How can design help achieve market dominance for a business?

Governments are threatening to break up and sanction the big tech companies. They claim that businesses like Facebook, Google, Apple, and Amazon have too much power over our economy and society.

These companies are believed to hold a monopoly over their respective markets. So, let's have a look at what monopolies are and what it means to design for a company that holds a monopoly - or is trying to become one.

1. What is a monopoly?

If you have ever played the board game monopoly, you may remember that the goal of the game is to be the last player standing. You want to bankrupt all other players to own all properties. In the real world, a monopoly is a market dominated by a ​single company. As a simple rule of thumb, we talk about a monopoly if a company has above 70 or 75% market share. 

Sometimes, monopolies are artificially created by governments. For example, they grant a license for a specific product or service that would otherwise not be profitable. This is common for big infrastructure businesses like railroads, telecommunication systems, public utilities, and even postal services. For example, US Postal still holds a monopoly on letter delivery in the US.

Other types of monopolies are generally fought by governments because they damage economic growth and innovation. If there is only one company dominating a market and others can't enter to compete, companies holding a monopoly do not have a strong incentive to innovate and improve. The trigger for regulators to take action is not determined only by the market share (we talked more about this in our latest pod). Companies get under scrutiny when they show anti-competitive behavior but having a big market share makes it possible for companies to do so.

2. What does it look like in the real world? 

While Apple, Google, and Amazon arguably don't have the market share to qualify as a monopoly, they are said to use their market-dominating position for unfair business practices. For example, Apple and its Apple Music can avoid the 30% cut that other music streaming services have to pay if users subscribe directly within the app. On the other hand, Amazon and Google can promote their products instead of showing the best results for users.

One of the most recent well-known cases of a government taking action against a monopoly was Microsoft with its Internet Explorer. In 2000, Microsoft was charged with anti-competitive practices for its Internet Explorer web browser, which was pre-downloaded onto every Windows OS, thereby damaging competitors such as Opera and Netscape.

3. Why is it relevant for business?

Holding a monopoly gives a company such a huge advantage that almost every company sets out to create a monopoly in their market. It gives an organization considerable ​pricing power​ and high barriers to entry, making new competition very unlikely. 

Common business practices such as economies of scale or network effects are all meant to help a company find its niche and dominate it. So, it's a bit ironic that if you get very good at executing these best practices, you will get in trouble. But holding a monopoly is such an unlikely scenario that these practices are meant to help a company survive rather than dominate.

4. How is it relevant to the work of designers? 

• In case you work for a monopoly (especially one granted by a government), the most you can do is be the user advocate in the room. Monopolies are often very rigid and don't innovate as they are in a unique position where they don't need to.

• When designing products or services, build in economies of scale and network effects. They play a crucial role in whether your design solution has a chance to not just be desirable but also to stand the test of time on the market.

• If you are starting your own business, set out to hold a monopoly in your market. Well, just don't become one. But do think about economies of scale, network effects, and controlling rare resources in your arena. It's unlikely you will eventually hold a monopoly but leveraging these mental models may help your company survive or even thrive.