• Saturday, October 31, 2009

    Google Does Not Have Innovator's Dilemma

    I asked a question to myself: "Why has Google been incredibly successful in defending and growing its core as well as introducing non-core disruptive innovations?". To answer my own question I ran down Google's innovation strategy through Clayton Christensen's concepts and framework as described in his book "Seeing What's Next". Here is the analysis:

    Google's latest disruptive innovation is the introduction of free GPS on the Android phone. This has grave implications for Garmin. To put this innovation in the context it is a "sword and shield" style entrant strategy to beat an incumbent by serving the "overshot customers". The overshot customers are the ones who would stop paying for further improvements in performance that historically had merited attractive price premium. Google used its asymmetric skills and motivation - Android OS, mapping data, and no direct revenue expectations - as a shield to enter into the "GPS Market" to serve these overshot customers. Google later turned its shield into a "sword" strategy by disinteremediating the map providers and incentivizing the carriers with a revenue-share agreement.

    On the other hand Google's core search technology and GMail are a couple of examples of "incremental to radical" sustaining innovations where Google went after the "undershot customers". The undershot customers are the ones who consume a product but are frustrated with its limitations and are willingly to switch if a better solution exists. The search engines and the web-based email solutions existed before Google introduced its own solutions. GMail delighted the users who were frustrated with their limited email quota and the search engine used better indexing and relevancy algorithms to improve the search experience. I find it remarkable that Google does not appear to be distracted by the competitors such as Microsoft who is targeting Google's core with Bing. Google continued a slow and steady investment into its sustainable innovation to maintain the revenue stream out of its core business. These investments include the next generation search platform Caffeine, social search, profiles, GMail labs etc.

    Where most of the companies inevitably fail Google succeeded by spending (a lot of) money on lower-end disruptive innovations against "cramming" their sustaining innovation. Google even adopted this strategy internally to deal with the dilemma between its sustaining and disruptive innovations. One would think that the natural starting point for Google Wave would be the GMail team but it's not true. In fact my friends who work for Google tell me that the GMail team was shocked and surprised when they found out that some other team built Google Wave. Adding wave-like functionality in the email would have been cramming the sustaining innovation but innovating outside of email has potential to serve a variety of undershot and overshot customers in unexpected ways. This was indeed a clever strategy.

    So, what's next?

    If I were AT&T I would pay very close attention to Google's every single move. Let's just cover the obvious numbers. The number of smartphone units sold this year surpassed the number of laptops sold and the smartphone revenue is expected to surpass the laptop revenue in 2012. Comcast grew their phone subscribers eight-fold with the current number exceeding 7 million. Google Voice has over 1.4 million users of which 570,000 use it seven days a week. Even though Google does not like its phone bill Google seems to be committed to make Google Voice work. This could allow Google to serve a new class of overshot customers that has a little or no need of land line, desire to stay always-connected, and hungry for realtime content and conversations. Time after time Google has shown that it can disintermediate players along its value chain. It happened to NavTeq and Tele Atlas and it is happening to other players with Google Power Meter and Chrome.

    Many people argue that Chrome OS is more disruptive. I beg to differ. I believe that Chrome OS does not have near term disruption trajectory. Being wary of hindsight bias, I would go back to the disruptive innovation theory and argue that Chrome OS is designed for the undershot customers that are frustrated with other market solutions at the same level. For the vast majority of the customers it does not matter. If Google does have a grand business plan around Chrome OS it certainly will take a lot of time, resources, and money before they see any traction. I see the telco disruption happening much sooner since it serves the overshot customers. I won't be surprised if Google puts a final nail in telco's coffin and redefines the telephony.

    Wednesday, October 28, 2009

    Branding On The Cloud Is Part Business Part Mindset

    As it goes "on the Internet, nobody knows you're a dog". Actually people do. Recently AT&T asked their employees to fake the net neutrality. Employees were asked to use their personal email addresses to petition against net neutrality. The internal memo ended up on the blogs and Twitter in minutes. Forcing your brand down your employees' throats is not particularly a smart idea.

    Is your brand ready for the cloud? This is not a question that many companies ask until their brand gets caught in a cloud storm. The storm is about the customers, partners, and suppliers discussing your products and brand in the public using social media, report problems using the SaaS tools, and engage into the conversations in ways that you never anticipated. Recently Seth Godin announced an initiative to help companies launch brand in public. It stirred quite a controversy and created confusion. He had to pull back. The organizations are simply not ready. The organizations are unclear on how to monitor, synthesize, and leverage the conversations that are happening on the cloud. The cloud enables the people to come together to share and amplify their conversations. .

    Whether you are a SaaS ISV, non-SaaS ISV, or not even a software company, what can you do as an organization to build your brand on the cloud? It is part business past mindset:

    Don't dread failures instead use them to amplify brand impact:

    Recently an enterprise SaaS ISV, Workday, experienced an unplanned 15-hour outage. Not so surprisingly customers responded well with the outage. SaaS essentially made the outage a vendor's problem. Unclear? Take an example of the analog world. Occasionally I have experienced power outage in my neighborhood (yes, even in supposedly modern silicon valley). The wider the outage faster it got resolved. The utility folks feverishly worked to resolve the problem that impacted hundreds of subscribers. Coming back to Workday's outage, while Workday had all hands on the deck to resolve the outage the management team personally picked up the phone and started calling the customers to reassure them that the outage will be resolved soon. They extensively used the social media during and after the outage to be transparent about the overall situation. Now it gets even more interesting. They reached out to a key blogger, Michael Krigsman, who analyzes IT failures to brief him on what happened and extended an invitation to have a chat with the CEO. Michael Krigsman has a great post 'A matter of Trust' covering this outage and his subsequent conversations.

    Workday used its outage not only to underscore the fact that why people think they are better of with a SaaS vendor but also used the opportunity to strengthen their brand proposition amongst the customers, analysts, and bloggers.

    Building brand leveraging SaaS delivery model to act in realtime:

    If you are a SaaS vendor ask yourself whether you are leveraging the SaaS delivery model to strengthen your brand in realtime. Jason Fried from 37 Signals was quite upset upset with Get Satisfaction when 37 Signals got labeled as “not yet committed to an open conversation”. A couple of people from Get Satisfiction immediately responded, apologized, and changed the parts of the tool in minutes that caused the problems. Similarly Twitter postponed its scheduled downtime to accommodate the protest against the outcome of the election in Iran. A former deputy national security advisor to George W. Bush, Mark Pfeifle, went to the extent to comment that Twitter founders should have won the nobel peace prize for postponing the downtime.

    Being able to demonstrate the support for what you believe in has significant positive impact on your brand. Don't underestimate the power of social media on the cloud. Twitter has changed culture of Comcast.

    Empower your employees to be your mavens:

    As Malcolm Gladwell puts it customers don't retain their soap wrappers to call the toll free number to let the manufacturer know if they are unsatisfied. But if someone does call, you know that, you discovered a maven whom you should serve at any cost. That person will start the word-of-mouth epidemics. Chances are that some of your employees are already having conversations on the cloud. Make them mavens of your brand. Get Satisfiction is an example of a great tool that a company can use to encourage their employees to get closer to the customers using the alternate customer support channels. Glassdoor is another example of such a tool that not only works as a great salary benchmarking tool but also provides insights into culture of an organization. Primarily designed as a tool for the external candidates the tool has potential to be used by the internal executives to objectively assess the employee sentiment and help improve the external brand perception as projected by the employees. Focus on your employees and how they can better connect with the customers and partners using the tools and open communication channels on the cloud.

    I am not ignoring the negative aspects of the cloud being an open medium that isn't perfect. It never will be. As Bruce Schneier describes the commercial speech arms race - "Commercial speech is on the internet to stay; we can only hope that they don't pollute the social systems we use so badly that they're no longer useful."

    I am optimistic. The cloud is a great platform for social participation that, if used wisely, could strengthen your brand.
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