The Rise of Google, Part III: A decade of leadership awaits

by Dirk Knemeyer

At the dawn of this new decade, Google sits comfortably atop the computing industry (see Part 1 and Part 2 of this series for my take on how they got there). Dominant in search – still the killer app of the Internet, with all due respect to social networking – Google has a variety of other essential and emerging products that put them at the very pinnacle of software. Still not satisfied, Google has officially moved into the deep end of the pool with their recent consumer hardware products and are clearly positioning themselves for a three team race between themselves, Microsoft, and Apple for leadership in the broader and more emerging category of digital lifestyle experiences.

Where does Google go from here? Unlike Apple and Microsoft, whose apexes are almost certainly in the past, Google’s peak has yet to come. While they may still face as many failures as they do successes – can they truly become the dominant player in mobile computing hardware? Highly unlikely! – they are well-positioned to be the industry’s sacred cow in the decade ahead. This may be traced to a number of reasons that speak to the very heart of why businesses succeed and fail:

  1. Brand. Apple may still reek cool, but the cold, hard truth is Steve Jobs is getting older and so is Apple’s core group of brand passionates. In fact, the other night I was watching a television program on the most loyal Apple devotees. It was hardly a glamorous collection. Now in their 50’s or older, most of them reflected an out-of-time-and-place hippie fanaticism. Relics of another age, they represent the backbone of people who lifted Apple to glorious heights in the 1980s and kept the fires burning during the lean 1990s.On the other hand, Google’s core fan base is made up of people who came of age during the Internet Era. They can’t imagine a world without easy and frequent Internet access and see mobile computing devices as logical, even natural, manifestations of modern technology. While Apple’s wonderful products of the last decade have brought countless new fanatics into their brand umbrella, the company still carries the leg iron of the multi-coloured Apple logo and the zeitgeist of the parents and grandparents of tomorrow’s consumers. People want to see themselves reflected in the companies, products, and services they choose. For the young, for the people who see now and tomorrow as “their time,” Google, not Apple (and certainly not Microsoft!) is the sexy choice.
  2. Product. Google is the Internet; the Internet is Google. Beneath the many devices that rule our lives is the software that collectively comprises the Internet. Thanks to it’s dominance in search – which is how most people decide what is important to them – Google is the primary driver of that software. To be clear, search will become less and less important as the other software gets smarter. In fact one could argue that the peak of search has already passed. Yet in the process of dominating search Google has smartly embedded themselves into what seems like every possible nook and cranny of Internet services. There would be an Internet without Google, but can any of us really imagine what that Internet would be?We would search from monolithic web portals. “Web mail” as an email platform would follow an archaic page refresh model – notice that Microsoft and Yahoo to name two still haven’t gotten it right! There would not be a large and meaningful company attempting to literally redefine what a computing operating system in the Internet age should be. There would not be viable, free, online alternatives to simple business productivity software such as Microsoft Office. In these and dozens of other cases, Google has pushed the standards and even limits of what can and should be done by, with, and for the Internet. In the process it has woven itself into the fabric of the very Internet and become the one company that, just maybe, the Internet literally cannot do without.

    As if being the titular head of the Internet were not enough, Google is busily diversifying into myriad industries that are part of or even just adjacent to that industry. Their well-publicized forays into advertising, publishing, remote hosting, network connectivity and more speak to the ambition and creativity of a winner. In fact, as mocked as their ambitions to conduct space exploration might be, it speaks to the verve and panache a company needs to beat an industry as tough and progressive as digital technology. In shooting for the stars they are ensuring they at least reach the moon. The explicit industries that Google infiltrates in the decade ahead may be a guessing game, but the volume and breadth of their ambition is without question. Expect to see more of Google in places you don’t expect them to be, and consider it just the latest signifier of their continued ascendance.

  3. Legal and political infrastructure. Just yesterday at Silicon Valley Today I was reading an article about Google facing and fighting anti-trust legislation that is being levied by a former Microsoft attorney on behalf of tech start-ups, while Microsoft simultaneously claims a lack of complicity with this past employee while smugly egging the whole thing on. From the first article about Google hiring a huge team of Washington lobbyists shortly after their IPO to stories like this, they have been building up the sort of legal and political infrastructure necessary to outflank both the entrenched and upstart companies in computing and continue to force their halo ever-wider. Perhaps unfortunately, in many aspects of Internet business, whoever has the most and smartest attorneys wins. Google got this fact early, and it is going to help them overcome companies and governments in much the same way it benefited Microsoft many years before.
  4. Financial. In 2009, according to each company’s profile on Wikipedia, Google had total assets of $40.497 billion. This is almost $7 billion less than Apple, and just over half the total assets of Microsoft. While seemingly in the weakest position, especially compared to Microsoft, Google has achieved their financial position while only being in business for about 1/3 the amount of time as Microsoft and Apple. In general, Microsoft is still far ahead of both Apple and Google in terms of overall dollar volume moving through the organization, while the smaller two companies are close to each other in volume, with both showing better growth and healthier trending over the past decade.However Google’s total equity – essentially its net assets – are almost the same as their total assets and are almost $5 billion more than Apple and less than $4 billion less than Microsoft! That means, among other things, they have a whole bunch of cash saved up. Perhaps nothing speaks so well to the health of a company than the size of its coffers. “Sleeping giant” is an apt metaphor for Google here: they have the positive momentum and the strong, absolute financial footing to pursue broad new vistas or ride out even the most arduous of financial storms.
  5. Culture. Love it or hate it, Google’s “Borg-like” monoculture is different and unique from other companies, which makes it necessarily special. So special that Google almost immediately rocketed to the top of the prestigious “best places to work” lists released by business publications, which in turn only increased the mystique and desirability of being part of the Googleplex.Google’s culture begins with their infamous rule, “Don’t be evil.” These three words immediately framed Google as a progressive and thoughtful company. This sound bite is all that most people know of Google as a corporate culture, and implicitly reinforces they are the kind of company worth supporting, a strong contrast to the popular perception of Microsoft. Interestingly, as Google becomes more powerful and is actively participating in the anti-social sort of behavior that characterizes a company of their size and breadth, the industry press is beginning to turn on them and see Microsoft, especially, as the “lovable loser” underdog in contrast to the seeming hypocrisy of the “do no evil” approach. While this may portend future black eyes to their perception as an idyllic culture, whatever damage done in losing some of their idealism will be replaced by the gains they are making in their aggressive growth and expansion.

    In ways both explicit and implicit, Google creates their physical workspaces to make their employees “captive” and get more and better hours from them. Examples of perks and services to support this strategy run the gamut and touch most of the minutiae that directs people’s non-professional lives: from high-end day care, to free delivered dry cleaning, to free gourmet made-to-order meals, to their most recent plan of trying to build massive housing on their main campus. Some of these ideas succeeded, others failed, still others succeeded but proved to be unsustainable. The point is that Google is trying to create a Utopian vision of how their employees can live, in the process squeezing as much as possible out of them. Whether one sees this as a win-win or dressed-up exploitation depends on your filters, but it certainly contributes to their ability to attract and retain the best and brightest talent, a pre-requisite to staying ahead of the competition.

These are five of the core components that make great companies, and I would give Google a rating somewhere between four and five stars (out of five) in each and every one of them. Combined with their current and recent growth, there is no question Google will continue to grow and diversify and become more important in our everyday lives as well as to the landscape of business. How high they soar, and for how long, has yet to be seen. I will write more on where the next digital superpower may emerge in a subsequent article or series.

Topics: apple, microsoft, predictive, Analysis, Blog, google