Tuesday, August 22, 2006

5 Things that could be evil about Google

Richard Brandt wonders if he is too soft on Google and unable to see a darker side to the story. As a Google admirer and investor on the one hand and a general sceptic on the other, I decide to list the 5 issues that about Google that would worry me. Note that these are not necessarily things that make it fundamentally evil - they are just issues that might in the long run take some gloss off the current poster child for uber-successful tech companies.

1.Weird management structure - How long Google can keep the triumverate as a structure that is able to lead a high growth company and industry is debatable. So far Google has had an easy run in that there really hasn't had a challenger and an inward focussed form of leadership primarily driven by engineering excellence has worked. How long two strong willed engineers working with a veteran CEO can keep a decent working relationship is a huge unknown and because of Google's weird shareholding structure, can easily scupper the company's fortunes.

2.Lack of clear non-search strategy - From all I can perceive about google, If you take core search out of the equation, it seems to be a place full of clever whizz kids who are trying to out-do each other by coming up with 'cool-stuff' and hope that a percentage of all ideas generated in this fashion stick. If there is any major strategic thinking going on it is simply not visible. Now, arguably it is better to bet on a collection of clever folk and their ability to cope with any changes and opportunities in industry and a lot of investors in google have done exactly that. However, it is just as easy to fail and get egg on the face. If search were to see a Black Swan scenario ( which I have written about in a previous post), Google could implode dramatically.

3.An inward looking corporate culture - This is a real danger where Google employees and management get carried away by their own myth and start believing they are infallible because they have never tasted failure. Microsoft is a great blueprint for this. A symptom of this affliction is the creation of products aimed primarily at demonstrating engineering coolness and nerdery rather than clear user value. I can see signs of this already happening within Google and this could be the one issue that takes it off track - the loss of focus on the user and creating products primarily to please itself. Arguably, this is how most tech companies start ( and the succesful ones manage to link it to a user proposition as google did) but somewhere along the line they need to reconcile their need to be a business with being a playshop for clever kids.

4. Secrecy - Richard Brandt has already alluded to this but I want to extend his point by including investors. At this point, due to the lack of guidance provided by google, investors are pretty much invited to buy shares not because they have visbility of clear strategy but because they are asked to trust the management team and products . So far, this has been a good decision but will this be true going forward ? Google gives very little indication of what it is thinking and working on strategically and the lack of external inputs on strategy could well lead to an inward looking 'We are always right' mentality.

5. Inability to change - Google is about search and sees this as very much its territory. Will it have the ability to quickly go beyond its original principles if broadband connectivity and richness of the online experience improve ? By this I am alluding to their original themes of no pop-up ads and simple text based pages. How willing will Google be to ditch these principles if and when the time comes to update them to take into account beter connectivity and broadband availability ? Will it be inflexible and remain wedded to a late 90s set of principles in 2009 thus allowing an incumbent to carve out a niche in richer media ( like youtube has done ) or will it remain flexible and aggressive enough to change rapidly ?

All in all, this reads more like a list of risks than anything tangible. If I were to list a potential source of evil long term, I would probably choose the dangers from an elitist corporate culture that believes its own legend. Humility and being able to contemplate failure is a vital part of the corporate DNA for long term success in my opinion and keeps companies honest.


Blogger Richard said...

Some good points. The observations I've made over the last couple years:

1. Google definitely has a wierd management structure, but there is actually some brilliance behind the madness. Google is designed to remain flexible. Not only does it give its engineers the time to pursue their own ideas, it shifts project managers around, on average, every six months! They learn the business and keep bringing in new perspective. Schmidt is the perfect guy to manage along with Sergey and Larry because he drank their Kool-Aid and lets them pursue their quirky ideas. And he's a smart guy. There are reports that Google engineers enjoy an elite status and more stock options than anyone else, which creates some resentment within the company.

2. I think there is actual strategy behind its moves. Think about them, and each one, even email and spreadsheets, fit the bill of "organizing and finding all the world's information. Also Microsoft has long had a strategy of investing in everything that might take off (it even invested in a Unix company years ago.) Both Microsoft and Google can afford to do this, and drop a product if it's not successful.

3. Google is too insular and the founders seem to believe in their own infallibility. A strong danger.

4. What investors have to realize is that Google doesn't really care about them! The company would have preferred to remain private, but had given out stock to so many people it had to go public. Google structured its stock to keep control in management's hands to minimize the pressure that shareholders might put on them to maximize revenues at the expense of their ideals. Google's own board members once tried to make Sergey and Larry give more prominence to advertisers and to allow them to influence search results. By refusing, the search engine was more relevant and less annoying, important factors in its success.

5. Google's wierd structure will keep it flexible, if it doesn't implode. Google management is well aware of internet trends, and will move with them. I think.

10:19 pm  
Blogger Andy said...

Nice reference to YouTube! Guess they bought their way out of that quandry!

2:08 pm  

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