Thursday, January 27, 2011

strategy and attachment

Recently, I was reading an article, and as usual I  encountered ‘like’ button of facebook. Although I have seen ‘like’ many a times, this time it just struck me that ‘like’ has become as pervasive as Google search box. Then I had a question, that why don’t we see Bing search box as often as Microsoft would want us to see? Despite of Microsoft’s immense efforts to dominate search space, it has only been able to acquire 10 percent share of search.


Google search or facebook or twitter widgets help a website to add a unique value for its users. Google search allowed websites to add search capability for its users and provided extra revenue to websites. Similarly facebook, twitter and other social media widgets allow users to share the experience with other people.  So there has to be a unique value that users derive from a new product or service for it to succeed. So trying to create another twitter or another facebook would really be a waste of resources and energy for companies.


So I wonder, why do many companies waist resources on creating exactly similar products? There is no harm to have similar products if playing field is somewhat similar, but for things like windows or Google search, with 80 to 90 percent dominance, having another search does not help a company. Although for end users it is mostly beneficial to have many players, that’s how quality of products improves.


So getting back to why companies do what is not beneficial to them? I think the problem is that when a company has an extremely successful product, most of its systems are geared to efficiently exploiting anything closely associated with that product. And anyone who is trying to create something new, would be mostly able to think in terms of the existing product or services.


For example, inside  Microsoft people mostly understand how windows got successful, and so they always want to exploit windows dominance. In Google people understand how search got successful, so googlars know how to exploit the search space for other products. As long as original product has momentum, everything works fine, but when the main product starts losing, company as a whole may start losing if it does not understand this reality. This observation is somewhat similar to a concept in economics, known as Dutch disease.


According to the Wikipedia entry about Dutch disease:


the Dutch disease is a concept that purportedly explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The claimed mechanism is that an increase in revenues from natural resources (or inflows of foreign aid) will make a given nation's currency stronger compared to that of other nations (manifest in an exchange rate), resulting in the nation's other exports becoming more expensive for other countries to buy, making the manufacturing sector less competitive.


So what can companies do? A company has to find new ways of doingthings or it may just get out of business.Companies can learn from Intel’s legendary  story. When intel was facing problem of losing money on memory chip business, Andy Grove asked Gordon Moore one simple question: if we were fired, and a new CEO comes in, would he do what we are doing? Then Moore replied that he will close memory business and invest in some other business. So Andy Grove suggested that why don’t we do the same and they litterally fired themselves and started fresh.


The above method helps us to get rid of attachments to our idea and positions.



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