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Navigating Business Disruptions: The Price of Monopoly Power

There's a common formula that has been applied to American businesses for more than 20 years: merge competitors, cut 30% of the workforce as "redundant," hike prices, and then reward the C-suite management team and the PE firms that architected the deal with lavish bonuses and payouts. Sounds great! For them. The rest of us deal with higher prices paid for less quality and service.


The rest of us are left with industries that don't have sufficient labor to maintain service levels, so then customers get dissatisfied. The usual customer response would be to go to another provider, but they were already consolidated: so you are stuck.


We all experience this, almost daily when we try to get service help, resolve an incorrect billing, or change options. There's few or no humans to talk to, and the web site and chatbot assistants only understand the most basic of operations.


Many of the key industries in America are now operating as monopolies. And monopoly power is truly powerful. Ever try to fight the cable company? Your utility? Or perhaps your health insurance provider? Good luck!


The world is not lost though (yet!)

In the "old" days when I wrote, implemented, and supported ERP software applications, we had a concept of redundancy. We didn't rely on a single vendor for anything of importance. We had multiple vendors, multiple supply routes, multiple carriers, and multiple service centers, and multiple points of contact within the customer's company. This was considered the prudent and rational thing to do. And it worked. Well!


Today's companies have very little redundancy. If the primary, or even single source of a component goes offline, then when current inventories are used up, the factory stops. Sure, the buyers and supply chain specialist frantically look for alternates, but often it's not built into the system.


Factory shutdowns used to be very rare and only happened infrequently. But we saw more such disruptions with Covid, with the subsequent shortage of chips, and now we also see shutdowns in non-manufacturing companies, like Change Healthcare, a unit of United Health Group. Cyberattacks, like supply chain disruptions, can stop operations just as fast as inventory shortages.


I believe the increase in disruption is due in part to the massive consolidation that has occurred in most industries over the last 20 years. Coupled with "belt-tightening" moves, and cost cutting w/o regard to the increased risk of failure has resulted in companies that are "OK" when the world is operating on the "happy path" but crumbles as soon as any problem arises.


So what do we do about it?

If you run a company, expect disruptions. There will be many more cyber-attacks. 83% of organizations experienced more than one data breach in 2022 [1]. There will be new tariffs. There will be bank failures. There will (unfortunately) be more consolidations and the accompanied diminished services and increased prices.


But don't just expect the disruptions: plan for them. Install redundant systems. Segment data stores so that breaches can't compromise the entirety of your data. Use multiple transportation carriers, modes, and routes.


Will it cost a little more? Yes it will. But in addition to helping you survive the next disruption you just might find your company described by your customers as the one with the best service. And they will buy from you!



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