Peter Thiel is famous for his recommendations about how to build a monopoly. I recommend his book Zero to One. There are four rules defined by Peter Thiel – (1) create 10x technology; (2) Follow network effect; (3) Use economy of scale; (4) start with a small market. I always found Thiel’s recommendations go against a conventional recommendation. One of these is related to competition.
According to Peter Thiel, Competition is For Loser. … Thiel’s message contradicts the competitive atmosphere of the business. He argues that no competition represents the ideal business model, and he advises founders and entrepreneurs to always aim for a monopoly and to avoid competition.
…businesses should embrace the opposite approach: start small, then monopolize. It’s far easier for a business to dominate a small market than a larger, more established market. Control over a small market can catapult a business into new areas and markets for expansion. For example, Amazon launched as an online bookstore, then transformed into a giant purveyor of e-commerce.
A special comment from Thiel is about branding.
“Branding alone is always a difficult one. It’s a real thing. It’s something I don’t claim to understand, so I don’t like investing in companies that are nothing but a brand, even though sometimes those things do work.”
It made me think of branding as is a real thing in CAD/PLM market. Thiel’s brings examples of branding but essentially connects branding to addictive products. Things Coca-Cola, Starbucks coffee, and some others. At the same time, you can hear voices that there is no such thing as branding and connecting addiction to chemicals or caffeine. So, is there such a thing as branding in CAD/PLM world? Do you think customers are repeatedly buying from a specific CAD or PLM brand? Is it a real thing?
Sometimes, I can see the honest belief of engineers in the advantages of using a specific CAD system. You can find opposite arguments of engineers about specific CAD features that sometimes remind me of religious beliefs. I didn’t see such things with specific PLM brand, but I know manufacturing companies working with a specific brand for years.
Is there a monopoly for engineering tools and specific CAD/PLM systems? It is a good question to ask. I think, there are some products that dominant in a specific area of the market, industry, or function. Some of them happened as a result of product development some level of uniqueness of dominant position developed over time.
Is there a way to build a new CAD or PLM brand? For the last decades, few companies built a few recognizable names. At the same time, the engineering software market is very conservative with the dominance of a few large name and practically didn’t change for a very long time.
What is my conclusion?
I think CAD and PLM software companies built strong brands with very recognizable products and behaviors. Some of them made history with specific features and creating strong channels and communities. These companies are recognizable brand names. Knowledge and experience of engineers working with specific products are important for them and then engineers following and using products of specific trends. At the same time, I found a hard time believing that manufacturing companies are purely buying “brand” names without testing and validating products.
Just my thoughts…
Disclaimer: I’m co-founder and CEO of OpenBOM developing cloud based bill of materials and inventory management tool for manufacturing companies, hardware startups, and supply chain. My opinion can be unintentionally biased.