from company politics or baggage of the past. While interims often step in to fill leadership gaps, in many cases they serve alongside current management to assess operations, future opportunities, and coach up the team. This might mean jumping into a division of a large company to develop and launch new innovative product ideas, expand internationally into new markets, make technological advances, or speed up the pace of innovation.
In every organization, there is someone, whether it’s the CEO, the rookie manager, the intern or the janitor, who sees areas of opportunity or who has a creative or innovative idea that could change the course of the company. Interim executives are skilled at tapping into this expertise and identifying changes that need to be pushed through, from organizational structure to how collaboration and communication happen within the team. For companies who are brave enough to change trajectory and make bold moves into the future, there is low-hanging fruit ripe for the picking. The question is, will you take it?