From the onset it would seem that Google was destined for success from the moment of its inception; there is no doubt that Google tackled and solved a critical issue in the information technology sector that has persisted for long in very ingenious ways. It is this Google’s first ingenious innovation that would set the stage for its future successes in the years to come, which is an expectation that it has not failed to deliver.
And as one pundit would aptly observe “Google was a Company in a hurry to do great things” and the technological innovation of its revolutionary search algorithm provided it with the lucky break that it so much needed (Gladwell, 2011). It is on this backdrop that we can best analyze the major success factors that positioned Google to its present day multibillion Company that it has become.
In a nutshell Google’s success factors can be comprehensively summarized in a range of four factors even though they are many and varied, these are; first rate technology, business innovation, core competence & diversity and consumer orientation (Parikh, 2011; Kiran, 2011).
More importantly is the fact that Google has complimented its business model with an effective corporate and governance structure and sought the best human resource skills that it nurtured as the Company continued to grow. So let us now briefly discuss how each of these factors has directly contributed to Google’s phenomenon growth.
First rate technology
Google’s initial area of business focus was a destiny that it had no choice to alter given that its founders were information technology engineers who were at the time engaged in finding a solution to the menace that search engines presented at the time.
This factor was a blessing in disguise because as the years went by Google not only solved and perfected the search engine but also revolutionized the information technology industry in a way that has been unprecedented in just a short while.
All this was possible because of its first rate technology, which in this case was rooted in its efficiently designed search engine. These early events, is what steered the Company to focus entirely on the information technology industry and specifically in the search engine business.
This is aptly captured in the Company’s mission statement which it still continues to retain despite its diversification business strategies which state “Google’s mission is to organize the world’s information and make it universally accessible and useful” (Edelman and Eisenmann, 2010).
Based on this it can be argued that if Google did not venture in the search engine business in the first place, then it wouldn’t be the Company that it is today.
In fact, we can also argue that if Google did not have first rate technology that was able to solve the problems of search engines from a different approach it wouldn’t have been the Company that it is now. Thus, we can see how first rate technology and creativity was integral to the success of Google.
Business Innovation
The fact that Google was a profit making organization meant that it needed creative business innovation to compliment its technological ingenuity; it’s probably because of this that Google hired one of the best and most experienced CEO’s, Eric Schmidt who took over the responsibilities of the Company’s business aspect.
At an early point Google caught up with the business of online paid listings in just about one year’s time (1999) from its inception and was probably among the first inventors of the cost-per-impression concept of advertisement that was not widespread at the time.
This concept would turn out to be very popular with advertisers since it favored their budgets more than the cost-per-click concept did; in addition, its click-through-rate turned to be also very popular with clients.
Four years later in 2003 it invented a varied method of paid listing which it referred as AdSense, a first of its kind even to date; over the years Google continued to launch new product inventions such as froogle and google maps among others (Edelman and Eisenmann, 2010).
Meanwhile, it was strategically positioning itself as a key player in the industry by pursuing significant acquisitions deals key of which included YouTube and DoubleClick. Again if it was not for these business strategies, Google would have missed on a lot of opportunities.
Core Competence and Diversity
Google’s greatest strength is on its core competence which Mr. Schmidt aptly observes by stating that it “is in the business of making all the world’s information accessible and useful”; and this it has never disappointed (Edelman and Eisenmann, 2010).
Because, Google has been very effective and efficient in its core areas of business it has come to perfect its products and consequently making a reputable brand name for itself globally. In fact, even when it has opted to diversify as it has been doing over the recent past, Google has continued to diversify along its core business areas.
This strategy has been very effective in furthering the vision and mission of Google over the years because it means that because of diversity the Company is insulated from risks associated with single business lines.
On the other hand, its core business implies that it is the best in what it does which means that it will continue to dominate the information technology industry as long as it continues to focus on its core competencies and remaining the best.
Consumer orientation
A critical evaluation of Google’s strategy indicate that the Company has gone to great lengths to ensure that its products meets consumer expectation right from the moment that the product is being designed. In fact, every single product that Google has invented and projects which it has ventured into involve an element of motivation that is directed in solving consumer challenges and refining consumer usage of the product.
And because Google’s products are designed with consumer’s foremost on mind they are deemed to be successful; an evaluation of its recent cell phone products such as Nexus One for instance would indicate that it has unique features such as voice recognition and touch screen which it states were motivated by a need to “reduce dependence on keyboard-style text entry” (Edelman and Eisenmann, 2010).
Such foresight and consumer oriented products transverse all major Google products from its design of its flagship search engine to its recent invention of online payment option dubbed Checkout which was long overdue because it has finally solved the risks associated with online payment.
Limitations of Google’s Organization Structure
From its inception Google made its intention to operate as an “unconventional company”; most remarkably is the way that the company’s founder Sergei Brin and Larry Page resisted issuing an IPO which would have brought in more shareholders and decision makers into the Company (Edelman and Eisenmann, 2010).
However, the pressure to provide liquidity to stock holders and reward its employs eventually forced them to accept an IPO in 2004. During the launch of the IPO the company clearly informed prospective shareholders that the company was not a “conventional company and it did not intend to become one” (Edelman and Eisenmann, 2010).
The top management further explained that the organization’s unique organization and corporate structure is what enabled it to perform effectively because employees were not bogged down by the organizations red tape (Edelman and Eisenmann, 2010).
In issuing its IPO the company divided its equity into two groups, class A and class B stocks, a rare practice in itself but which effectively insulated the Company from hostile takeovers. The implications were that, though the top management held 30% ownership of the company, they exercised 80% control over the organization.
The unrestricted control of the overall direction of the organization by the founders of the Company has allowed for strategic risk taking because they have control over the overall direction of the company.
It has also given the company stability needed for the company to focus in its core business of innovation and design of new products that continue to strengthen the Company’s position in the industry (Edelman and Eisenmann, 2010). Google’s management was also aware that they operated in an industry where hostile mergers and acquisitions were common occurrences.
In order to insulate themselves from such, a distinctive governance and corporate structure that insulated the Company was the answer especially since it enabled the management to focus their energy on other meaningful areas of building the Company rather than guiding its takeover.
Google Inc is also entirely run by a handful of people and only three of them are responsible for chatting the Company’s strategic direction which is very different from what happens in mainstream organizations.
Corporate Values
From the onset the founders of the company adopted and instilled strong and distinctive corporate values in every aspect of its business processes; these values which formed Google philosophy have been integral to its success and include “i) do no evil, ii) technology matters and iii) we make our own rules” (Edelman and Eisenmann, 2010).
These three rules amongst others have had a profound effect on the company’s actions and contributed immensely to its performance. The principle of “do no evil” for instance guides its advertising and search business and forbids the advertising of guns, hard liquor and pornography content (Google.com, 2011).
In addition, Google insists on ethics in its advertising business and does not engage in manipulating results to make a quick profit or misconstrue facts to gain a competitive edge which has served to maintain its integrity.
Its search engine is designed to show only relevant to appear; as a result of its integrity, Google searches are respected by users as the results are reliable, dependable and trustworthy. It is no wonder then that Google’s share of the search business was approximated in 2010 to be at “65% in US and 90% in the rest of the world” (Edelman and Eisenmann, 2010).
Google’s unique organizational structure is also seen in other varied ways such as in the way that it claims to make its own rules and does not allow itself to be controlled by limitations placed by the industry (Edelman and Eisenmann, 2010).
The company does not comply to all rules especially if they do not contribute to its operations and has over the past indicated its unwillingness to make public all its future strategies among other information.
Managing Innovation
The core of Google’s workforce is engineers; naturally engineers are described as “brilliant thinkers, competitive by nature and have low tolerance for others who are not as driven or knowledgeable as they are” (Edelman and Eisenmann, 2010). Google’s CEO Eric Schmidt developed a unique and unconventional approach to manage them.
He developed the 70/20/10 rule of managing innovation which stated that 70% of all their time and effort should be spent on an organization core activity which was search business and advertisement (Edelman and Eisenmann, 2010).
This rule has not only been unique to most mainstream organizations but is also the strategy behind Google’s success in producing very innovative products.
The 20% time spent by engineers on related projects has been the source of virtually all new and major innovations that the company has developed this include Gmail, Google Earth, amongst others (Edelman and Eisenmann, 2010). The company acknowledges that most of its innovations come from engineers’ personal projects rather than from the company’s top management (Battelle, 2005).
The company also operates small work teams as opposed to wide departments that are the tradition in large organization such as Google. This is because of what the CEO describes as focused energy because few people working together offer several advantages which he cites as being “more productive and allow the company to pursue several hundred projects simultaneously” (Edelman and Eisenmann, 2010).
Google’s has also done away with middle level management personnel and this has served to cut bureaucracy and increases efficiency which is integral to its success of its projects (Edelman and Eisenmann, 2010).
Limitations of Google’s Organization Structure
While it is clear that Google’s unique organization and governance structure as well as its corporate values have been a source of its distinctive competitive advantage, it also places severe limitation on the organization. The absolute control that has been placed on the three top executives demonstrates lack of an oversight body such as a board of directors in controlling and managing risk.
Though the company has not undertaken any project that has resulted in a major loss, we cannot foretell if its smooth run will continue into the future. A board of director that is especially skilled and independent is useful in advising and managing risk in a company but which Google has none courtesy of its unique organizational structure.
Google’s unique corporate and management strategy is valuable in attracting brilliant engineers that aspire to work in an environment where they can pursue projects that they desire.
However, on the other hand there is a possibility that such employees’ egos can make them ungovernable especially when they realize their contribution to the company and it is possible that they might leave the company and take their talent to other competing organizations.
Furthermore as the company grows and mature and its current management naturally becomes more engaged in social and family activities which means they have less time to commit to the Company. Thus, there is need to inject new management which is unlikely to happen under the present governance system that the organization has.
Recommendations
The company should retain its strong, unique and distinctive corporate values and management concept that foster an environment of innovation. The following strategic suggestions can help Google continue to dominate the IT industry in future.
The company should consider breaking down into several strategic business units that are separately managed by professional managers. This is because the company portfolio of products has diversified and each of these products has great potential for profitability and growth independently from each other.
Because some of the products are unrelated for example Google phone, Google books and Google self driven cars, it is not possible to manage all these diverse products under one roof. Instead these products can be developed and exploited fully by separate and distinct companies.
As the company, IT industry and the management of CEO mature, there is need for a new breed of workers to be hired who will take the company forward. Just like the founders Larry page and Sergei Brin recruited Eric Schmidt to strengthen the management team, the company should consider hiring new talent to move the company forward.
The company should also develop new mechanisms to retain its skilled and experienced workers to guard against having them being headhunted by its competitors. The company can reward such employees with senior positions in the company or include them on Google’s board.
In addition, Google should consider establishing middle level management personnel in its organization structure; this is because as the organization becomes bigger, its activities increase and the existing management cannot provide adequate oversight to all the organization’s activity. Thus, there is need for new management that will supervise and guide everyday job activities of workers.
Due to the increasing popularity and usefulness of social networking media, the company should seek to venture towards that market. The company already has a social networking site Orkut and it can use this effectively to facilitate its entry (Edelman and Eisenmann, 2010).
The company should use its superior technological ability and brand power to market this site so as to reach its intended market segment as the opportunity for advertising through social media is immense.
According to the case study (Edelman and Eisenmann, 2010) the bulk of advertising revenue that Google makes is from the US market; the company should thus expand and exploit other regions in the world such Europe, Asia, Africa and Latin America as its core business of advertising and search is global.
Finally, the company should continuously and vigorously continue building on its products integrity and upholding of business ethics and thereby safeguard the brand name that it has so far made for itself which has over the recent past been threatened by various suits from its major competitors (Foxnews.com, 2011).
References
Battelle, J. 2005. The 70% Solution: Google CEO Eric Schmidt Gives us Golden Rules for Managing Innovation. Web.
Edelman, B. & Eisenmann, T. 2010. Google Inc. Boston: Harvard Business School.
Foxnews.com. 2011. Microsoft Files Antitrust Suit against Google. Web.
Gladwell, J. 2011. Factors behind Google’s Early Success. Web.
Google.com. 2011. Play it safe, family-safe. Web.
Kiran, M. 2011. Key Factors behind Google’s Success. Web.
Parikh, J. 2011. What were the key factors behind Google’s early success? Web.