The source of sur/petition
Sur/petition goes far beyond housekeeping. Getting things right within the organization (cost control, quality) is undoubtedly essential, but this merely gets the baseline right. Classic competition is part of housekeeping, though it is also concerned with getting the baseline right.
Quality and prices have to be correct. There is a slight overlap between product differentiation and sur/petition, but the overlap is not considerable.
Sur/petition is not so much concerned with differentiating changes in the product as it is with the uniqueness of the value provided. There are several ways in which value monopolies were established in the past. Some are still as important as they ever were, but others have become less important over time. The following are some of the ways you can establish value monopolies.
Physical uniqueness
There is only one Mona Lisa and only one Van Gogh irises. Their price may fluctuate with the market, but their unique value will remain. A retail store built in a prime location may, over time, lose its special status.
Technological uniqueness
Patents are an obvious example of a value monopoly. Intellectual property is crucial and should be protected. The pharmaceutical industry has the most patent protection because of the long development time required.
Outside of the pharmaceutical field, sur/petition through technology is much less secure. Technology may only provide a six-month to one-year lead time, and except for exceptional cases, lead times may be reduced further.
There’s also the problem of very high technology development costs with a small, narrow market. This problem is happening in the chip market as more chipmakers focus on specially designed chips vs. the broad commodity chip market. You can keep up your margins but also progressively reduce your market.
Also, new products are being developed that are not technology breakthroughs but new applications of technology. The application can be more valuable than pure technology. That is why there is a need to treat concept development as seriously as technical development.
Name recognition
The extent to which the name of a politician, company, brand, author, Etc., is familiar to the public. Name or brand awareness and brand recognition lead to Brand Trust.
Dominance
Occasionally, a corporation becomes so dominant that it provides sur/petition by its position alone. This dominance is undoubtedly true for Apple, Microsoft, Alphabet, Amazon, and Facebook.
A dominant position is a good base for sur/petition, but it needs to be continuously used. Boeing may be somewhat complacent about his dominant position, which is always much more vulnerable than it looks.
Cost of entry
CMOS chips require less power than standard chips but require heavy capital investment. The cost of entry is high and requires continuous injection of development funds; there is protection from newcomers. However, existing cash flow has to cover these development costs.
Once something is established, the cost of displacing it may be huge. The keyboard’s design, which was to slow down typing, is still the prominent keyboard today. We could design a much more efficient one today, but the cost of introducing it would be huge.
Brand image
The most traditional way of getting a value monopoly is through the brand image. McDonald’s does very well despite its many competitors. Heinz tomato ketchup continues to be a favorite. Familiarity, availability, dependability, and public image are essential when other values are similar.
Although brand images are a useful way of gaining recognition, there will probably be an even greater need for them in the future. However, it will become increasingly difficult to sustain them as quality improves and consumers become more conscious of their values.
Segmentation
Specific niches, segmentation, and market focus have always been ways of gaining a sur/position. At the very least, they give a company a good starting position. Even when others enter the same area, there is still an initial advantage, provided management can keep up the quality.
As always, there is an initial advantage and the importance of follow-through. It is possible to have market segments that are even too specific. Then, there is the same problem as with very specialized products. The market may be tiny. Having a dominant position in a small market may not be good enough. If the market gets bigger or seems lucrative, others will undoubtedly take a good look at it.
Protection or plus
Above were some of the more traditional methods of getting value monopolies. Some of them are forms of protection, like patterns and cost of entry. A few are based on uniqueness. The rest have to be based on some sort of a plus.
The plus factors will come from careful attention to integrated values. For example, Domino’s Pizza was based directly on this concept. People who want pizza do not feel like going out to get one, so Domino’s delivers to their door.
Perrier is another example of integrated values. Perrier introduced the concept of designer water and kept up the pressure to remain the market leader. People are becoming more health-conscious. The two-martini lunch was going away, so what were you going to have for lunch? Water made you seem very cheap and often tasted awful. So consumers were crying out for the most expensive possible way of drinking water, and Perrier satisfied that need. It became not only socially acceptable but even a mark of sophistication.
One of the worst reasons for not doing something is that it might hurt existing businesses. But that is where sur/petition may be found in new concepts.
