Monday, March 2, 2009

What do you do if you have a monopoly in a declining industry?

Typically companies that find themselves in the position to imageenjoy a monopoly are pretty happy. However, as what often happens in a monopoly the company gets fat, happy and complacent. I’ve been privileged to observe this first hand in the past few months. It’s amazing and amusing at the same time. While the companies in question may not be true monopolies in the textbook sense they do enjoy huge market share in relation to their competition.

Why am I writing about Monopolies?

As I continue to look for my next challenge (aka job) I have connected with numerous companies across the high tech spectrum. As I have blogged and tweeted about before I imagehave been pleasantly surprised and happy to see that there are enlightened companies that continue to look for people with an eye towards growing their business.

However, I have been amazed by a few that don’t seem to be willing or able to put forth the effort to move beyond their monopoly malaise. I guess I shouldn’t be too surprised. Remember Standard Oil and AT&T? They didn’t take any action until they were forcibly broken up.

I’m not an economist and I don’t play one on television. However, as a business development guy I do know that the measure of success for every business I have worked with is revenue and ultimately a profit. Yes, I know there are community and psychic factors to consider, but every business I have ever worked with needs cash to continue operations.image

Contrary to what I mentioned above it DOES amaze me that a company that has a monopoly in a declining industry is not doing everything they can to continue growing and expanding their business.

image Actually, at this point it’s more amusing than amazing. I expect a fire sale or worse in the not too distant future. Note: I am not referring to a government entity or a financial services firm. So, they do in fact need to generate cash flow and should not be expecting a few billion in TARP bailout funds.

The irony is that they have the tiger by the tail. Yet sadly, it is clear they don't know what to do next. It's sad to see and even sadder to watch unfold in near real-time. They will have their head handed to them before they even realize what happened. By then it will be too late.

What should they do?

There is so much they could do. From the simple market expansion efforts that could easily add new market segments with no changes in the products to the more complex challenges of tweaking/building new product sets and shifting compensation models to achieve new objectives. At the end of the day people do what they get paid to do. This works well for partners too – when partners can generate revenue in a predictable and repeatable manner they will jump in and help to change the market with you.

I’m Curious

Have you seen this type of behavior in your career? What happened to the company in question? Are they still in business? Is there business significantly different now – as compared to what it could have been if they focused on growth?

Have companies you have worked with or otherwise observed acted in such a cavalier way that they let their business falter before they realized what was happening.  Please drop me a line here as a comment of contact me via Twitter, e-mail or Facebook.

clip_image002 About The Author:
I have spent the better part of the last 16 years working in various aspects of the ECM space. I spent time at
Kofax, Microsoft, FileNet, K2, and most recently Captaris (which was acquired by Open Text in Nov 2008). Prior to that I was a Unix VAR running my own company. Follow me on Twitter, check my blog, send email or find me on Facebook or LinkedIn.

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2 comments:

chrisg said...

I agree with you and you make a good analogy with companies that have the tiger by the tail and are not sure what to do next. Its almost as if they are afraid to do anything different. However different MAY be exactly what they need to do if you stagnate you die. One item i know you and i agree on is that companies right now should be taking advantage of some down time and really hunkering down and working to build up what is neccessary to explode out of this downturn. Think of all the time in the past you have needed some down time to catchup and prepare. Now may be a great time for that. Think of all the great people out there who may be out of a job. Now may be the best time to find a few more a players or even trade a few b players for a players. However sadly as you point out some of the big players out there are grab the tiger by the tail and just sit down.

Henrico Dolfing said...

It is hard to do something different when all the people in an organization are afraid to do something different.

The need to change is relatively easy to see for people outside of the company, or for people who are just new to the company. But actually changing is very hard when the rest of the company does not see the same need.

So staying put, sit out the ride, and see the company die is actually a sad, but common thing in this situation.

By the way Jeff, I really like your blog and added it to my blog roll. Keep up the good work!