The quest for the number one position is the desire of every business. Everyone wants the success and money associated with market position numero uno. Not everyone achieves that position. The reason why is rather shocking.

When a firms becomes a monopoly in a market, they are given the freedom to take higher profits and often are the leaders in innovation. They are afforded certain advantages for being the biggest. It’s the reward for the risks undertaken to get to first place. On the other hand, a negative public perception exists regarding monopolies. The news stories we hear about monopolies involve the word ‘lawsuit.’

Here’s what most stories don’t tell you – market dominance is not inherently bad. In fact, it’s good for exactly the reasons already mentioned – higher profits and increased innovation. It’s not bad to a monopoly.

I’ve observed that many small business owners believe they are operating in a commodity market or they accept that operating in an oligopolistic market is the only option (Def.: Oligopoly – Market with a small number of firms ). They want to be successful, but there seems to be a sad reluctance that business is business and they are in a “highly-competitive” market.

The main reason they continue to operate in this manner – lack of focus. They bring their business and move into a wide category and don’t find their differentiation.

The quickest way to discover this mindset is to ask them about their industry. They answer the question like they were a commodity. The description of their business is generalized and overly broad.

“We’re in advertising.”

“We’re in the restaurant business.”

“We’re in the software business.”

Those answers are all too broad.

Now, these answers could be conversational laziness. They just don’t want to go into the detail required to give a full explanation. More insight comes when you ask them about their competition.

They’ll respond with a handful of competitors. Normally around 3-4 competitors. I rarely hear anyone say “We’re the number one firm.” When I do receive that response, it comes across as fake. I get a middle of the road response – “We’re in with a few different players.”

The mindset of operating in an oligopolitic or commodity market forces you to react to external factors like competition and pricing. You aren’t executing on internal factors like customers and innovation. Being in a commodity business means you have no differentiation, thus no value, at all.

Oligopolistic markets have an inherent interdependence on each other. Price cuts in one firm’s offering will induce price cuts from another. New promotions lead to rival promotions. New products lead to new, shockingly similar, products. Over time it leads to a step-wise and predictable game of business Marco Polo.

One firm cuts their prices: “Marco!”

A few days later a competitor reduces their price – “Polo!”

It can all get rather depressing after a while. And, it will ultimately lead to mediocre performance and profits.

Here are some steps to help you clarify your thinking on this matter -

1) Have you released a new unique product/service in the past 1 year?

2) Do you continually receive new ideas from customers?

3) Have you had to cut your prices over 10% based on competitive pressures?

4) Are you considered the top firm in your particular niche?

5) What do your customers consider to be your one unique trait?

Answering these questions should help you determine if you are following the market or leading it.