Linked by Thom Holwerda on Sat 18th May 2013 21:33 UTC
Google Why does Google get so much credit in the technology industry? Why, despite the company's many obvious failings, do many geeks and enthusiasts still hold a somewhat positive view on the all-knowing technology giant? A specific talk at Google I/O this week provides the answer.
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It's all about business models
by Tony Swash on Sun 19th May 2013 12:00 UTC
Tony Swash
Member since:

In order to understand how a large tech company (or indeed any company) operates one needs to be very clear about the business model of the company and thus understand it's core dynamic, what drives it. How does it make it's money, what is it selling, to whom. What threatens it's business model, what supports and enhances it's business model. What is import to it's core business and what is not.

Clearly companies can have internal cultures which impact on how they behave in total or in part, but internal culture is a weak driver of corporate strategy and long term behaviour, what really drives things is money and business.

Of course companies can misunderstand or lose track of their core business especially when confronted by rapid innovation and mutation in the tech world which transforms key aspects of how their business operates. Companies can be slow and fragmented and unresponsive. Such business will start to fail. Successful businesses remain highly focussed on a clear understanding of what their business is about.

Some examples.

Apple. Core business model: to sell a lot of a few distinctive, highly designed and easy to use products, which combine hardware, software and services, for a healthy profit. Hence Apple's lack of interest in pursuing market share as an aim in itself, it's desire to totally control the whole product and service stack, and it's extreme prickliness about what it considers to be evidence of anyone copying it's products and thus reducing their distinctiveness.

Microsoft: Core business model: to sell software licenses. Interestingly Microsoft are in my opinion a good example of a company that has lost track of their own core business, they became convinced that their core business was ensuring the ubiquitousness of Windows and thus, astonishingly, they have almost no presence in the largest and most dynamic software market on the planet which the mobile device app market.

Samsung: Core business model: trickier because it is such a vast and sprawling conglomerate operating in so many very diverse markets. If one focusses on just the electronics side of Samsung's business I would say their core business is to be a huge and profitable presence in the electronic tech supply chain, to use that presence to build a powerful productive base and to have the best possible understanding and advanced intelligence about market and product trends and then to decisively enter the market with their own products in competition with their previous corporate customers and take their profits. Samsung seem to be very good at working this strategy.

So let's now turn to Google.

Google: Core business model: to sell advertising which has special value for it's customers (the buyers of the adverting) because Google can target and tailor the ads at the level of the individual viewer based on it's unique ability to gather data about what almost everyone does on the internet and beyond. This means that Google is not interested in making profits on hardware sales, it does not it care about how people tinker with hardware and it does not care about generating revenue from software so it can give it away for free. This characteristic, of not caring about protecting either hardware or software, makes it very popular with techies and geeks, and it's policy of giving stuff away for free or selling at costs makes it's offerings very popular in the wider world. Google's complete focus is on making sure it can observe what people are doing on the internet (and with mobile devices and especially devices like Google Glass what they are doing in general and where they are doing it) and then using that data to serve high value targeted advertising increasingly presented in the often not inaccurate guise of useful information.

The other consequence of Google's core business model is that it views all activity which it cannot watch, and thus where it cannot collect data about user activity, as a threat. It is a threat not just because someone else might sell advertising in the space Google is excluded from but also because the less comprehensive Google's data collection is the less value it has. Google is driven to see everything (expressed by the company as the desire to 'organise the world's data'). Thus Google often see's dynamic new areas of innovative user activity (social networking and mobile device use are prime examples) as threats and is compelled to create it's own offerings in direct competition.

It's core business model also explains why Google loses interest in things when their job (from Google's point of view) is done. Once there is no danger that it will be excluded from offering it's services, and thus collecting the all important user data, Google is no longer very interested. I think we may be witnessing this dynamic in relation to Android at the moment. The sheer energy unleashed by the early exponential success of Android combined with the Schmidt era looseness of Google's corporate strategic management meant it stumbled into expensive missteps like the Motorola purchase. Now Google under the steermanship of Larry Page is far more focussed and it looks like developing Android's core OS is now considered not so important as building a wide range of attractive services, services that can often run on both Android and iOS, and which deliver the all important data harvesting. It may be that as far as Google is concerned Android has done it's job, which was preventing an alternative and dominant mobile OS from shutting out it's services, and the core development of Android can now shift into maintenance mode.

Both these article are interesting on Google and Android.

Reply Score: 4

cdude Member since:

the core development of Android can now shift into maintenance mode

Stop innovation and you get done. So, no, its not done and never will be. Starting with JB Google focused on specific actions. Performance with 4.1, security with 4.2 and now services. 4.3 will come, I think its focused on stabilization. 5.0 is work is progress. My guess is Project Butter 2.0 with focus on low-end. Maybe already with 4.3.

Point is 4.3 may just not be ready yet. There are enough indicators for 4.3 coming as incremental update. So, maybe just later this year.

Edited 2013-05-19 12:49 UTC

Reply Parent Score: 1

Tony Swash Member since:

Stop innovation and you get done.

Only if that relates to your core business. Android is not a core business of Google's, it's a cost centre. Android was a means to an end for Google, it was designed to protect Google's core business from the threat posed by the rise of a dominant mobile OS (seen originally as Windows Mobile and Rim and later as iOS) which might have excluded Google services. Android so far has sort of done that, it certainly prevented any alternative OS from dominating the mobile market, but it has been far less efficient at ensuring the inclusion of Google services and so the next phase of Google's mobile strategy will probably focus far more on making Google services ubiquitous across all mobile OS.

I think it was this sort of change of strategic emphasis that led to Rubin's departure.

Reply Parent Score: 4

acobar Member since:

Funny how you praise Apple and throws stones on everyone else.

Apple has trying to use stupid "should not be granted" patents to stop competition for years, it is fine to you. Note, I am not against patents, not even against software patents and I do find it hard to put software in the same level of math, it is not but, sincerely, there should be a way harder path to get them approved, the current system is a joke. To use the system to keep the trolls away is one thing, but to go and use "hard to believe" patents against competitors is something completely different.

When they were the underdog, they picked FOSS projects to leverage their products, I am fine with it, sponsors are welcome, but there were some misbehaviors on the path, like with khtml.

Microsoft is far from be a saint and even though I see them as a very competent tech company they sure have lots of misses and, from my point of view, deserves all the troubles they got and much more. Anyway, I would not count them out yet.

Of course Google has its problems, but I fail to recall any other company that brought so much benefits to the market through free services and stimulus to competition on all human history.

Lets recall that companies are just that, companies, they are out for money and there is nothing wrong with it and they may provide good things to society even thought they are out for their own interests.

Reply Parent Score: 4