Let’s indulge ourselves for a minute and imagine that Baidu is writing a letter to Google, its former chief rival in China’s search engine market. It is very likely that the message would start in the following way:
“Dear Google: I miss you. Truly wish that you had never left.”
Did Peter Thiel – the “don” of the PayPal Mafia – not claim that competition is for losers? Why would a company miss its former chief rival? How does Google have anything to do with Baidu’s recent rumoured gamble on biotech? It turns out that, while firms should make the effort to distinguish themselves, the absence of competition or the lack of efforts to seek competition, would gradually erode one’s competitiveness.
Looking back, Baidu was among the very first Chinese digital companies possessing world-class technologies. While western media have generally described Baidu as a Chinese clone of Google, most of their claims could not pass basic reality checks. For instance, Robin Li’s first search engine patent was filed in Feb 1997 and approved by the US Patent Office in July 1999. In contrast, Larry Page’s first patent was filed in Jan 1998 and approved in Sept 2001.
While Baidu was a fierce competitor against Google ten years ago, the two companies are clearly on different paths today. On their original core businesses, Google is making breakthroughs in AI that is becoming better at recognising breaking news and misinformation. However, Baidu has been widely accused of displaying too much commercial and even misleading information among its search results.
In terms of new growth opportunities, Google has restructured itself and the newly named Alphabet owns and operates the world’s most popular mobile operating system, controls a large number of smart device and AI companies and is making headways in quantum computing. Meanwhile, the large exodus of Baidu’s talents makes people worry about its future.
It is not that Baidu has not tried to grow itself. Over the past decade, the company had ventured into social networking, fintech, online-to-offline (O2O) services and autonomous driving. However, most of these initiatives are either abandoned in-house or sold to outside companies. One has to scratch his head and wonder – Weren’t China’s multi-billion dollar search market Baidu’s to harvest once Google ceased its Chinese operation in 2010? How could winning in such a dominant fashion trigger one’s demise? We have to remember while it is a bad idea to compete in a red ocean, neither is it a good idea to be the only shark swimming in a large area of water. Along with handsome profits, another “best thing” about monopoly is that you can live a life of leisure and be worry free (at least for a while). While it was unclear when exactly Baidu’s search engine started slowing down in performance or when the line between “organic” search contents and promoted advertisements became murky, it is clear that they took place after Google left China.
One general consensus among business researchers is that dominant firms tend to become complacent and often get disrupted by firms with very different technological or business paradigms. When business giants are threatened of becoming obsolete, they tend to allocate an oversized amount of resources on new initiations but without self-discipline or patience. The urge (or desperation, in many cases) to discover new growth opportunities quickly often triggers them to make massive and risky bets to gamble their future on the next big thing. The problem is that, more often than not, rushed gambles do not pay off.
Let’s think about the recent news of Baidu raising up to $2 billion over three years to invest in a biotech start-up, tapping on AI technology to develop drugs and help in the diagnosis of diseases.
It is beyond doubt that AI and machine learning have huge potential to enhance and accelerate drug discovery. Healthcare accounts for a large percentage of the GDP in the developed world and drug discovery has been notoriously expensive. It is not a surprise that an increasing number of start-up firms (as well as subsidiaries of big pharmaceutical companies) are exploring alternative ways to look for drug targets and therapies, combining advanced algorithms with large (patient-driven) data sets.
At the surface level, these are also areas of strength for big technology companies such as Google and Baidu. However, it is unclear to what extent internet giants can truly redeploy their resources and talents to help in drug discovery. At this moment of history, all the drug-discovering AIs are “narrow AIs” focusing on specific tasks. Even within the biotech community, the algorithm developed by one firm for drug discovery for one disease is not readily redeployable for another disease. Most drugs have multiple biological targets and activities and their effectiveness depends on a large number of factors. The ideal algorithm would recognise important characteristics of known drugs and then use the obtained models to automatically assemble new molecules. While extra computing power and AI talent can always help, it is unclear how Baidu’s technology in other areas can greatly facilitate breakthroughs in drug discovery and trials.
That being said, Baidu is not the first internet giant to venture into the healthcare sector. Google has been doing it for quite a few years; IBM has also dedicated enormous resources promoting its Watson system. However, these two players have adopted very different approaches in the process, partially due to their difference in the threat of obsolescence. While IBM gambled its future on the readiness of AI/machine learning in healthcare, Google was mainly trying to build up absorptive capability to explore potential opportunities. Even though neither company has a successful track record in this area, Watson’s failure would deal a big blow to IBM’s future prospects. In contrast, its biotech subsidiary’s failure to grow into a multi-billion dollar business would not be a major deal for Google, given the company’s success in a wide range of other sectors that are well positioned for the future.
If Baidu treats its (rumoured) investment in biotech based on the same logic as Google – part of a large portfolio and as an exploration for medium to long-term growth, the company may become a major player in the field in future. However, if Baidu aims to score a major victory quickly, it might run into the same problem as IBM’s Watson – overpromised but underdelivered on AI healthcare.
The emergence of new technologies usually takes a long period of exploration. Even though systematic efforts of trials and failure may not necessarily lead to success, firms without the dedication and self-discipline to suffer through the process are much more likely to pay the ultimate price. Looking in retrospect, Baidu could have been in a much better position in controlling its own destiny if its rival Google had never left China. While the sentimental claim that “competition is for losers” has its appealing power, firms that do not actively look for competitors will for sure become losers and meet their sunsets.