How Google Wins…

Article submitted for peer review to the Association of MBA’s

David Dean Ellis LL.M MBA BA

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win”. Sun Tzu

The establishment of Google as the leading provider of internet search capability has been one of the major success stories in the technology and information industry.  Since its inception in September of 1998 Google has grown steadily to rival and dominate established companies in an industry which is marked by constant reversal of fortunes and change. In this paper I will attempt to demonstrate and analyze Google’s formula for strategic success against its rivals, specifically in the areas of Growth through acquisition, advantage through diversification and dominance through continuous innovation and development. I will also seek to analyze how these pillars of strategy can and be applied to other organizations which may seek to apply this template of success.

Information technology as an industry is an ever expanding world constantly at the mercy of the forces of change. Google’s leaders from the outset acquired an advantage through the capital gained from their listing on the stock market. Indeed it was their ability to gain dominance through their superior search capability which made the company so attractive. By “winning “at the search game Google was able to extend its influence and expand rapidly.

The acquisition of companies by Google and the use of the technologies and capabilities gained from these acquisitions have enabled Google  to not only augment and strengthen their position as world leader in Information technology  but to create a multi layered organizational presence with a core motif of “organizing the world’s information” as it central driving force.  The policy of acquiring new technologies and companies has had the effect of reducing Google’s research and development costs especially in areas where the company had little or no distinctive competence. The acquisition of Keyhole Corp for instance in October 2004 preceded the Launch of Google maps which expanded Google’s ability to bring useful information to the public, whereas the acquisition of Picasa in July 2004 gave the company a product offering. In the early stages of its development therefore Google’s acquisitions were geared at expanding its capabilities and product portfolio and to utilize its dominance in the area of search to extend influence in the information industry which was in line with its mission statement. In the more recent stages of the company’s history acquisition can be seen to be more of a means of survival through continuous change.

Google’s decision to diversify its capabilities past the search capability and into the areas of software and productivity tools represents a bold step to win through utilizing market trends and an unbeatable pricing scheme. In short, it is reasonable to assume that people who use productivity tools usually work with or require information. By diversifying their product range into these areas, Google intends to effectively become one stop shopping for the information technology market. As an illustration the average manager in a company has access to spreadsheet analysis tools, web search capabilities and online calendar  which can be accessed from any part of the world and a mapping application which can suggest places where he may have lunch. Google has in effect is seeking to become indispensible to the online community. The result is a company which is virtually omnipresent in the world of information technology. Diversification therefore provides a competitive advantage in that specialist organizations such as social media companies are limited in competing with Google on only one front of its business enterprise at a time.

In a casual look of the company’s timeline one notices that Google has been engaged in continuous releases and augmentation to its product line over the course of its business life (jan 1996- jan 2012). This constant incremental improvement of its services and products has been aided in part by the decision to pursue both open and closed innovation strategies. The use of end users as product and service testers has allowed the company to release a continuous stream of products and services into the market. The effect of Google’s open innovation strategy on the consumer is to give consumers and developers the opportunity to identify with and share in the “great work” that Google is doing for the information technology industry. The fact that most of Google’s products are provided free of cost gives the company an image of being socially responsibility to aid the world. This in effect makes the company an attractive company to a majority of its users and does more for the company’s image than any expensive advertising campaign.

The steady release of products shows a continued dedication to develop and change and target markets which are complementary to Google core search/ advertising business. In essence the more useful and free products the company creates, the more opportunity it creates to monetarize these products by linking it to their core advertizing business. An example of this would be the acquisition of Adscape and YouTube, which sought to bring advertisements to free online entertainment applications trafficked by hundreds of thousands of users.

Google’s strategy represents a very multi layered and complex approach to competition which cannot be classified as either proactive or reactive. Its strategy is more “emergent” and organic in the way it responds to prevailing market trends and by its creation of disruptive technologies to control market forces. This strategy however holistically would be almost impossible to apply to most organizations as it requires not only a very high market capitalization which is necessary for a firm which intends to practice the use of acquisition as an expansion strategy especially in the current global economic downturn.

In terms of the ability to diversify and engage in multiple areas of an ever changing industry, many companies would find this difficult especially organizations with established bureaucratic structures which have detailed decision making process. Such a structure would not support the pace which is needed to prevailing market forces especially in innovative contexts.

Added to that is the restrictions associated with certain industries, such as government regulation.  In the case of most food or drug industries, companies require approval from government bodies which slows down product development and release. For industries such as agriculture the concept of continuous innovation and development would be limited to the production process and not necessarily the product itself and the concept of complementarity would be difficult to implement.

Google’s strategic process however on the other hand offers a great study for organizations who may want to adopt transformational changes as a means of improving their performance in an innovative context. Companies involved in technology or information may seek to implement certain aspects of Google’s decision making such as adopting a flatter structure and self managing teams for greater creativity and efficiency.  Embracing the concept of open innovation may allow companies with limited resources to invest in Research and development to improve their products and increase the speed to the market.

In summary Google’s decision making process represent a “web” of strategies which work together as an organic whole. From its inception the company utilized its “victory” in the area of search and advertising and used its influence to surround whole industries through constantly changing and ever expanding “virus like” strategic methodology.  Its success however is based on strategies that are peculiar to the company and the way in which it developed. Any attempt to map its decision making processes directly and holistically on to another organization will invariably be met with limitations either in the industry or within the organization itself which is a precursor to failure.