What are
parasitic business practices? According to a Microsoft CoPilot search:
“Parasitic business practices involve companies or
entities that extract value from others or the system without providing
reciprocal benefits, often undermining institutions, consumers, or competitors.”
These kinds of practices can
erode trust and confidence, weaken governance by undermining rules and norms,
and increase economic inefficiencies by causing companies to divert resources
to combat them.
Mark Boatwright-Frost wrote a
blog in October 2024 about parasitic culture. He describes it as follows
“Parasitic culture can be understood as a societal
framework where certain groups or individuals thrive by leveraging the
contributions, efforts, or innovations of others, similar to how biological
parasites exploit their hosts. This concept is marked by specific
characteristics that delineate it from more symbiotic or beneficial societal
interactions. In a parasitic culture, one can observe a pervasive reliance on
the resources, creativity, and labor of others, often leading to minimal
personal investment or innovation.”
One might even say that my
blog here can be parasitic in that I often feature the work of others in long
and frequent quotations and extensive use of graphics. I don’t plagiarize, but
I share more than I would if I were writing for pay. However, I have not made a
single penny from any of my thousands of blog posts and use it mainly to
enhance my own information and education, as well as to inform and educate
anyone who might read it. To myself, I refer to utilizing the work of others as
“piggybacking.” The only possible benefit I get from my extensive blogging is
to feature it on my resume as an example of my abilities. I can also say that
it has led to zero opportunities for me so far. However, I also believe it is
an enhancement to my experience and broad knowledge base.
Boatwright-Frost notes that
parasitic culture is often born when opportunities to take advantage are
discovered and acted upon. He notes that parasitism is not a legitimate
contribution and often serves to stifle creativity and innovation rather than
encourage them. He calls out subscription services and their associated
aggressive sales techniques as a hotbed of parasitic activity:
“A prominent manifestation of this phenomenon is seen in
the rise of subscription services and aggressive sales techniques that have
become ubiquitous in today's economy. These models, while ostensibly designed
to provide continual access to products or services, often ensure that
consumers pay consistently for goods that offer limited value or utility. This
arrangement not only skews the economic landscape but also presents a
significant challenge to authentic innovation and sustainable growth.”
He mentions the proliferation
of pseudo-services, or “entities that masquerade as value providers yet
deliver minimal actual benefits.” Such services of questionable value can
erode customer trust and result in loss of business. The opposite of parasitic
business practices are symbiotic business practices. These can produce benefits
for both the seller and buyer of products and services. I will post about
symbiotic business practices in the future as I learn more.
Boatwright-Frost continues in
this vein:
“Authentic economic growth hinges on a symbiotic
relationship between value creation and consumer satisfaction.”
He goes on to talk about a
parasitic business culture where exploitation is all too common. The results
for consumers include psychological ones, including feelings of
disenfranchisement, uncertainty, resentment, and anger. He identifies one
problem as favoring opportunism over contribution.
He continues on about society
itself being parasitic, but I think here he goes a bit too far, calling for
grassroots organizing and social justice actions. Of course, no one wants to be
ripped off and strung along in what they perceive as bad deals. He also
teeters on the edge of calling our very economic system ‘parasitic capitalism’
and calls for more cooperativism, collectivism, sustainability, and resilience.
However, I believe we can achieve sustainability and resilience without
cooperativism and collectivism. Thus, I disagree with his suggestion to
redesign our economic system simply to root out exploitation. We can regulate
and otherwise discourage parasitic practices with smart policies and by
increasing customer vigilance.
The following abstract from a
paper in the Academy of Management Proceedings entitled, ‘Strategizing for
Parasitization: The Types and Stages of Business Parasites,’ gives a good
description of how parasitic business practices function.
The abstract also notes that
some parasitic practices can be beneficial to both the parasite and the host.
In those cases, the practices can be symbiotic from the perspective of both
companies but parasitic to consumers. The types are reviewed from the abstract
below:
1) commensal, where both the harm and benefits
are insignificant and negligible; 2) mutualistic, where benefits
dwarf the harm; 3) siphoned, where the harm outruns benefits; and
4) abducted, where both the harm and benefits are significant and
seemingly inescapable.
The three stages are
characterized as: 1) targeting, 2) co-evolving, and 3) reproducing.
In an article published on
LinkedIn, Aaryavartt writes about parasitic branding. The author notes that
such practices as parasitizing branding are very risky for those who attempt
it, but also apparently possibly lucrative, or they wouldn’t try. Parasitic
branding is defined below:
“Parasitic branding represents
a calculated attempt to benefit from another company's brand recognition,
reputation, and consumer trust without making the necessary investments in
innovation, quality, or authentic brand building. These "market power
parasites" engage in unilateral anti-competitive conduct that
significantly reduces or distorts competition by free-riding on the market
power of established brands.”
One manifestation of this is
lookalike products with similar-sounding names. I posted earlier this month
about an alternative A/C product that was troubled by cheaper lookalike
products with similar-sounding names. They are sold more cheaply and are likely
of inferior quality. Many are Chinese companies.
The article notes that trade
dilution laws can address parasitic business behavior. Companies involved in
such behavior, especially small ones, are taking huge risks as litigation costs
alone could ruin them. They may also face cease and desist orders and may be
required to change packaging. These are costly. The article notes that
parasitic businesses face a reputation degradation cycle, and their short-term
gains can be followed by longer-term losses.
One thing parasitic
businesses have working in their favor, in my estimation, is that they can
sometimes offer a similar product to name-brand products at a lower cost. In
many cases, that product will be of lower quality, but if it is not, they can
benefit.
The article notes that
investing in imitation rather than in innovation will eventually lead them to
fail, which they call an innovation deficit. They also note that consumers and
market forces often serve to weed out these cheap imitations over time. Some of
their conclusions are below.
“The modern business environment presents a clear
choice: invest in authentic brand building or risk the inevitable consequences
of parasitic strategies. While parasitic branding may offer short-term market
access, it ultimately delivers business instability, legal vulnerability, and
reputational poison that can destroy long-term viability.”
“Legal systems, digital enforcement tools, and consumer
expectations now converge to reward originality and penalize deception. In this
climate, parasitic branding isn’t just ethically dubious-it’s strategically
self-destructive.”
Adam Caudill wrote a post
about parasitic and symbiotic business models. He cites data aggregators and
location tracking as an example of a parasitic business model:
“A great example of this is data aggregators and
location tracking; services that exist to collect, connect, extend, and sell
data about users. Too often, this is done without the user having any idea that
it’s happening — much less having willfully agreed to it. This business model
relies on the ability to collect vast amounts of data on users, and build
profiles that can be sold to others, primarily for ad targeting & tracking.”
He points out that these
activities offer no benefit to the user or potential consumer. He also thinks
that data has little value itself without merging it with other data, which is
often done. I will explore his section on healthy business relationships in my
symbiotic business practices post.
When users become involved in
a parasitic business relationship, there are often costs to them, including “loss
of privacy, revealing secrets, bypassing legal safeguards, or even risking
personal safety.” Businesses involved face reputational risks and potential
legal risks. I think he correctly characterizes these parasitic business models
as unethical. They should be seen as the scams they are. He highlights
advertising practices as frequently being parasitic.
He concludes, and I agree:
“Businesses have an ethical obligation to protect those
they have a relationship with (directly or indirectly), not exploit them.”
A March 2024 paper in the
Academy of Management Review characterizes institutional parasites. Remember
from the first graphic in this post that this may include consultants hired to
enable companies to avoid non-compliance or misrepresent them as compliant.
They give three outcomes of institutional parasitism: institutional drift,
layering, or reform. They are explained in the abstract below. The authors
point out that institutional parasitism always involves deviant actors,
basically scammers.
An article from London-based
Bayes Business School explains the paper and institutional parasitism. The
author notes that suppliers or other key external partners and employees can
become institutional parasites and should be rooted out as soon as possible. He
writes:
“They cite accountancy firms which collude in
falsification of accounts (such as Arthur Andersen’s oversight of collapsed
energy giant Enron) and specialist ESG firms that guarantee positive outcomes
from human rights and sustainability audits of clients’ supply chains.”
They note that relationships
that are initially mutually beneficial can sour and lead to problems for both
parasite and host. In some cases, parasites serve to guarantee desired outcomes
for their hosts. Therefore, early detection is vital, and companies need to
realize that the benefits they obtain with deception are not durable and open
them to huge risks. Some in regulatory circles used to say that each new
regulation creates new, creative, and often unethical ways to get around it.
“The authors urge leaders to instead act boldly –
“reforming” the institution in ways that improve transparency and reinforce its
core purpose and principles. Regulators and lawmakers responding to exposure of
wrongdoing should also embrace that approach and aim to improve the
identification of parasitical actors.”
One of the paper’s authors
noted:
“Complexity is the key driver of institutional
parasitism and as organisations grow it is more difficult for leaders to be
aware of emerging problems across many sites or partner organisations. It’s
also a fact of life that there is sometimes a gap between what we claim about
ourselves and what we do – and that can apply, for example, to monitoring of
suppliers.”
They also note that parasites
go well beyond those who merely cut corners. Another of the paper’s authors
gives a warning for businesses to be aware of, and to focus on the best
immediate remedy:
“It’s understandable that the first response to a
parasitical threat is adding yet more pages to bulging staff manuals or
supplier contracts. However, leaders should instead focus on stripping back the
complexity and looking at the core functions, purpose and expectations of their
organisation. Ironically, sometimes such change allows leaders to maintain a
form of the status quo.”
References:
Insidious
and potentially lethal - the strange rise of organisational parasites.
'Institutional parasites' can thrive in
complex organisations and wreak huge damage if ignored, academics find. Chris
Mahony. Bayes Business School. City St, George’s. University of London. April
10, 2024. Insidious and potentially lethal -
the strange rise of organisational parasites | Bayes Business School
Institutional
Parasites. Jukka Rintamäki, Simon Parker and André Spicer. Academy of
Management Review. Vol. 50, No. 3. Published Online:14 March 2024. (Abstract). Institutional Parasites | Academy of
Management Review
Parasitic
& Symbiotic Business Models. Adam Caudill. August 22, 2021. Parasitic & Symbiotic Business
Models - Adam Caudill
The
Modern Menace of Parasitic Branding: When Cheap Publicity Becomes Business
Poison. AARYAVARTT. LinkedIn. October 3, 2025. (25) The Modern Menace of Parasitic
Branding: When Cheap Publicity Becomes Business Poison | LinkedIn
The
Parasitic Culture: An Exploration of Economic and Social Drain. A somewhat
gross but apt description of our culture of excesses based on feeding of the
masses! PERSPECTIVE. Mark Boatwright-Frost. October 20, 2024. The Parasitic Culture: An Exploration of Economic and Social
Drain | Resilient Ecosystems (RESECO)
Strategizing
for Parasitization: The Types and Stages of Business Parasites. Mengyue Su and
Hao Ma. Academy of Management Proceedings. Vol. 2025. No. 1. Strategizing for Parasitization: The
Types and Stages of Business Parasites | Academy of Management Proceedings
No comments:
Post a Comment