Is Google the Walmart of Tech?

To start, I am not a fanboy of any particular technology over another.  I am a firm believer of no technology religion, using the best product or service that fits the job I want to do for the best price.  With my personal disclaimer out of the way, the question remains... is Google the Walmart of the technology industry?

Recently, the news has blown up with companies becoming increasingly aggressive in protecting their market turf through patent litigation, communitiy messaging, and media coverage.  As one company in technology succeeds with a breakout product, it is reasonably assured that 15 other companies will chase to build nearly identical products to flood the market.  It is a continuous cycle, in which companies such as Microsoft have been supremely successful.  But because the tech industry is a particularly entrepreneurial and idea driven community it raises the well known cry of "COPYCAT!"

So first, the business strategy.  Standard competitive strategy teaches that when new innovations occur (i.e. market transitions, market disruptions, tipping points, etc.), revenues and profits are generated.  If profits are extra-normal, then it is assured that competitors will be attracted to the same market because the market has room to accomodate them.  As such, those competitors strive to furnish products that look, feel, and function as a near match to the initial innovation, i.e. a copycat.  So entrepreneurs and idea people beware... if you have a great idea, nothing is stopping anyone from making a copy.  Now you can protect yourself and errect barriers to entry, such as patents, lobbying, market consolidation or whatever your creative and expensive brain can concoct, however, it isn't a matter of if, but when will a competitor come knocking.

As noted in a previous rant, in many cases the markets can sustain a number of large competitors in oligopoly, while numerous solid lifestyle businesses service the niche related markets and fight for industry scraps.  In most cases, companies find pricing parity and work in unsaid collusion to maintain prices and profitability.  But, where it gets ugly is when companies break from the pack, make bold strategic moves, and price competitors out of the market.  While initially great for consumers because it lowers prices, it can mean slow, painful death for competition.



By the above graphic you may think I hate Walmart... I envy Walmart.  I think Walmart is an amazing company with awesome people.  They solve all my needs in one place and I thank them for it, but this is Walmart's alleged strategy.  To be the Low Price leader Always... no matter what.  They have been notorious for allegedly entering communities and offering whole sale generic products at prices that are impossible to maintain for local businesses.  In turn business is sufficiently wounded for surrounding entrepreneurs that they end up selling their business or going down with the ship.  Once the market has consolidated, Walmart is free to offer whatever "low" prices they desire.

So is Google no different than Walmart?  They have brilliant strategists that have taken competition to a whole different playing field.  Google, like Walmart aims to be the 'Low Price leader Always' in everything but except probably search.  Like Walmart, they know that if they can grab you to use one of their 'free' services like Gmail or Google+, then they can own your data, serve you ads, and drive you to spend more time using their search products.  And when you generate as much cash as Google does from a virtually infinitely profitable business model, you can focus on creating a whole host of context products to pull through more growth and more profitability.  If a competitor has a core product in one of your hot 'target' growth markets, Google gives them the option to sell and assimilate or go down with the ship.  If the target doesn't sell or can't be bought (in terms of larger competitors like MSFT or Apple) it builds and deploys a 'copy' product, smashes the price to nil and burns the market to ashes in perfect competition.  It completely and utterly disrupts the business.  Customer's love it in the short term and it limits the possibility that the competitor ever can really reciprocate.  Brilliant...

We are seeing it again today.  Google+ recently added functionality for social gaming, probably one of the best and most powerful features facebook had to offer to its user community.  facebook makes money hand over fist by charging a generally market standard 30% fee for digital purchases through its platform, basically matching market pricing parity  with Apple for platform marketplaces that have large user bases.  facebook can charge this premium fee because it has relatively the best game in town as far as social platforms, and relies on these type of fees to feed other inventions and innovations within its model.  Games, unlike your recent status post about what food you just ate, provide tangible entertainment value and stickiness to facebook and is most likely considered a core functionality of their business.  Seeing that games and digital purchasing was core to the social platform business... Google+ had to launch games.

Now Google could have played it nice, came in at price parity for the revenue split fee at 30% and stuck to the industry standard, but that isn't the Walm... ahem... Google way.  Instead, Google launched a promotional digital goods fee of only 5% to entice developers to add Google+ to their radar.  This 'beta' digital goods fee may or may not remain 5%, but it is hyper-competitive behavior and a Vegas sized signal to facebook that there is no intention to play nice.  The point is that there is room for both Google+ and facebook in the marketplace, but hubris and ruthless strategy dictate that like the immortal Highlander... there can only be one!

Rightly so, the case for Walmart comparisons can be made for other tech companies as well, but Google has definitely been the most visible and aggresive as of late.  While Google might not particularly like being branded the modern Walmart (or even worse to them, the modern Microsoft), their intentions are clear... burn the villages, storm the castle, and take no prisoners.  Its all fair play, and it is brilliant strategy.  So the next time Google comes calling with a nice little acquisition offer... remember that you have been duly warned.  At the same time, can Google realistically maintain victorious by fighting a digital war on all fronts?  Right now, it seems so.

-K

For those that don't want to link...

Fight or Flight? The future of Nintendo's 3DS

An online debate with a friend sparked a thought that has been rattling around in multiple business spheres lately as companies begin or continue to emphasize resource and portfolio management due to the effects of the last recession and the fear of a double-dip.  As markets dip and company profitability is questioned, investors clamor and cry for management to make tough decisions by reprioritizing their resources.  This often results in the Bob's getting involved to validate the value of all the pieces of a business; which includes headcount, products, services, systems, and leadership.  Sadly, the result is often workforce reduction, closure of once high potential products, and/or budget cuts.  Investors and leadership understand that this is part of the natural order of a business as the market ebbs and flows and companies are forced to pivot in existing market opportunities and/or add adjacent products and services to their portfolio to achieve growth.  Periods of growth are inevitably followed by periods of contraction, and then ideally the cycle continues with revitalized growth.

That is the concept depicted by the S-Curve.  All companies fight the battle to minimize and avoid the contraction that comes as existing products and services commoditize due to increased competition and disruption.  They typically do this through invention and innovation.  Invention by the creation of new products and services.  Innovation by the application of new ideas that generate incremental revenue and profits.  And many companies use the build, buy, and/or partner model to achieve the next level of invention.  The success of their build, buy, and/or partner model is dependent on how well the company listens, integrates, and adapts to the market's consumers, i.e. "innovates."

However, as companies fail to effectively build, buy, and/or partner to achieve invention and innovation breakthroughs, companies are faced with the tough situations mentioned above, so what is the best option?  Really only three options exist... to milk the cash cow, double down on re-invention, or prepare to kill the business.  These are the hard core decisions that keep leadership up at night because they affect thousands of workers and often billions of dollars.  This is the decision that Cisco recently faced with the closure of Flip, the reorganization of its consumer businesses, and the recent workforce reduction.  Did John Chambers really want to layoff workers? No.  But, a stagnant stock price, increased pressure in routing and switching, and a struggling consumer products line forced his hand.  Meritted or not, investors were betting against Cisco's ability to innovate.

Now to the headline... is Nintendo now facing a similar decision in one of its core businesses?  Nintendo's wildly profitable mobile gaming handsets have historically been the leader in mobile gaming technology.  For years Nintendo pioneered and innovated in the market providing hit after hit from the original Gameboy to the DS.  However, the recent "invention" or line extension with the 3DS handheld has left consumers and investors wanting.  The poor showing comes from the sad fact that 3D technology is still more "invention" than "innovation" with difficult and varied user experiences that don't inspire consumers to purchase or pay premiums.  Also, the proliferation of smartphones and the innovative ability to provide a standard platform for both the creation and sale of gaming applications has completely threatened the fundamentals of the once stable gaming marketplace. 

While dubbed a game of telephone in which a minor note from a large investor turned into wild speculation.still Nintendo faces the age old question that all companies face in periods of missed innovation and contraction.  Nintendo must face the harsh reality that dedicated mobile gaming devices are now a niche business. 

As listed above Nintendo has a few options available... they can fight like dogs and continue to sink money into a bottomless pit of invention to try and come up with a utility mobile device that can compete with the other multi-use smartphones.  It would only take at least 2 years minimum in product development and testing, and require the development of better-than-par marketplace and software developer partnerships.  But we see how well that strategy is working for Sony, Nokia, Microsoft, and RIM. 

Or Nintendo can purchase or partner with a large social game developer like Zynga for a godzilla amount of money (no pun intended).  They may also just start developing games for the new mobile platforms, taking advantage of the mass market opportunity.  They have a fair amount of cash, so these are all possibilities.  But, this only offers an opportunity to compete on the disruptor's playing field and does nothing to help the mobile hardware problem at hand. 

Lastly, Nintendo can ride out into the sunset with its head held high.  This is ultimately the route that Sega took, deciding to milk whatever they could from the Dreamcast and stay active in the markets they could remain innovative in, software and coin-op.  Now, when was the last time we saw a REALLY innovative Sega game?  A long time, but that begs a different topic... talent retention.  So the only option left for Nintendo is to do the same.  Nintendo has to face facts that the moment they let EA, Square Enix, and other game developers and publishers out of their grasps, the more innovative (not the most inventive) platform took the lead.  Is there time for Nintendo to get back in the game?  Yes.  Do I think they will win?  Sadly, no, but I can hope... my boyhood days of hours with my Gameboy is rooting for them.

The question I leave is no different than the above.  The gaming market is experiencing a massive transition point as invention of cloud-gaming possibilities (OnLive) and convergence of multi-use hardware becomes commoditized.  So that begs one only to ask... is the main-stay console next?  Watch your back Wii...only time will tell.

Talking to the Bobs



Office Space
— MOVIECLIPS.com

Bob's Reference...for those that don't want to link to it.

Can't tech just get along! MSFT vs FB vs GOOG vs AAPL

VS  

In business there is often the need to analyze and over-analyze competition in the market place.  This need for comparison often creates the need to manufacture strategic battles between titanic foes like Microsoft and Apple or Coke and Pepsi.  Today's new digital age is no different, so the social media, browser, operating system, digital deals wars are now upon us.  A flood of social technologies have dominated market headlines and have become the darlings of both private and public investors.  However, these hyper-growth companies have huge questions to answer as they navigate through the infancy of a new digital media age and take aim at incumbent technology leaders and each other.  Unless you have been in a cave, you probably didn't miss the very public twitter, blog, and media battles between MSFT and Google legal councils over patent bullying.  Or how could you forget facebook's Mean Girls move of trying to sully Google's reputation by using slimy PR tactics.  And now Google fanboys and their constant complaining of Android this and Apple is that... Finally, does facebook really have to act like a crazed Ron Burgundy that is being threatened by the arrival of Veronica Corningstone because Google has finally put together a successful social product they didn't acquire.

Now in the immortal words of Rodney King, "Can't we all just get along!"

But while we all grab a bowl of popcorn and watch as the claws, brass knuckles, machetes, mace, and handguns continue to fly out maybe some common diplomacy should enter the discussions.  Yes, these massive conglomerates are competing for billions if not trillions in future profit, but does the land of software and the internets have to be a battlefield?  Software and purely web based products have a very unique property that no other good or service has in its arsenal.  Software is a good that once produced has the potential for near infinite returns... meaning that it has a nearly infinite thresh hold against diminishing returns otherwise known as "increasing returns to scale."  It is easy to store, has little maintenance cost when compared to physical goods, and allows for faster viral adoption because it is easily shared.  By those means shouldn't there be room for Oligopoly instead of Google having to grab a monocle, top hat, and cane and make like Mr. Monopoly?

The point is that in the brave new digital world new markets and new market opportunities are created almost every second.  Barriers to entry are falling and falling fast.  So Google, Groupon, facebook, Microsoft, Apple, Zynga, etc... don't be surprised when a newbie product comes knocking at your front door threatening to take your market share because maybe, just maybe you are counting your market share the wrong way.  With software, because it has the unique property of being a digital good, I can have 5 web browsers running on my machine or mobile device because it doesn't matter to me anymore.  Why can't I be a lover of Opera, Firefox, Chrome, Safari, and yes, even Internet Explorer?  It costs me nothing to download them, install them,  and managing between browsers has become easier than ever.  The same with social networks.  I have an account on just about everything I get my hands on.  LinkedIn meets my needs in one area, Google+ meets my needs in others, and I still post and check my facebook page.

Just like cable and satellite television, why can't we have thousands of unique options?  And that should be the point.  Companies like facebook and Google should strive to capture share of TIME not user share.  If they stop spending on resources to fight and bicker in court and the press, they would have more time and money to spend on creating useful features to capture my TIME.  That will be the battle of the future, so video game companies, cable providers, retailers, web companies and the like beware.  Share of wallet is what will pay for the web of the future, but share of time is where the real battle will take place.  The companies that ignore the hype and fight battles with innovation rather than lawyers will win the day.  So don't put out the competitive fire, just refocus it on what matters, engaging and powerful user experiences.

-K

Will Googlehire.me? and Welcome

By now or very soon the internet phenomenon that is now Matthew Epstein will cross your path in the digital or media sphere.  For those that don't know, Senior Epstein has launched a marketing campaign to try and launch a product marketing career at Google.  Armed with $3,000 in savings the budding Googler launched a website (googlepleasehire.me) matched with specific child pages that described his knowledge of Google products, how he utilizes them in his daily life, why Google is the company for him, and how he could potentially add value.  He even produced his own viral video as a wonderful welcome to his glorfied resume and cover letter.  Creative? Absolutely.  Can the kid create a persona? For sure, part of his brand strategy was to make himself a larger than life character that sports a mustache as a manner of logo and brand more than a gimmick.  As a self-proclaimed cross between Old Spice Guy and Chuck Norris, the persona is probably the most critical aspect of M.E.'s campaign to cross through to Google's vaunted Mountain View pearly gates.

So the question is will M.E. achieve his goal?  Google has responded by asking him to go through the proper recruiting channels, but they definitely noticed.  But the real question is, why in the world does he need Google anymore?  With major tech blogs (TechCrunch and Hacker News) and news outlets reporting his campaign, he has launched into something bigger and its not clear if he realizes it yet.  If and when his self-promoting stunt hits critical mass, hasn't he basically already succeeded at achieving the goal of why he is wanting to go to Google in the first place?  M.E. clearly states that his whole inspiration is to sit at the feet of the Googler Rock-Stars and soak up their guidance and gospel.  In crafting a serious, but fun campaign M.E. has proven that he has the ingenuity, creativity, and execution that most PMs, even at super companies like Google lack.  So maybe M.E. should take a page out of Google's playbook and continue his innovative direction by using his entrepreneurial chutspa for himself?  He may have a lot more fun crafting quirky marketing campaigns for local products and sarcastic startups.

Beyond Epstein, this has shown a general trend of social campaigns now beginning to bowl over out of the standard Facebook page or YouTube video.  People are beginning to use the internet in fantastic new ways as our ability to share information settles into Moore's Law.  Viral or social campaigns have become the new norm and seem to be doubling at a pace that makes the markets blush.  From Betty White and her SNL crowd-demanded appearance to viral campaigns for A-list Celebrity dates for the Military Ball, new creative campaigns are popping up each day and will only continue to multiiply as the long-tail of consumer retail and web gain education and access to the social connections that are building accross the planet.  Can you imagine a day when Epstein's campaign becomes the norm?  It is a brave new world.

Welcome to this blog among a sea of other tech and entertainment blogs...  Hopefully you gain a bit of perspective and share your own.
-K