By reading this phrase there are two things come to my mind, one, it demotivates new entrants to enter in the established markets where few incumbents have a strong position, second, it motivates venture capitalists to push unneeded capital in their portfolio companies to make them winners.
When we get some idea and research around it to understand as to how other companies are solving this problem, we usually come to know a big company which has a monopoly in the market and it seems everybody is using their services or product. This feeling that everybody in the market is using single product demotivates us to enter the market, as we have this preconceived notion that “the winner takes it all”, but this is not the case, even in the market where there is a monopoly, there is always scope to re-segment and built something more relevant for a group of customers. Even if we don’t re-segment and just launch a competitive product to serve the same segment of the customer as served by an incumbent, still we would able capture some market if a product is built with some differentiation.
I have two examples where million dollars businesses are built just by re-segmenting the existing market. One is convertkit.com, this company is a competitor of MailChimp which has monopolized email marketing but this company has built a product specifically for bloggers, by identifying the needs of this segment, they able to launch a successful product which solve unique problems exists only for this segment, now they have $10 million in annual recurring revenue. The second example is meetedgar.com, they launched a product for content publishing and scheduling on social media networks, the incumbent is buffer.com, which is a de facto standard for social media scheduling but still Meet Edgar is able to capture some market share and has crossed $5 million in annual recurring revenue.
Another thing which is very much influenced by “the winner takes it all” philosophy is a venture capitalist’s pumping of unnecessary funds into the companies. Initial investment is very well thought out and planned but when investors observe that with the existing capital the investee cannot be the winner, so to protect their existing capital they infuse more capital and convince other investors to invest in further rounds, because for them there would only be one winner and other players would become irrelevant.
This notion “the winner takes it all” is not going to benefit anybody in any way, today’s reality is that more than one player can be profitable in the same market and any new entrant can challenge existing market leaders and capture market share.