CONTENTS
I. Executive Summary 3
II. Introduction 3
Question 1 5
A. Should Google Continue with Projects like Google Loon and Google Fiber? 5
B. Is the Innovation Model of Google Sufficient to Foster Innovation, or should it Change It? 7
C. What Steps Should Google Take to Increase the Confidence of Analysts and Investors in Its Innovation Strategies 9
III. Question 2 – What Should Google Do to Preserve Entrepreneurial Spirit 9
IV. Conclusions 10
References 12
Executive Summary
Among all the companies, which drive innovation, Google, Inc. enjoys a special place. The projects of this company changed the way people do business, the way they communicate with each other, as well as it substantially modified advertising strategies and buying patterns. At the same time, innovativeness of Google has some downsides. In particular, the investors and the shareholders are sometimes confused by the company’s projects. In particular, there is a serious controversy about the Google’s Loon and Fiber projects.
This research argues that although projects Loon and Fiber do not fit traditional business frames, nevertheless they are necessary for achieving commercial and social objectives of Google, Inc. In addition, this paper illustrates what measures should the company implement to preserve its entrepreneurial spirit while evolving into the large transnational empire, as well as it illustrates how the company approaches innovation.
Introduction
Google is one of the fastest-growing technology companies in the world. Nowadays, it is the most popular Internet search solution, the best online advertising option for many businesses, and one of the most accomplished providers of cloud computing services (Purkaystha & Rao, 2014). Apart from providing Internet advertising services, the company is known for developing a wide range of useful web related products, such as Google Docs, Google mail, cloud storage options, messaging solutions, video speaking options etc.. In addition, the company is actively developing mobile segment of the digital economy, in particular, by leading the development of Android smartphone operating system (Stross, 2014), as well as the variety of mobile applications.
Together with its core businesses, the management of Google prioritizes the development of unconventional digital products, which may potentially change the future landscape of the Internet world. The projects Google fiber and Google Loon are intended at realizing the possibility of providing high-speed Internet connection to the remote areas. In particular, the Google analysts estimated that approximately 5,000,000,000 of the world's population do not have a reliable and constant Internet connection (Purkayastha & Rao, 2014). Despite the fact, that many analysts describe these projects as 'unrealistic', the company professionals are actively working to overcome this problem of humanity and uniting nations and states in a single digital world. These two projects are subjects of intense academic and business debates. Some people argue that Google Inc. squanders its financial and human resources for pursuing these utopist ideas, while others are vigorously advocating the opinion that these projects will change the world we know nowadays (Purkayastha & Rao, 2014).
Furthermore, although the company is a multinational corporation, somehow the company manages to preserve its 'start-up' culture. Business endeavors of its employees are hugely encouraged by the managers and receive all forms of corporate support.
All these factors make Google a completely untraditional company, which, although being one of the most profitable institutions in the world, sometimes fears the investors. The purpose of this research is to analyze whether the company should continue developing Google Loon and Google Fiber projects, to analyze whether its current approaches to fostering innovation is sufficient and to speculate about the strategies, which can keep the investors confident. Moreover, this paper examines the methods, which the company can use to preserve its entrepreneurial nature while growing bigger.
Question 1
Should Google Continue with Projects like Google Loon and Google Fiber?
Google fiber is the project, which intends to provide high-speed broadband Internet and television to remote areas in the United States, and, prospectively, worldwide. Despite the fact that the number of clients is not significant yet (the company reported that in 2015 it was capable of retaining 120,000 customers in the USA), it is steadily, but gradually growing. In accordance with the statement delivered by one of the Google's executives Mr. Schmidt, this project is no longer an experiment, but a viable and actively developing business segment of the Google operations. In the light of currently implemented restructuring framework, this project became a subsidiary division of the Alphabet Company.
Nowadays, the analytical opinion confirms that this project is successful in business and in social dimensions. Firstly, for only $70 performance of subscription fee, the company provides highly reliable and, what's more important the quickest Internet connection in the United States. In particular, by providing1 Gbps , the company joins the ranks of the few United States firms, that makes such a scenario the possible. Statistically, it is from 70 to 100 times faster Internet connectivity than its main competitors are able to offer. The analysts believe that if present tempos of attracting customers are maintained, the company will be capable of getting 35 million customers in the United States within the next five years (Purkauastha & Rao, 2014). In contrast, for Verizon communications, which is one of the largest fiber network providers in the USA, it took almost 10 years to reach the milestone of 13 million clients in the USA.
Socially, this project is important because the company specifically focuses on working with the remote areas of the USA, where other Internet providers do not have interest to provide high-speed broadband connectivity solutions. Because the economy is becoming more and more digitalized, staying connected, as being capable of uploading and downloading high volumes of the data is essential for survival in a turbulent Internet economy. However, the practice demonstrates that today even Internet business is becoming geographically centralized, with the majority of operations taking place in the commercial hubs, such as New York, San Francisco or Washington. As a result, in order to stay competitive, the business owners have no other options, but to be relocated to the big cities. As a result of these, there is a huge discrepancy between the digital economic development of the large cities and the rural areas in the United States. Google Fiber appears to be an ideal model for dealing with this disadvantage of the digital revolution, equalizing the technological balance between the residents of the top commercial destinations, and their counterparts in the American remote regions.
Project Loon is currently an R&D initiative of the top-secreted X Department of the company. Together with Google fiber, the main idea behind this project is to provide a good and reliable Internet access to the remotely located rural areas of the United States, sub-Saharan Africa, Latin America and Southeastern Asia. The key technological feature of this project is that it intends to disseminate Wi-Fi Internet connection from the balloons. Not only this option will help to cover undeveloped regions with Internet, but also it is almost indestructible and can be used during the times of natural calamities, when Internet connection becomes the matter of survival for many people, while the traditional sources of Internet connectivity collapse. The viability of this business model has successfully tested by the company in Sri Lanka.
Together with Google fiber project, the "Loon" idea is a highly promising business and socially positive initiative of the company. Firstly, there is a unanimous opinion among the business scholars that the countries of sub-Saharan Africa, Latin America and southeastern Asia will become the most attractive import markets during the next decade. In addition, these countries are extremely rich in natural resources and human talents. Thus, in order to stay in line with the global developments of the international economy, the populations of these countries must have reliable Internet connectivity. However, deploying traditional broadband Internet solutions there is not possible because of the existing infrastructural problems of those countries. The analysts predict that it may take decades for the traditional broadband Internet providers to enter these markets, while the local providers do not have sufficient technological and human resources to ensure high-speed, reliable and powerful connectivity there.
Therefore, Google Fiber is an ideal response to these problems. Firstly, the revenue of Google AdWords, which stays for 93% of all cash influx into the company, is directly dependent on international internet trade. Therefore, by making it possible for the local manufacturers and service providers to get integrated into the global economy, Google can potentially increase its revenues for the AdWords department. The profitability of this approach has been successfully tested in the countries of Eastern Europe, where there 'technology boom' dramatically modified the traditional, post-soviet economies.
Is the Innovation Model of Google Sufficient to Foster Innovation, or should it Change It?
In contrast to other technology companies, Google is people-centric, i.e. the most important aspect of all company successes is human resources, not its financial or technological spheres. Until 2015, the company was actively developing the "20%" model, meaning that 20% of all their working time, the employees could spend working on their own projects streamlined with Google's technological and managerial resources. The results of this approach to 'innovation management' are staggering - Gmail, Chrome and some other projects, which are nowadays inherently associated with this company, are the results of these innovative approaches to ‘ideas management’.
However, when the company gradually transformed into of the largest international technology behemoth, the idea of "20%" was no longer effective. In particular, the practice revealed that while the employees continued taking the allowed to breaks to develop their own projects and ideas, overall productivity of their teams declined dramatically. Thus, the company had to reconsider its approaches to innovation, and nowadays Google has special departments, where every employee is encouraged to 'pitch' his idea to team of managers, who will then conclude on whether is idea is feasible, and if yes, decides on the resources , which the company is ready to allocate to the development of the project.
Generally, the company’s approach to innovation has several important elements. The first characteristic is dynamic capabilities, i.e. Google is known for its unique ability to develop new skillsets, and recalibrate the existing ones that is necessary to react to the dynamically changing environments. Secondly, the company understands that change is inevitable, and therefore, even the most radical ideas expressed by its employees are heartily welcomed and discussed by the company executives. Thirdly, as discussed before, the company is people-centric, meaning that it focuses on evaluating each employee individually. The practice demonstrates that, in some cases, even the most unproductive employees are nevertheless retained by the company, because their unique ideas may be implemented in the future. Finally, it is worth accentuating that the company is known for its acquisition appetite. In other words, any attractive startup appears on the global technological landscape, Google is usually among the first bidders to acquire it.
Generally, this approach to innovation management appears to be extremely effective. Despite the fact that the company is gradually becoming a traditional corporation, its approach to innovation allows grabbing the most promising ideas on the market.
What Steps Should Google Take to Increase the Confidence of Analysts and Investors in Its Innovation Strategies?
Although Google, Inc. is one of the most financially affluent companies in the world, yet, it is heavily dependent on its shareholders and investors. All of them should be interested in profitability of the company, otherwise, the stock prices may go own, and, as a result, capitalization of the firm will suffer. Therefore, in order the keep the investors interested in supporting the company further, it should always demonstrate that its new projects are profitable (Johnson, Christensen & Kagermann, 2008). Even if the project is mainly oriented on accomplishing some sort of social missions (e.g. Google Loon), it is important to demonstrate to the investors that realization of this project will have positive business outcomes, and that future profitability of the company is dependent upon realization of this project.
In addition, in order to keep the investors interested and confident, the managers of Google should always maintain dialogue with them, i.e. it is very important to ensure that the investors always have the possibility of communicating to the company executives and getting their feedback about the firm’s operational and tactical performance Johnson, Christensen & Kagermann, 2008).
Question 2 – What Should Google Do to Preserving Entrepreneurial Spirit
Keeping entrepreneurial spirit alive is often a task of particular complexity for large corporations, yet, it is often the matter of very survival for many of them. The practice demonstrates that Google, Inc. is not an exception in this list, because the most profitable company divisions are the results of individual entrepreneurial endeavors of its employees, who developed them during the “20%” time. In order to preserve and cultivate entrepreneurial spirit in the company, implementing the following measures and procedures is necessary.
Firstly, the company should ensure that the new projects are identified and that the managers provide due support to the creators of these projects. Otherwise, timid and unconfident employees may decide not to speak about the idea. In the most negative cases, they may try to come to the competitors with it.
Secondly, the company should institute a culture, that all employees, who develop a working business model, are promptly and deservedly rewarded for all their exertions. The people should be always aware that the company values all their contributions and welcomes new initiatives.
Finally, in order to preserve entrepreneurial spirit, the company should allocate sufficient resources for realization of such projects. The people must see that their ideas are not only verbally encouraged, but also practically tested.
Conclusions
Secondly, the company approaches to innovation are exemplary. By giving each employee an opportunity to realize his projects with the company’s resources, Google ensures their loyalty, dedication and productiveness.
Thirdly, the best way to keep the investors interested it to emphasize that all projects of the company are financially oriented. The only effective method of keeping the investors interested is by showing to them that any groundbreaking project will be positive for the firm financially in the long run, even if the short-term benefits are not feasible.
Finally, preserving entrepreneurial spirit in Google, Inc. is important in order to ensure that the company employees contribute new ideas to the company growth. The company should continue encouraging the ‘googlers’ to express their ideas, although the methods of evaluating the ideas should become more institutionalized.
References
Johnson, M.W., Christensen, C. M. & Kagermann, H. (2008). Reinventing Your Business Model. In: HBR’S 10 Must Reads. Harvard University Press.
Purkayastha, D. & Rao, A. (2014). Corporate Entrepreneurship and Innovation at Google, Inc. Reference no. 414-033-1.
Stross, R. (2008). Planet Google: one company's audacious plan to organize everything we know. New York: Free Press.
