The End of Business Monopolies? AI is Redefining Competition for SMEs

There’s a classic pattern you hear in every business school case study. A company finds a clever niche, builds product–market fit, and, armed with positive cash flow, starts expanding. Sometimes it's organic. Sometimes it's through acquisitions. Eventually, it builds dominance. Maybe not a monopoly, but close enough to block any serious competition.
This isn't a flaw in capitalism. It’s how markets tend to settle. Like a physical system seeking its lowest-energy state, business gravitates toward efficiency. And this efficiency, for decades, meant consolidation. Fewer players, bigger scale, higher margins. The textbook endgame was always some form of oligopoly.
Which brings us to the question: if that's the natural direction, why is it starting to break down for some industries?
Surprisingly, it might be AI that's rewriting the script.

Why monopolies were the norm until now

Until recently, the energy-efficient structure of most industries favored big firms. They had brand equity, distribution, talent pipelines, pricing power. They could afford to acquire competitors or lock in customers with bundles and contracts. Even when they weren’t the most innovative, they were hard to beat.
But we’re seeing cracks. Regulators did not get smarter, it is the cost of operating a lean, high-output business has collapsed. Small businesses now launch with workflows that used to take entire departments.
One person can spin up full-service operations, automate client touchpoints, build custom reports, and run outreach at scale. That goes way beyond the perception of AI as "productivity software". It’s a drastic shift in how value is created and delivered.

How AI lowers the cost of competing

Let’s keep it grounded. Think about logistics. Ten years ago, a small freight operator couldn’t match the dispatching or tracking capabilities of a multinational 3PL. Today, they can.
Not with more people, but with systems.
Or look at OEMs. Quoting custom parts used to take days of manual work. Now it's done in minutes. These firms need to get sharper in their operations and execution, not bigger.
Even in education, independent schools are experimenting with hybrid teaching models, real-time performance tracking, and parent dashboards that outperform what some public systems offer. In professional services, solo consultants are competing with agencies by delivering faster, more tailored results.

What connects all these examples?
General workforce reduction → smart tools replace routine labor → smaller players produce more with less → larger companies can’t adapt fast enough → market position becomes a matter of months, not years.

The death of traditional moats

Traditionally, big companies protected themselves with:

• Pricing power: buying in bulk, undercutting smaller players.
• Brand moat: years of advertising and customer trust.
• Ecosystem lock-in: tools that only worked if you stayed inside the vendor’s stack.
• Acquisition of threats: buying early-stage innovators before they scaled.

These tools are blunter than they used to be.
Lower-cost operators don’t need scale to offer competitive pricing.
Customers value responsiveness more than legacy logos.
Modular tools work across platforms. Switching has never been easier.
And when a small firm can reach profitability in six months without raising a cent, there’s less incentive to sell out.
In short, the moats are shallow and getting shallower.

Why SMEs are in the best position to win

The industries feeling this shift first are the ones built on workflows and human capital: IT, consulting, marketing, HR, education, legal, accounting, because the friction to automate them is lower.
You don’t need to wait for robot arms or cleanrooms. You just need a small team with a tight process and the right tools.
And once it starts there, it spreads. As systems improve and robotics mature, the same unbundling can happen upstream in supply chains, production, and industrial distribution.

What this means for founders and operators

This moment isn’t reserved for startups or venture-backed business anymore. They are often stuck chasing valuations and investor narratives. If you own a €2M logistics firm or a small regional consultancy, you’re in a better spot.
You’re not too late. You’re not too small. But the window to move is narrow.
If you can rethink your workflows, upgrade your systems, and strip out the friction, while competitors are still doing things manually, you can take share that used to be untouchable.

You don’t need more people. You need better processes.
You don’t need VC money. You need margin discipline and speed.
You don’t need to chase buzzwords. You need to move.

For decades, the gravitational pull of business favored the biggest players. That’s changing.
Not in every industry. Not overnight. But company by company, market by market, the structure is shifting. The system is finding a new equilibrium, where the most energy-efficient business isn’t the biggest, but the smartest.
And that’s the kind of game small businesses were born to win.

Curious about the flip side? While this post focused on how AI empowers smaller players, some analysts argue it actually reinforces monopolies. Check out this Bloomberg video for a deeper dive into that angle.