Competitive Advantage

Quantifiable Luck: How Google Dominates Luck in Competition

In the old days and by the old days I mean pre 2007 when machine learning and big data really started to take off, starting a new company or launching a new product was heavily dependent on luck. There was limited information and resources for entrepreneurs to test their ideas for market viability. Even larger more established companies with more customer insights from conversations, data collection and other formal/informal ways of understanding their target consumers were still governed by the laws of luck when launching a new business or product. 

The reason luck played such a large and important role was that there was no way to get  valuable, unbiased, uncorrelated information from millions of customers over prolonged periods of times. Consumers rarely know what they need, if you ask them directly they will want to sound informed and smart ultimately providing misleading (although well intentioned) answers which put the odds of commercial success roughly at 50/50. 

The odds went even further against the odds of success when a startup or a company wanted to fill a niche market. The lack of data to find the niche was a problem; how do you find something that doesn't exist yet? If the company was lucky enough to stumble upon a niche that wasn't yet being served the proper way to fill the niche was even more difficult. The absence of quality data turned many companies into gamblers when companies were supposed to be risk takers. This is why "luck" has played such a large part of commercial success in business. 

But today, the competitive field has changed significantly with a a key player quantifying luck in real time. Google, with a staggering 78.78% of the global search market (September 2017) has developed the ability to quantify:

  • What people are searching for
  • What products/services are being viewed more
  • Which products/services are going further down in rankings
  • What searches are yielding little if any results (niche opportunity!)
  • Clear regional socio economic factors
  • Short/Medium/Long Term Trends and momentum. 

Granted the list of insights is much longer and more in depth than this but the point is clear. Google knows you. They probably know you better than your significant other or best friends know you. Which allows them to tailor their offerings (ads) to you unlike anyone else in the world. Sure Facebook, Amazon and some other players have immensely valuable insights into the consumer, but as of now Google is king. These insights have allowed them to eliminate the majority of the guess work in launching new products and insights. Sure they still have failures but the odds have been moved in their favor as much as possible and they have maximized their possibility of being lucky. Google simply knows more than anyone else about the market conditions, customer sentiments, which companies are weak, or which ones are coming on the radar of significance. 

All entrepreneurs love to have unfair competitive advantage in any market segment. It's fair to say Google has achieved the entrepreneurial dream of any founder in their market segment (search) but they have also created the unfair and I would said dangerous capability to monitor the world (in real time) and act accordingly. Imagine this, Google handles an estimated 40,000 searches a second, 3.5 billion searches daily and 1.2 trillion searches yearly. Combine this with the insights they get from their 1 billion active Gmail users monthly and 2 billion active Android users (81.7% market share) and the scope of the combined insights becomes clear. 

This is all pretty cool stuff honestly. I'm not a Google basher so if you're looking for me to complain about this fact you've come to the wrong place. However, I do think the question should be asked; how should companies effectively compete when the tables are effectively against them? There are a lot of business segments Google is not currently in and might never be in. But what about the companies who happen to find themselves in the cross-hairs of a Google project? Google has the equivalent of insider information on any company, startup or new product launch. They will know how many people are looking at it, searching for it, buying, talking about etc. and they will know it before anyone else does. They would know if they should step in and buy you or step up competition and crush you. 

Before you get angry at Google, it's important to note that it's not their fault per se. Almost 80% of the worlds population voluntarily votes every year to freely give Google their data for free. Google in turn offers users a broad array of services for "free": Gmail, Drive, Docs, Sheets, YouTube and many others to encourage users to do as much of their online activities via Google. These services have a value of roughly $600-$700 a year per user. That is, for $600-$700 a year you are signing away all of your activity via Google services. Emails, searches, your physical location history, purchase habits etc. All, because you wanted to get some free photo storage and email. It's important to note that most/all internet companies collect and track this data via their desktop and cell phone apps (Facebook, Amazon, LinkedIn) so I'm not highlighting Google because they are the only one, I'm highlighting Google because they are by far the best and most dominant player.

So what is the take away? What can you do with this information? Well, there are a few things:

  1. You should be aware that the game of competition is changing quickly in the favor of a few larger players who are able to front run other companies in the market place because they have access to better and more reliable information. 
  2. You are voting to weaken your startup or company advantage indirectly when you choose to use Google services to operate your personal and/or professional searches, emails, collaborations etc. You are giving all of your information for free. 
  3. Be more aware of your personal data rights. Know what information you are sharing and with who. If you had to take control of all of your digital footprints online would you even know where to start or who has what?
  4. Just because Google, Facebook, Amazon and others are huge doesn't mean that's the way things have to always be. It's a conversation that I believe is worth having and it will become more important in the coming years as personally generated data value gains more awareness.
  5. Startups and established companies alike have to consider how they will compete on the tilted board. Artificial Intelligence/Machine Learning Startups, Augmented Reality/Virtual Reality Startups and Self Driving Startups are all prime targets to be placed in the cross-hairs of Google, Facebook and Amazon. 

To wrap up. Do I think now is a good time to launch an artificial intelligence/machine learning, AR/VR or any other technology startup? Absolutely. Now is an excellent time to take the plunge and take the entrepreneurial risk. Competition is always evolving, there will always be players with out sized competitive advantages in one or numerous areas. The only way to win in business is to be informed about what can end your company. Don't be caught gambling when the big companies are taking calculated and quantified risks to dominate in the market place. 

Just remember, the only way someone could fix a game is if you didn't know the game was fixed. Google and others are fixing the game by Quantifying Luck in their favor. Now you know and can change your plans accordingly. 

What To Do When Technology Eats Your Lunch and Then Wants Your Dinner Too. 😳🍽️

I became inspired to create and write this site thru the process of running my companies during 2014 to 2017. To be frank, I’ve always been much more of a private person and never really sought any sort of public attention, preferring to operate quietly and relatively unnoticed. But the changes in the market place and the severe lack of simple, clear and actionable information pushed me to put that way of being aside and put myself out there. The best way for you to understand why this site is here, why I chose to write about technology, why it’s important for everyone to read (business owners, entrepreneurs, and especially employees) is to tell you the short story of how WanderingAlpha.com came from being an idea to the site you are reading right now.

My entire career has been as an entrepreneur. Taking on challenges, addressing un-met needs in the market, and thankfully creating jobs coast to coast in the United States and in Europe. I had been trained by some of the best business people in the United States and Europe and even though I didn’t have an MBA, many would say I definitely earned a few over the years thru various companies. They pushed me hard, taught me how to break problems apart and most importantly they helped me nurture my natural talents as a businessman and recognize my weaknesses. It is this last point on weaknesses that I want to focus on for a moment.

We can generally become aware of our personal and professional weaknesses when we come into contact with a problem or situation that causes us to deal with the problem head on to move forward in our lives or goals. In most cases, we (or the people close to us) can identify the problems we’re facing and more importantly the best course of action to address the problem and move on. But sometimes it becomes more difficult to identify the problems and even harder to come up with a solution. Leaving the problem unsolved and causing continued damage. 

A few years back, when businesses were still playing by the traditional rule of competition it was easier to predict where trends were going, what customers would want and what the causes of competitive problems were. Entrepreneurs, owners, managers and investors would be able to reasonably come up with solutions to problems the business faced based on the previous experiences they’ve had. But the disruptive technologies launching around the world has rendered the old way of diagnosing and solving problem obsolete. What happens when the problems can’t be properly defined because the rules have changed? What happens when all the tools, skills and strategies you’ve spent a lifetime learning no longer fully apply to the problem of today and even less to the problems of tomorrow? What do you do? You can learn, innovate and prepare yourself for radical change.

Think about this: The business specializing in producing audio and video cassettes could only survive and thrive if they accepted the need for radically changing their view on the products they sold. The companies who changed, survived. The ones who refused to recognize the changes went bankrupt. This isn’t to say that you shouldn’t have strong convictions and change your business and strategy like a leaf in the wind. But you must be aware when your convictions are diverging greatly from the economic realities of your business, job or investments. No amount of good intentions and pivoting could have kept and maintained an audio and video cassette viable until 2017. Now the point isn’t if you are in the cassette business or not, no! The point is, has (or will) the business you’re in materially changed? Are customers habits changing because of technology and not your normal competition? Let me explain with a personal story.

One group of companies I had founded focused on providing the complete range of home service to high end clients in the New York Metro Area. Daily Maid Services, Pet Care + Boarding, Handy Men, Painters, Landscaping and a few other services. With a simple online setup and booking, clients could secure regular, high quality services with world class customer service. These companies operated as major players in the North East and California primarily with competition coming mainly from the national chains and local players. We knew the game, we played it well, and we expanded to city after city. Times were good. I would read about some of these tech startups who wanted to break into the various businesses. Some of them even wanted to partner with our companies. But they didn’t really have their concept or strategy together.

Around late 2015 things started to change. The competition from the On-Demand Companies (also known as the Sharing Economy and Platform Economy Companies) were competing against us in multiple markets, with more funding, lower paid freelancers, and generally slicker websites and apps that were very hard for a non-On-Demand company to compete with. Clearly, many of these startups had learned a thing or two over the past year and were now raising more money than they knew what to do with. They smashed into every market with huge promotions and mediocre services, but were willing to operate at huge losses over a long period of time. It was clear that I was not interested in fighting a price war racing them to the bottom, so I knew we needed to make some changes. We slugged it out successfully in some markets, less in others and in some we just had to close. I was able to see these companies coming and had worked with staff to create competitive strategies to build the business and then exit them by in 2017.  and in hindsight was the best thing I could have done.

During this time of competition with these well-funded competitors who could operate with losses longer than any other non-VC backed company could, it became crystal clear to me that the rules of the game had changed. Many companies who were still in the market were making cassettes and the new wave of competition was streaming the music live. So many business models, strategies and methods had become obsolete in a matter of 18 months. Even though I had gotten out relatively unscathed, I knew that I had to update what I thought and how I evaluated business opportunities if I wanted any chance of succeeding and building dynamic, durable and innovative companies.

This put me on a two year journey learning about everything I could related to disruptive technologies, what they were, how they operated, where they were strong, and where they were weak. I got into the nitty gritty details of the Artificial Intelligence/Machine Learning, Automation, Blockchain, Augmented Reality and Virtual Reality, I learned to code (Python) and made the tech capital of the world, San Francisco, my second home. It’s been an experience that has changed my perspective on the future of business, work, employment and the shared future we are creating with these technologies. Essentially, I went as deep as I could to understand the opportunities and risks ahead of me (all of us for that matter) and I’m still going deeper.

It was mid 2017, I had completely exited the previous companies and was now in the process of building my technology focused company when I had been having more and more conversations with people asking for business and investment advice. I was acting almost as a bridge for many of my business friends between the old and traditional way of doing business and the new tech way of doing business. I’d tell them in the not too distant future, all companies, irrespective of size, will need to be digital businesses. How competition, business norms, customer acquisition, and so many things had to be rethought and redesigned. Before long, I had more requests, invitations and request for formal advising than I could have ever imagined so I also launched an advisory service at my company to help people compete and succeed in this new era of industry disruption. But what about the people I wasn’t advising? The business owners, entrepreneurs, workers and students who want to start wrapping their mind around their issues. I wanted to help them as they make their way in the world. They deserve a clear, straight forward explanation of what’s waiting for them now and in the near future.

This is how I came to create and write WanderingAlpha.com. I wanted to provide information that was clear, accessible, straightforward and free. Where anyone with an interest can gain a clear perspective on the future and begin informing themselves. The site will always be a work in progress and I’m adding sections and content to it every week. I hope you enjoy reading it as much as I’ve enjoyed writing it. If you ever feel like asking a question, feel free to do so and I will answer you to the best of my abilities or point you in the right direction.

With that I wish you lots of success whatever your goals are. Now let’s do this.

Christopher Sanchez, Founder WanderingAlpha.com