You shouldn’t pay any attention to your competition. There are several entrepreneurs who are generating eight and even nine figures with their businesses and none of them focus on the competition either.
They are aware of the competition, but they aren’t worried about trying to beat them. In fact, a lot of them will help out their smaller competitors because they are so confident in their own growth.
WarningCompetition is often heralded as a motivating force that drives innovation. But taken to the extreme, competition can be a barrier to success.
That’s the philosophy of Peter Thiel, the billionaire entrepreneur and investor who co-founded PayPal and Palantir Technologies. He made a very early investment in Facebook, and companies like SpaceX and LinkedIn. and now is a partner in the leading venture capital firm, Founders Fund.
ImportantThe shared belief is that competition encourages people to perform better. Thiel does not dispute these motivational factors, but he does express concern that competition often dilutes what’s actually important and valuable.
If that sounds crazy to you, then you definitely need to keep reading this.
If you embrace the mindset shift I’m talking about here, it will allow you to quickly multiply the growth of your business. Plus, it will get rid of the unnecessary stress and anxiety that might be holding you back right now.
Here are some of the highlights behind the monopoly theory entrepreneurs should aim for rather than competing.
Roll The Dice
There are only two categories of businesses: perfect competitions (non-monopolies) and monopolies. These binary models define the spectrum, with nothing else in between.
Regardless of their classification, all businesses cast themselves into the opposite grouping. They actively distort their images and create counter narratives to hide their actual status.
ImportantMonopolies dispute their own monopoly and portray themselves as members of a big market, while non-monopolies promote their uniqueness in a small market.
Tell Me Who is The Most Beautiful
To avoid the hyper-competitive restaurant industry, a new restaurant crafts a unique identity that belongs to a seemingly smaller market.
New technology startups employ marketing campaigns from a web of buzzwords that often overlap and intersect.
These efforts aim to shape a distinct image and reduce the size of their market.
Stop competing and start monopolizing!
ImportantIt’s the entrepreneurs who bring something totally unique to the table that succeed in the long run. And competing really is for losers! The problem with a competitive business goes beyond lack of profits. Entrepreneurs who get caught up in competing for a voice are going literally nowhere.
In perfect competition, a business is so focused on today’s margins that it can’t possibly plan for a long-term future. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits.
In a static world, a monopolist is just a rent collector. But the world we live in is dynamic: We can invent new and better things.
Creative monopolists give customers more choices by adding entirely new categories of abundance to the world. Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making it better.
Don’t Be Evil!
Since Google doesn’t have to worry about competing with anyone, it has wider latitude to care about its workers, its products and its impact on the wider world. Google’s motto—”Don’t be evil”—is in part a branding ploy, but it is also characteristic of a kind of business that is successful enough to take ethics seriously without jeopardizing its own existence.
Last Shall Be First
You’ve probably heard about “first-mover advantage”: if you’re the first entrant into a market, you can capture significant market share while competitors scramble to get started.
But moving first is a tactic, not a goal.
What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you.
ImportantIt’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits.
This unveils a popular fallacy in the business world: overvaluing growth rates and underrating durability. A successful monopoly isn’t measured by current results, but instead, by its projected stability in the future.
The way to do that is to dominate a small niche and scale up from there, toward your ambitious long-term vision. In this one particular at least, business is like chess.
InfoAmazon shows how it can be done. Jeff Bezos’s founding vision was to dominate all of online retail, but he very deliberately started with books. Amazon continued to add categories gradually until it had become the world’s general store.
Patience Is Golden
It’s easier to dominate a small market than a large one. Small doesn’t mean nonexistent. Once it monopolized the Beanie Baby trade, eBay didn’t jump straight to listing sports cars or industrial surplus: it continued to cater to small-time hobbyists until it became the most reliable marketplace for people trading online no matter what the item.
Do Not Disrupt
Disruption has recently transmogrified into a self-congratulatory buzzword for anything posing as trendy and new. Silicon Valley has become totally obsessed with “disruption“.
Originally, “disruption” was a term of art to describe how a firm can use new technology to introduce a low-end product at low prices, improve the product over time, and eventually overtake even the premium products offered by incumbent companies using older technology.
InfoThis is roughly what happened when the advent of PCs disrupted the market for mainframe computers: at first PCs seemed irrelevant, then they became dominant. Today mobile devices may be doing the same thing to PCs.
The concept was coined to describe threats to incumbent companies, so startups’ obsession with disruption means they see themselves through older firms’ eyes.
ImportantRivalry causes us to copy the past. It causes us to overemphasize old opportunities and slavishly copy what has worked in the past. Amid all the human drama, people lose sight of what matters and focus on their rivals instead.
Disruptive companies often pick fights they can’t win. Think of Napster. Shawn Fanning and Sean Parker, Napster’s founders, threatened to disrupt the powerful music recording industry in 1999. The next year, they made the cover of Time magazine. A year and a half after that, they ended up in bankruptcy court.
Studying The Competition Leads to Failure
Your subconscious mind will guide your body toward any outcome you focus on — even if it’s a negative outcome you want to avoid. In business, this means that focusing on your competition is the same thing as handing over your market share to them. You’re literally training your body to send energy over to the competition instead of putting that energy into your own business.
A business becomes successful if it satisfies two conditions: creating something of value, and capturing a fraction of that value.
In more quantifiable language, a business creates X dollars of value and captures Y% of X, where both X and Y serve as independent variables. This means that X could represent a substantial number, with Y only a small percentage – or X could be an intermediate number, with Y at a much higher percentage.
InfoThe latter case demonstrates the idea of holding a large piece of a small pie, where a business captures a highly profitable portion of value from average revenue number.
Overdeliver to your customers. It’s essential to give your customers good reasons to come to you. Your product or services unique selling point (USP) should tap into what customers want in a clear and precise manner.
On AirIf you aim to make your business strive, I strongly recommend reading my post on this topic : How to skyrocket your Business?
Challenge the Dogmas
To build the future we need to challenge the dogmas that shape our view of the past. That doesn’t mean the opposite of what is believed is necessarily true, it means that you need to rethink what is and is not true and determine how that shapes how we see the world today. As Peter Thiel says, “The most contrarian thing of all is not to oppose the crowd but to think for yourself“.
The days of companies strategizing to beat competitors to own the customers are over. How often do you hear about customers who care about anything other than the value they receive and the degree to which they trust who they do business with?
ImportantTo make it all worse the time, the energy, the focus and the money spent on the competition is telling the customer how unimportant they are.
Destroy the myth that companies compete to own the customer and embrace the reality of value based customer’s partnerships.
The big lesson here is that you, as an entrepreneur, have a sacred duty to market your product or service based on the benefits it provides to your market.
It’s one of the core principles behind all business empires, and you should take any failure in business as a reminder to get back to core principles like this.
InfoZero to One is full of counter-intuitive insights that will help your thinking and ignite possibility.
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Digital Dandy. Hacker From Heart. Workaholic. Coding Artist. Self-made.