What should Google do?

[Pawan Fangaria]

Google being the second most valuable company in the world is just about half in value (~$370 billion) compared to the first one, Apple (~$740 billion). I have been thinking for a while why it is so. Yes, it's known that Apple concentrated on its core areas iPod, iPad, iTunes, iPhone, and now Apple Watch. Google on the other hand has many things. So, what Google should have done, or should do even now?

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In terms of innovations, I see google has done great innovations; Google Glass, Driverless cars, they are amazing. However, in business terms there are too many diversions, they get into far unrelated diversification. Driverless cars are fine, but should they get into taxi services? I see them even getting into biotechnology. Google Glass was great, but did not go anywhere. There can be numerous other examples where innovation is great, but wasn't rightly pursued into business.

In my opinion, Google should pursue its core area and every thing 'closely' related to that core area. Google core area is its search engine and advertising. Closely related to this is its "Youtube" business and social networking (Google+) should have been pursued more aggressively to close the ties there. Today, I do not see Google+ to be much popular, the use model doesn't seem to be understandable.

Other area closely related to their software is security. Instead of riling over other firms about bugs in their applications, Google could have come up with a versatile solution for security, a universal debug engine, a platform which could be used for software sign-off, and so on, which everyone would have embraced. I am just throwing some wild ideas, of course not more wild than google, because I am trying to stay closely related to its core areas.

On hardware side, I'm sure Google can do very well. They should have developed android phone on their own, if they wanted to win on mobile platform. This could be done even with their software being used by other phone makers. Just keep the two divisions separate within Google. I think I am talking about many things here, and really there are many more to talk about, but will stop here. More opinions from others welcome!

 

[astilo]

I think Google has a quite good strategy (diversification), even better than Apple's one. In a monopoly, once you have taken all, there is no more room for improvement left. Is anybody here thinking about Intel?
If you bet all of your money on a single outcome, even with odds as good as a 1000 to 1, sooner or later you are going to lose everything.

 

[Pawan Fangaria]

Intel also is entering in many things, but still I would say they are related diversification. In case of Intel, the areas are fine, they just need to make better strategies to win. But Google has distant, unrelated diversification. That may save it from doom, but that will not push it to win in anyway.

 

[Paul McLellan]

Google has a big problem which is that it doesn't make any money on anything other than advertising. They pioneered driverless cars but don't seem to be serious about it. Even Delphi (which not long ago was part of GM. GM!) just drove an autonomous car (an Audi) across the US. They have 80% share in mobile operating systems but only monetize it through search and already there are re-skinned versions of Android with no Google products at all (in China where Google is basically blocked by the Great Firewall). Of course they get most of the search from iPhone too since Apple doesn't have their own search engine (please Apple learn from maps and don't force a proprietary search engine on us). Their primary business is at least partially under threat from Facebook too (Google still has a higher Alexa ranking but I wonder for how long, Facebook is an order of magnitude more sticky).

 

[ippisl]

Pawan,

I think multi-area diversification could work, see GE and Samsung. To judge Google, you need to look to each of their respective projects, judge their competitive advantage and the market potential. In general google has pretty good competitive advantage in many of their projects and good market potential. But things take time.

As for Google's strategy with android - the goal was to prevent microsoft and apple from controling mobile. They've succeeded in that, mostly. But in order to support that goal, they had to build an ecosystem and not compete against it. Even a seperate company connected to google selling a phone would have created many problems - as we saw when google owned motorola.

As for the matter of related/unrelated diversification: Some things that might look unrelated are related. Google's self driving car uses unique AI and data maps, and map making tech) from Google that nobody has. Google internet balloons will give Google control over the internet of a few billion customers, besides the money.

For others i suspect this possible linkage: they are building something new - a unique research organization, with unique processes , unique software tools, etc. Of course they could fail - but if they succeed with this goal - and keep at least some of it in their organization, it means they'll be very very successful monetary wise , in the long term.

 

[Pawan Fangaria]

ippisl, you have brought good points. Samsung is also diversified in many areas, but look at Samsung how they are pursuing each of their areas to get the value out there. Samsung supplies chips to its main competitors like Apple from its foundry business and still competes with Apple. It uses Google software and still competes with Google supported android phones. Why can't Google do the same? Why should it feel shy of entering smartphone business on its own just because it supplies the software for the same?

Google is world class research organization, there is no doubt in that. They have done great innovation, however there is lack in pursuing those businesses. If you talk about related, unrelated - let's say driverless cars. They have invented. Now they can manufacture those cars, that will be a complete new market; there are many things there, but I will not go into those at this moment. Then the taxi service with those cars, that will be another kind of business. They are related with car, but are very unrelated in with respect to logistics involved in those businesses.

To keep it short, yes unrelated diversification also can be pursued, but the question is how many and in how much time? Apple did about 5 product businesses (and those were all related) in say 25 years. Now think about how much time Google will need in pursuing all those related and unrelated businesses and whether that is realistic.

 

[ippisl]

Pawan: maybe Google can attack the smartphone business like you sayh. But how ? software is not the route, because that would be betrayal of the android concept and ecosystem. I think they've tried hardware with motorola and it didn't go too well. And anyway , if we look at the hardware business we see that the integrated approach(fab+chips+phones) is what wins there and the rest don't make much money so maybe it's not such a good business ?

But anyway , Google is still attacking some part of the smartphone business with their modular phone(project ara) - we'll see how that goes.

As for driver less cars - nothing is set in stone with regards to business model ,etc. But the potential of owning transportation in say north america is too great to dismiss going at it alone. As making those cars and building the business - i think we're not there yet, it's a very hard tech and will take time until we'll see it on the street.

And as for diversification - i don't believe in the thesis that focus in the only way to win. Yes Apple did so , but Apple is a pretty unique company and i'm not sure we truly understand why it succeeded so well(i think a big part is unique and mysterious luxury marketing skills). If you can build many exceptional things, at low enough costs , and have a good enough competitive advantage and attack targets with little competition , and have great partnerships[1], i think you can do well.


[1]Many Google-x projects have partnerships with important players - Internet balloon with telecom companies, Various medical devices with the relevant medical companies ,Computer vision technology partnership with a big company in medical robots

 

[Pawan Fangaria]

ippisl, It's not necessary that it has to be combination of (fabs+chips+phone) to win, Apple and many others do not have fabs, and for that matter TSMC is there for you.

Google project ara for modular phones again looks like a kind of innovation, at least to me. Time will tell, how successful that can be a product to sell.

Partnerships, diversification, ... are all fine, provided they are planned and pursued up to product development, deployment, future revenue generation,... What is lacking in my view is well planned strategies in a particular areas where Google wants to be there. Usually, I see it taking half-steps and then leaving those in the middle.

 

[ippisl]

Pawan,

I judge how hard it would be to Google to make money in the phone business by comparing it to the rest in android, and currently it seems only Samsung is making money, don't you agree? . The only way of out this by releasing a lot of unique software - but that is certainly going against the ecosystem. And being a trust worthy partner is worth more to google long term , i think.


>> What is lacking in my view is well planned strategies in a particular areas where Google wants to be there.

Let's be more concrete , can you give a few examples ?

 

[Pawan Fangaria]

ippisl, let's take Motorola, Google interest was only in their patents and research group for Project Ara. They sold rest of Motorola. If Project Ara was the one they wanted to pursue, then they should have gone aggressively on that and moved the crowd not to change the whole phone and replace bad components with best components which Google can provide. But then they again came back with Android1 phones with multiple partners to manufacture them. I would call this as a distributed strategy, the focus is not sharp.

Take their strength in software, they could have focused in security aspect and come up with a universal platform for security test of software. Today, it is a big issue, they could have led the solution for the same.

Take another core area, search engine and Google maps from where most of their ad revenue comes. They have youtube, they could have enhanced search and map experience with videos to remain ahead.

These are some examples, but mainly the point is that there should be more product focus than research focus. I hope I am not mistaken by this statement of mine. Research focus is good, but for a company product and revenue are equally important, if not more.

 

[ippisl]

Pawan:

First, let's talk about security. Google entering into the security field(in a strong way) would put them against the u.s government and other governments. Not sure that's a good move, especially that we don't have knowledge on their political alliances. There's of course the're the weak way - chrome os operating systems are much more secure than windows-7(win-10 is still open), and it'll give them strategic power and another app store on computers(they combine android + chrome os) which could be a significant revenue source.And they are focused there - multiple laptops, very sucsefull in education and other places, new cheap compute stick, etc.. But it will take time.

As for project ARA - my guess is that to build a good modular phone takes time(even with resource investment) - and in that time they could lose share to someone in emerging nations ,so they did android1.Of course hey could have build android1 alone - but this would betray the ecosystem and won't make much money anyway and would be very low margin,which isn't good for the stock. I see no reason why google did purposely delay ARA. but i could be wrong.

>> they could have enhanced search and map experience with videos to remain ahead.

I think they've enhanced search with videos, sometimes videos appear in search. As for videos in maps, i'm not seeing where the value is, could you please explain ?

Product focus vs research focus - if i had to guess, i would say that more than 80%-90% of the people in Google work on main products ,while the rest work on Google-X projects. That's pretty focused. And like i said before - i'm not even sure focus is the only correct business strategy.

 

[Pawan Fangaria]

Pawan:
>> they could have enhanced search and map experience with videos to remain ahead.

I think they've enhanced search with videos, sometimes videos appear in search. As for videos in maps, i'm not seeing where the value is, could you please explain ?

I was thinking of something that Nokia's "HERE" provides. HERE's maps can link to smartphones that can let parents of school children see images of the stops in the schools from where they need to pick up their children. These kind of applications can help driverless cars by large extent for automating routing. As Google's search engine, maps,... provide a well knit platform, I would hate to see Google lagging in such technologies which are their core areas.

 

[ippisl]

>> HERE's maps can link to smartphones that can let parents of school children see images of the stops in the schools from where they need to pick up their children.

getting a live feed requires a camera or a satellite pointing at that point , How does that work ? Or the just show old videos? Because if it's old videos, it's a bit similar to google earth.