In Praise of Dissimilarity

Products and markets with nothing in common “taxonomically” can have “thematic similarity,” which may open up important business opportunities.

Image courtesy of Flickr user TheBusyBrain.

What do Intel and McAfee have in common? Ebay and Skype? Voice recognition and GPS? Louis Vuitton and Al Gore’s Climate Project? Or, more generally, when are two things (such as companies, products, resources) similar, and when are they not? More important, how do these similarities and dissimilarities matter? Executives must thoroughly understand these questions, or risk overlooking vast opportunities and grave threats. Whether explicitly or implicitly, the traditional understanding of “similarity” by managers has been a taxonomic one. Simply put, the degree of similarity as traditionally measured depends on the extent to which two objects possess the same features. Personal computers, for instance, all have hard drives, processors and a video monitor. Taxonomic similarity underlies key frameworks of management such as strategic relatedness, the Standard Industry Classification (SIC) system, the definition of industry boundaries, including the forces within that industry, and the International Patent Classification (IPC). For example, the IPC category F02 (combustion engines) contains internal-combustion piston engines, gas-turbine plants, jet-propulsion plants and so on. So, what do Intel and McAfee have in common? Well, not much, according to comments by “industry experts” when Intel, a manufacturer of computer chips, acquired McAfee, a security software manufacturer, in late August 2010. Intel produces hardware — chips, mostly — whereas McAfee produces anti-virus software. They are seemingly in two completely different (read, dissimilar) categories. The acquisition (which cost Intel $7.7 billion) was the biggest in Intel’s history. According to the Financial Times, the acquisition by Intel of such a dissimilar business puzzled many security industry executives. While experts hope that chips can be improved to make them able to withstand malicious attacks, that prospect is seen as being years away. But while Intel and McAfee seem unrelated in a traditional, taxonomic sense, researchers in cognitive psychology have recently suggested that there is a second kind of similarity, called thematic similarity, and in that context the relationship between Intel and McAfee looks different. Importantly for us in management, thematically similar concepts tend to be taxonomically dissimilar. By appreciating thematic similarity, we can extend managerial cognition into areas that are taxonomically dissimilar, and therefore generally seen as irrelevant or outright counterproductive.

Read the Full Article:

Sign in, buy as a PDF or create an account.