The tech market and why the winner takes it all
Ever noticed how much of the tech market consists of monopolies? Take Google, Amazon, and Microsoft. These tech giants are the winners of their tech markets — and they have taken it all.
No one can take on Amazon as an online vendor. ‘Google’ has become synonymous with searching the web. The tech industry is full of single companies being the best in show. They have little competition and there’s little hope of displacing them from the top spot.
So, why is this ‘winner takes it all’ phenomenon happening in the tech market, and what can ‘losers’ do to compete?
Tech market: the winner takes it all
The most successful tech companies evolve into monopolies. When it comes to entering a new tech market, the winner takes it all. And once they’re established, it’s near impossible to upstage them as the go-to name in that field.
For example, in the mid-90s, Microsoft was the market leader for PC operating systems. In the present day, Microsoft is the market leader for PC operating systems. In the late 90s, Amazon was growing in the ecommerce market. Today? It’s still on top. In the early 2000s, Apple and Android occupied the top spots for mobile phone sales. Nowadays, 99% of all smartphones use one of the two companies’ operating systems.
Once a brand has their feet under the tech market table, they eat up the majority of opportunities. Competitors, meanwhile, are left fighting over the crumbs. The bigger these companies grow, the harder it gets to compete, and the slimmer the pickings become.
Behaviour: nothing more to say
One reason for the steadfast nature of each tech market winner is that technology lends itself to habitual use. Users must learn how to use the technology in any given field. As a result, behavioural factors have a part to play in the winner takes all nature of the tech market.
Once consumers have learned how to use a product or service, they’ve invested time into that brand. This adds to the perceived cost of migration, discouraging users from swapping supplier.
Plus, the more a person uses this tech, the more it becomes habit. Add to this the addictive nature of some technology, and it becomes difficult to entice users away from their chosen brands. So, once a tech company is on top, competitors are battling user behaviour as much as they are the leading brand.
Data: no more ace to play
Data is the oil of the modern era. It powers decisions, informs marketing, and drives growth and improvement. When a company declares victory in the tech market, they gain more access to user data. This is another reason behind tech’s winner takes all environment.
Big tech companies can use the data they get from their increased user base to keep all the aces to themselves. That is, the insight they gain from their users drives continuous growth and improvement of products and services.
They can respond to user wants and needs far easier, making it hard for competitors to find a unique selling point. Meanwhile, big tech companies keep a competitive advantage.
Standing small on economics
Another reason why the winner takes it all in the tech market comes down to economics. That is, the technology industry lends itself to strong economic growth that helps the ‘winner’ stay on top.
First, there’s the fact that tech products and services tend to offer a good economy of scale. That’s because digital products and services have high fixed costs and low marginal costs. Think software for example: once you’ve written the code for a product, you reuse that same code for every single customer you sell to.
The bigger a tech business gets, then, the more cost-effective it becomes to produce the products or service. So, once a tech company starts to win in a tech market, it snowballs and gains more traction — allowing it to win more.
In other words, for big tech companies, once you’ve won your spot in the market, it’s easy to grow to fill up the rest of the space. And, it’s easy to maintain your lead. After all, you’re well rewarded for it — you have more resources to spend on keeping the top spot.
The game is on again
In the tech market, the winner takes it all, and there’s little you can do about it. So, rather than competing with a tech giant in their market, new innovations create new markets. These new markets are then battled for, and the winner takes it all, surpassing the growth and popularity of the ‘winner’ company in the old market.
So, tech market competition happens between entire tech markets, rather than each company. Winning companies continue to ‘take it all’ in their market. The competition lies in the popularity of the markets themselves.
For example, a PC software company (i.e. Microsoft) retains its top-dog, winner-takes-all role in the PC software market. It’s not displaced, but rather a bigger market is created for smartphones. So now Microsoft continues to have the monopoly on PC operating systems, but fewer PCs are sold in favour of mobile technology.
The winner takes it all
Tech markets are often ‘winner takes it all’ spaces. But that doesn’t mean the loser has to stand small. Rather, the winner-takes-all nature of the technology industry drives a need for innovation, creative thinking and new ideas.
The takeaway from this is that in the tech industry, building a spot in the market is as important as building the product.