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Recognizing Strategic Threats

There is more to thematic similarity than just opportunity recognition. Strategic management typically splits competitive analysis in opportunities and threats. We’ve just looked at opportunities. But what about the threats, especially those that your traditional taxonomic frame of mind would not expect? Ultimately, just as Thematic Thinking has direct implications for finding opportunities, it also is instrumental for distinguishing competitors from noncompetitors. In particular, Thematic Thinking suggests an alternative and complementary frame for understanding the competitor definition problem. Note here that taxonomically dissimilar firms can also be competitors, in particular if they are thematically similar. A case in point is whether Facebook in its first four years of existence (since its foundation in February 2004) represented a competitive threat to Google. A taxonomic mental model predicts low similarity between the two companies. Technologically, the two used completely different platforms, applications, algorithms, and business models. From a market-based perspective, Google was in the business of providing information about online sources and in the email business, not in the business of social networking. Facebook’s share of Internet activity, however, was growing. As early as 2007, 18% of U.S. Internet users visited the site at least once per month and the average user spent 3.5 hours per month on Facebook,7 and by mid-March 2010, for an entire week running, more people worldwide were using Facebook than Google.

Recognizing the thematic similarity between social networking, email, and online searches, media analysts argued that Facebook could become “the platform that unites the applications and services you believe are best on the Internet and then instantly overlay your social networking fabric on top of it.”8 It was not until November 1, 2007, that Google openly acknowledged the threats posed by Facebook by launching Open Social, Google’s first significant attempt at establishing its own social networking platform. In other words, Facebook remained a noncompetitor in the eyes of Google executives for more than three years and six months after Facebook’s launch. In fact, Google managers actively dismissed Facebook precisely because it did not fit Google’s taxonomy of activities: Google CEO Eric Schmidt said: “We have address books, and the sum of our address books is the social graph.”9 Thus, Eric Schmidt’s interpretation of the environment as well as his response to that environment was chiefly based on the classic taxonomic mental model—in this case, an excuse for inaction, giving Facebook the time it needed to establish itself as a formidable competitive force. In fact, it was not until February 9, 2010, that Google’s managers acknowledged the thematic similarity between social networks and email by making a determined foray into exploiting the integration of social networking and email by launching Buzz, a networking service that was closely integrated with the firm’s email offering, Gmail. Buzz let Gmail users create the network easily from their existing email contacts (given that Gmail had 176 million users, the thematic similarity between the two services lowered entry barriers for Buzz). Buzz also exploited Google’s search know-how to help users identify the material of most interest to them and to customize the information received on their networking pages.10 In October 2011, Google closed down Buzz. Currently, Google Plus provides similar functionality and is Google’s most recent attempt at competing not only with Facebook, but also with Twitter and the like. In 2013, Google Plus had about 359 million active users and was the second largest social networking site in the world, having surpassed Twitter in January 201311 (at the same time, Facebook had more than one billion active users12). In September 2013, two researchers from the University of Oxford published a map showing how Google and Facebook dominate the Internet. They had analyzed how many people had visited each of the sites on August 12, 2013.13 According to their study, Google was the most frequently visited site in 62 countries and Facebook in 50 countries.

As you can see, thematic similarity opens your mindset to a vast competitive landscape that remains hidden under the taxonomic way of looking at the world. What is dissimilar (from a traditional, taxonomic perspective) remains in the shadow of competitive analysis and opportunity recognition, and it remains completely outside your understanding of what your core business is and what is or might (in the future) be related to it. Conversely, competitors in dissimilar businesses are, well, simply not competitors. Consequently, they remain outside the competitive radar screen, so to say. They remain invisible. Thematic Thinking unmasks these potential threats by pointing to ways in which they might (again, in the future), interfere with an updated definition of your core business—a definition that relies not only on taxonomic similarities within industries, markets, and technologies, but also (!) thematically related elements in other industries, markets, and technologies. As you will see later in this book, business analyses based on taxonomic grounds are not in themselves wrong, but the exclusive reliance on such heuristics renders you blind in one eye, giving you part of the truth, which in many cases proves too little. Another perfect area to illustrate this “blind-spot effect” is innovation. The next section shows you how Thematic Thinking helps you avoid the innovation dead end in the day-to-day (core) business.

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