Is Google Really A Model for the US Economy?

Through July Google began to revive its reputation in many people’s eyes, appearing at number 7 in the Forbes list of 100 most innovative companies, and enjoying the radiant glow of strong earnings and a successful Google Plus launch (with a few hiccups as it digested the good news).

Quentin Hardy asked a week back whether the recharged Google offers a model for the US economy as whole (Mathew Ingram has a different take at GigaOm). I want to disagree and I want to set out some important reasons for not regarding Google as a role model. I think the economy has changed so substantially that Google cannot be a model for other American companies.

So what counts in Google’s favor, if we are looking for a model to work to?

It was started by two young people, Brin and Page, who were smart enough to spot and exploit an opportunity nobody really thought existed – replacing classified ads with an online version, pegged against search results and in content across the web.
Adwords is a work of genius. From inception to the business model it is incomparably smart.
In search Google created such a strong monopoly that we will never know how useful web search could have become. All we really have is Google’s version – with Bing bringing in social in an astute counter-move, ten years too late.
Outside of search and ad sales Google has been courageous (driverless cars, alternative power sources) and long term.
And its 20% rule – giving people time to innovate is iconic, though that shouldn’t imply that it is not open to skepticism.
Outside of its powerhouse products, however, Google’s performance is not necessarily smart or wise.

In mobility is reaps very little direct advantage from Android – in fact it looks as though revenues might flow from Android but to patent contesting competitors rather than Google.
In products like its Enterprise Appliances and Apps Google has struggled to breach the $1billion mark.
Creating billion dollar businesses is something of a benchmark for smart companies – P&G has done it more than 20 times. Google in its recent earnings call did try to talk up its ability to create new $1 billion businesses – but they all look like advertising.
But put those to one side.

Search and Ad Sales highlight why Google is not a good role model.

In online ad sales Google is part of an oligopoly that includes Facebook and Microsoft. In web search it is, at best, part of a duopoly.

The real reason Google is not a role model is because of its dependence on quasi monopoly positions.

Why is this bad?

The reason has nothing to do with anti-trust problems. The reason is American and European companies are losing oligopoly power in industry after industry.

Look at telecommunications and the problems of Ericsson, CISCO and similar companies. These companies are lab-to-market companies built on the back of oligopoly power. Their innovation strategies have been research-pipeline-market as have those in the auto market.

Does Google offer a better innovation model? It’s hard to see – what these companies need to do is create downstream innovation processes, processes where they work with customers, individuals, and talent anywhere.

It’s not clear to me that Google offers a model for them or for the new world of innovation. What in its model or hit rate suggests it has the secret ingredient outside its quasi-monopoly businesses?

The problem many other companies now face is to innovate in industries that are being disrupted by a new scale of production and by new values, introduced by powerful new sources of competition. Faced with disruption from Facebook, Google floundered.

The harsh reality is many American companies now face a different market structure, influenced by capital power and scale that is unprecedented.

To combat that we all need to adopt new values.

Of course as well US and European companies have to learn a new set of management skills to astutely seek out uncontested markets and untapped demand but I suspect it is in replacing traditional insights with new heuristic models of interaction with their public that their needs will be met.

Companies need to connect in real ways with the audiences, publics and customers they seek to serve.

Perhaps here – with Google Plus as a heuristic engine – Google can advance its cause for being a model innovator but heuristics will be a big data play that many companies can and should embrace.

In some cases they need to do this in a new financial environment. In almost all cases they need to do it in the face of unprecedented competition with little oligopoly power to fall back on – that is why Google is not a good role model.

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