I’ve spent many hours trying to puzzle out Google’s product plans. What’s the logic behind Google Drive, how does Motorola fit in a software company, and on and on (link). But with the acquisition of Nest, I think I’m going to stop looking for a single product strategy. I believe Google’s mission statement to “organize the world’s information” is no longer a meaningful guide to its actions. To me, the company looks less and less like a unified product company and more and more like a post-modern conglomerate.
The idea behind the “Internet of Things” is that network connectivity is moving into almost everything. If that’s Google’s investment thesis, it could rationalize an investment in almost any industry. Appliances? Absolutely. Shipping and logistics? You bet. Phosphate mining? OK, maybe not that. But any category of products that have electronics in them is fair game, as are any services that rely on data management. That’s going to be most of the economy.
You’re left with no grand product plan, other than the strategy of any conglomerate: Move into hot categories where we can apply our skills and expertise.
If that’s the case, we’ll need to evaluate Google’s strengths and weaknesses differently. We should worry less about the overall grand plan, and more about the management structure of its businesses, the skills of its general managers, and the efficiency of the support staff behind them. In other words, will Google be more like GE or like HP?
Here’s the key question: Does Google know how to manage itself this way? Does it have the right culture, processes, and team strength to run a conglomerate? Does it understand its weaknesses, and have a plan to fix them? For example, maybe the acquisition of Nest is less about its products and more about getting a team that knows how to apply high technology to a low-tech device category (link).
No industry is safe. The answers are crucial to many people. Investors obviously need it to understand whether Google stock is a good buy. VCs need to understand what categories of companies Google might buy. Competitors need to anticipate what Google might do next. And more broadly, the leaders in most industries should ask whether Google is now a competitor to them.
Google the Conglomerate: After Nest, No Industry is Safe
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14 comments:
Google is like gold. It's always a good buy
They're just not interested in LOCAL phosphate.
http://www.theguardian.com/science/2012/apr/24/tech-tycoons-asteroid-mining-venture
Google is the world's Xth largest server manufacturer.
Google is the corporation that uses the Xth largest amount of electricity.
Xth in network size.
How many years till an android phone is the 'world's most ubiquitous object'?
Google kills ineffective projects.
GE is closer than you think.
I have read so many comments about Google OVER-overreaching into our privacy with the Nest purchase. Stepping back from all that, the sky is the limit for some creative product teams. For example, it might be interesting if, and how, the Nest team contributes to the Google car.
I wonder if Jeff Bezos is kicking himself over a lost opportunity. Amazon certainly wants to get into your house; Nest products could be a nice way to keep the refrigerator fully stocked.
Ben Thompson @ stratechery has an interesting take on the purchase of Nest. What is your opinion on his view?
http://stratechery.com/2014/googles-new-business-model/
As silly as I think much pop-media comparison is, this works: http://www.bbc.co.uk/news/technology-25725808 Google is going to become Buy-n-Large, from Wall-E. The company that does /everything/.
The common theme I see in Google's ventures is the opportunity to process data and do much more with that. Their core competence is large I data processing infrastructure and that gets used.
I wouldn't be surprised if Google decides to pursue phosphate (or other mineral ) mining if it can do some data processing to do that much better than others. Oil prospecting, for example, is data intensive.
I think it still have one leg in "Data Mining"...
And may be we may see the next wave of Anti-Trust cases, this time in hardware. LOL!
I found What Google Is (TechCrunch, July 2012) very compelling: Benjy Weinberger argued that Google is a systems company. Creating large distributed systems is what it beats pretty much everyone else at, so that's what it does. And the Internet of Things fits neatly into that. Google doesn't necessarily need Nest, but why not grab that team (they can afford it) to help Google establish a leadership position in the IoT world?
Google becoming a (focussed) conglomerate is not completely crazy.
It's obvious that any business should exploit its strengths. Google has two obvious strengths going into such fields as wearables, autos, and home automation:
- The obvious strength is the whole machine learning/pattern recognition/limited AI thing. They are the guys who know how to do this stuff better than anyone else, and there is no reason they can't add value to most products by seeing the patterns in how you use your "devices" (whatever they may be) and how your uses match those of other people.
- The less obvious (possible) strength is security. We've already seen the story of LG using its smart TVs to tell LG what you are doing. We've already seen that lousy security on smart fridges and smart TVs has opened these up to being taken over by botnets.
Personally I think LG and Samsung have zero hope of every convincing the public that they take security seriously, that they will deliver fixes for your white goods for twenty years after you buy them. It won't matter for the first round of naive purchasers (MS could get away with lousy security for quite a few years) but the backlash will come.
Google has, I think, the public image that they know enough to get security right. Less clear is that they project an image of being conscientious enough to keep up the security updates fore twenty years. And, of course, the issue of whether they will behave somewhat like LG is, let's say, problematic. They will have to make it VERY clear the nature of the bargain they are drawing up with customers as to what info they get to see from appliances. And you just know that some idiot MBA at some point is going to exploit the language of this bargain to grab data that, yes, is maybe legal in some technical sense, but doesn't at all match what people thought they were signing up for.
Against all this, we have Apple who have the trust/security part down cold, but who don't have the bench in contextual algorithms, and seem unlikely to go from making a few very focussed products to everything from $10 smart pens to $50,000 smart autos.
The SMART play would be for Microsoft to use this opportunity to regain its former glory. They have (now, after bitter experience) the security nous, they have a (partial) reputation for long term support (XP yes, Win CE/Mobile/Phone not so much), they have some big data experience. AND they are set up to work with 3rd party vendors.
But to do this right would require some things like
- flexibility on UI (*cough* Win8 *cough*)
- toughness on certification, so that vendors cannot destroy the user experience and security update experience
Personally, I'd guess that by the time MS have their heads out of their asses and appreciate the size of the opportunity, it will have passed them by (again).
I love Google
It might be a mistake to assume that there really is a strategy here.
How about - 'Google bought nest because Larry thought it was cool, and Sergei liked the founder'
This actually fits with the philosophy of the 20% projects. In the early days, googlers were encouraged to do something they thought was cool. Lots of projects kicked off and a few stood the test of time.
This is just one of Larry's many 20% projects - an acquisition bought with pocket change from behind the sofa that might be interesting (but which probably won't be).
If I was a nest owner, my biggest worry would be getting shut down in the spring clean a couple of years from now.
Google are already in the hardware business, their handset business that's performing well with the whole Nexus product line. Google have acquired Nest, I believe, to bring in a new generation of smart devices over and above smart phones.
Most likely with their concentration on Primary and App Services, they will be tailoring the heavy investment in their O.S to facilitate other external devices that connect to a central mobile control system. A wise acquisition? We will see.
So they bought NEST, and sold Motorola because there's no future in being gadget makers? Maybe the question now is "Is Google nuts?"
bestest,
Matt
Well, Mace, we just got a social Conglomerate, I guess :-D
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