Conceptually, on paper rather than in reality, it must have seemed like minor genius. As noted, there were other RPG and wargame products doing the same sort of thing at the same time. Because you could have a truly huge number of monsters and still have them in alphabetical order and so on.
In reality, it was hideously impractical. The binder was not high-quality, or I dunno, maybe it was for 1989, but it was rubbish compared to the ones we had in the office in say, 2008. Very often it closed ever-slightly off-centre (and once that happened once, it happened more), and when it did that, all the pages would catch, preventing you from going quickly to the right place, and sort of micro-damaging a lot of the holes punched in the pages (to fix this you had to carefully lay it out, re-open it, and very carefully re-close the mechanism, which was pretty annoying - I can still almost feel the tension of the mechanism in my hands). Because they wanted it to fit way more stuff than a book, and presumably for cost reasons, the pages themselves whilst not super-cheap or light, were not strong either. Even after just a couple of years of moderate-to-heavy usage, when the PHB and DMG were still in perfect condition (it look 8 years of heavy usage for the PHB to start to fall apart), a lot of the MC pages had got torn at the holes. We fixed them and strengthened the others with little round stickers made for that purpose, but that was painstaking and not a long-term fix. IIRC the idea of it having everything alphabetical fairly quickly fell apart too because the pages were double-sided, so instead (IIRC) you had to have sections anyway, really making the reason for its existence in the first place kind of questionable. And because it was a large, extremely heavy ring-binder (once you'd started adding stuff to it), it was far less practical to carry than a book, and it damaged the pages inherently just by carrying it around (as they exerted weight on the holes, rather than being attached by a spine more evenly and permanently).
TSR must have realized this fairly quickly, even the MM came out less than four years after the MC did. I can't remember if monster-related products switched over to a book format before that, if not it was immediately after it.