An analysis of the dynamics of technological innovation at google

Published: 2021-06-29 15:05:04
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Approx. 2,000 words (excluding title page, table of contents, appendices and references) FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE EXECUTIVE SUMMARY Google’s mission “to organize the world’s information and make it universally accessible and useful” is both powerful, and long-­? term. While its mission underpins the way in which it executes its business, Google continually challenges the very principles of innovative practices through its unconventional approaches. However, both history and theory show that new eras of technological discontinuity will soon emerge, which is likely
To exert pressure on Google to enhance its innovation practices or risk losing its competitive advantage. This report analyses Google’s current approach to the dynamics of innovation based upon the framework proposed by Schilling (2008). Furthermore, it considers the future direction of the company and offers insight into how it can enhance these dynamics through various strategies. The analysis framework demonstrates important links between current innovation practices at Google and relevant innovation theory to reveal relative positions of strength and opportunities, along with weaknesses and threats. From
The conducted appraisal, it is clear Google’s innovation practices have served it well, building a position of undisputed design dominance in Internet search. However, for Google to sustain its current competitive advantage, it must evolve technological innovation dynamics. The appraisal indicates Google’s strength lies within its design dominance; its weakness with its sources of innovation; its opportunities within its innovation types; and its threats within its timing of entry. The report concludes Google must develop strategies to optimally leverage its significant component value, and when combined with
Disruptive innovation, generate opportunities in new, diverse industries. Furthermore, Google should consider the inclusion of both top-­? down and open innovation practices to address its weakness. It should also consider a more optimal approach to the types of innovation required to successively address new opportunities. Finally, Google should diminish the threat of first mover advantages in the future by reducing the amount it follows third party innovation and leverage the benefits of this new strategic approach to innovation. -­? 1-­? FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE

Presented in Appendix Error! Reference source not found.. This evaluates Google’s mission statement and philosophies through the lens of the aforementioned framework and relevant innovation theory. Clear trends emerge from the appraisal that aligns each framework dynamic to an element of the SWOT analysis theory. Strong evidence suggests that Google’s strength lies within its design dominance; its weakness with its sources of innovation; its opportunities within its innovation types; and its threats within its timing of entry. The following sections provide greater articulation of these correlations to formulate our key insights. 2.
1 STRENGTHS IN DESIGN DOMINANCE The appraisal of Google’s design dominance outlined in appendix A. 4 indicates that this innovation dynamic is where its strength lies today, particularly in relation to its core search product. Google’s design dominance in search (US 37% and Int. 68% market share (Eisenmann & Herman, 2006, p. 14)) is underpinned by a highly loyal and substantial installed base. To achieve this position, Google gained a superior technological utility through its search algorithms, resulting in great user satisfaction when compared to its competitors (Exhibit 8 of Eisenmann & Herman, 2006, p. 25). Google continues to
leverage its install base through the addition of products such as Gmail, Google Maps and Local Search to its portfolio. Although functionality offered through these products is typically a reduced subset of comparable competitor’s products (e. g. Microsoft Outlook vs. Gmail)(Keller & Husig, 2009), the resulting value to the user is at least equivalent due to network externalities arising from this broad array of complementary products with simple, common, and easy-­? to-­? use functions. Continuing to focus on this will allow Google to further leverage its install base to deliver complementary search products, thereby delivering
additional advertising revenue, and providing a self-­? reinforcing mechanism that in itself increases Google’s search design dominance. Nevertheless, it is likely that at some future point in time, Google will exhaust most benefits within the search market, resulting in a decrease in the rate of return (Schilling, 2008, p. 78). This trend is already evident in the forecast within Exhibit 4 of Eisenmann & Herman (2006, p. 17). Therefore, to continue to maintain (or extend) its rate of return, Google must look to transform its design -­? 4-­? FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE dominance into new
industry opportunities. To achieve this, Google must develop strategies to optimally leverage its significant component value, and when combined with disruptive innovation, generate opportunities in new, diverse industries (Bower & Christensen, 1995). By doing so, Google can deliver innovative products that provide either a first-­? mover advantage in new industries, or are strongly positioned in value against the incumbents within an existing industry. However, to achieve this, Google must also consider recommendations within the other three dynamics of the innovation framework of Figure 1 to best leverage its design dominance. 2.
2 WEAKNESS IN SOURCES OF INNOVATION Google’s sources of innovation, as appraised in appendix A. 2, can be characterised by two underlying principles. Firstly, by its own admission (Eisenmann & Herman, 2006, p. 12), Google conducts a distinctive bottom-­? up approach to generate creativity leading to innovation, where ideas are predominately generated within Google’s R&D team. Secondly, Google has an inwardly focused innovation system. It relies almost entirely on internal creativity with little interaction extending beyond the bounds of Google itself. Both characteristics are driven by Google’s core values of “technology matters”
and “we make our own rules” (Eisenmann & Herman, 2006, p. 5). While we consider Google’s bottoms-­? up approach to innovation an asset, such an omni-­? directional approach can make it difficult to balance creativity with value creation, particularly at a strategic level (Davila et al. , 2006, p. 89). As Google continues to organise and make accessible more interrelated and complex information, a strategic top-­? down approach will also become increasingly important. Through implementation of this approach, a bottoms-­? up/top-­? down integrative solution will be created, giving Google superior balance between technology push and
market pull (Johnson et al. , 2008, p. 326). This will allow Google to better address new opportunities such as enterprise markets, which typically require strategic partnerships with third party developers, complementors, partners and customers to optimise strategic value creation through market pull, as opposed to a technology push driven purely from creative innovation. A conscience of this dominant bottom-­? up’s approach to innovation is the limited sourcing of innovation outside of its internal team. By creating a focused program promoting open innovation, Google can create dedicated channels to access external sources of
knowledge (Chesbrough, 2003). The creation of such channels through an open innovation program will -­? 5-­? FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE create a knowledge network that is all encompassing of the value chain, not only Google’s internal team. This program will increase Google’s capacity to innovate considerably, as it bases both its creativity and strategic value creation on the entire knowledge of the network, not just its internal knowledge (Silverstein et al. , 2008, p. 19). It will also provide Google opportunities to commercialise new products through pathways that extend beyond
the bounds of the firm’s current business (Morris et al. , 2008, p. 97). Such opportunities can create additional complementary goods to Google’s core products, thereby leveraging its significant installed base, and further strengthen its design dominance. Furthermore, an open innovation program can lead to open standards being created and adopted, thereby reducing the risk of a standards battle. Therefore, for Google to address the determined weakness of its innovation sources it should consider the inclusion of both top-­? down and open innovation practices. This will lead to a highly integrated approach to Google’s sources of
innovation, allowing it capitalise on both strategic and disruptive opportunities across a much broader spectrum of both its current, and new industries. 2. 3 OPPORTUNITY IN ADOPTING NEW INNOVATION TYPES Google’s adopted types of innovation, as appraised in appendix A. 3, are not focussed or structured in a manner that achieves an optimised position across all possible types defined in Shilling’s framework (Schilling, 2008, p. 37). Google currently focus on process innovation without maximising product innovation; strong incremental but negligible radical innovation; competence enhancing and not competence destroying; and during its
start-­? up phase an initial focus on architectural but over time this has transformed into a more component based approach. Like Schilling, Dosi also suggests that to be successful leading firms should be flexible and aim to maximise all of these dimensions as part of their innovation program (Dosi, 1982, p. 157). To maximise the value from its innovation investment it is recommended that Google adopt a more balanced approach across Schillings four innovation type dimensions. The gaps in the four dimensions above represent an opportunity for Google’s future growth. Over time Google’s growth rate has been steadily declining well
below its rapid start-­? up levels and Google have now moved into an “era of incremental change” (Anderson & Tushman, 1990). This symptom is consistent with technology s-­? curves and cycles and therefore is not a surprise. However, what is of most interest now is the future potential. The future potential is for a new -­? 6-­? FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE technological discontinuity to occur. Through the adoption of a balanced innovation program it is recommended that Google position itself to create, and then take advantage of, a new discontinuity based on a radical innovation. This will
lead Google into an “era of ferment” (Anderson & Tushman, 1990) and possibly towards a new dominant design position. Importantly, this radical innovation may be in the space of the internet, thereby leveraging off their current strong position, or, it may be beyond their current core business. 2. 4 THREATS IN COMPETITIVE TIMING The timing of entry for Google’s innovation, as appraised in appendix A. 5, has significantly decreased in importance as the company has grown more successful. Because of Google’s market dominance, predominately driven from its user base, it is always well positioned to accelerate market acceptance of new
innovative products. The power of the internet as its exclusive software distribution platform has enabled Google to circumvent any typical distribution channel impediments (Keller & Husig, 2009, p. 1050). Google’s philosophies exude a strong patience mentality. This paradigm poses a genuine threat for the timing of entry dynamic. Google must adopt a more radical and top down approach by leveraging their design dominance entering new markets to gain first mover advantages. Furthermore, if this is not addressed, their patience and reluctance to be first mover may continue to see a diminishment of returns (Eisenmann & Herman, 2006,
p. 17) from ‘search’ saturation and an increased vulnerability for competitors to rapidly overtake them in many market sectors. A reliance on these factors resulting in innovation momentum rather than a top-­? down strategic and purposeful timing of entry, presents a genuine threat for this innovation dynamic. The consistent trend also remains in following the ideas of others rather than leveraging the advantages of first mover innovation and its own design dominance. -­? 7-­? FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE 3. CONCLUSIONS Google is at the cross-­? roads and is now operating in an “era of
incremental change”. Google are well past their start-­? up phase and now have the dominant design for search. So, what next for Google? Evidence suggests that that after an “era of incremental change”, a technological discontinuity occurs. This is then followed by an “era of ferment” with design competition and substitution. While Google’s innovation practices have served them well to date, to continue to dominate within these new eras, Google must further enhance its technological innovation management. Through the analysis conducted in this report, clear strengths and weaknesses were identified including potential blind-­? spots
in the way in which Google manages its innovation. In summary, Google must develop strategies to optimally leverage its significant component value, and when combined with disruptive innovation, generate opportunities in new, diverse industries. To achieve this, Google should consider the inclusion of both top-­? down and open innovation practices to address its weakness within the dynamic of innovation sources. It should also consider a more optimal approach to the types of innovation required to succeed within the projected new eras. Finally, Google should diminish the threat of first mover advantages in the future, by reducing
the amount it follows third party innovation and leverage the benefits of both bottoms-­? up and top-­? down approaches to produce strategically valuable, disruptive innovation. -­? 8-­? FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE A APPRAISAL OF GOOGLE’S INNOVATION PRACTICES A. 1 FRAMEWORK FOR ANALYSIS Schilling (2008) presents a strong framework that can assist organisations in developing optimal understanding of the innovation dynamics within their industry. This framework considers sources of innovation, the types and patterns of innovation, the standards battles and design dominance, and timing of
entry as the key components. The following sections, examine each framework dynamic with relevant appraisal of links between Google’s organisational tenets and innovation theory. A. 2 SOURCES OF INNOVATION According to Schilling (2008, p. 6), one dimension of the dynamics of technological innovation is the very sources that innovation is derived from. This can broadly be separated into three separate domains; one internal to the organisation, the second relating to the interactions of the people within the organisation , and the third relating to the interactions and relationships of the organisation within its macro environment.
In appraising Google’s sources of innovation, the following table of was formed. SOURCES OF INNOVATION Dynamic Dimension Individual Creativity Key aspect of evidence Source: Eisenmann & Herman (2006) unless stated Only hire highly creative engineers, with ability favoured over experience. Employees are encouraged to spend 20% of their time undertaking their own projects that extend core business. Creative work environment with small teams closely located and geared around a bottoms-­? up approach, where innovation is fuelled by culture and individual engineers. Organisational Creativity Google apply a 70/20/10 rule with 70% on core
business (search), 20% on projects that extend the core and 10% on fundamentally new businesses (p. 7). Corporate commitment to innovation with tightly aligned values and culture. -­? 9-­? Appraisal Source: Eisenmann & Herman (2006) unless stated Google’s engineers are highly creative with high levels of intellectual abilities. Furthermore, the organisation’s structure facilitates communications between engineers to “qualify” ideas. This process is bottoms-­? up focused. Furthermore, the focus on ability over experience is sound as this can offer a good balance between creativity and existing paradigms (Schilling, 2008, p. 17). This
strategy provides high levels of intrinsic motivation to individuals as they are working on projects that have a high degree of person interest (Schilling, 2008, p. 17). Google are committed to funding 10% of projects that have the capacity of billion dollar returns long-­? term (p. 7). Google does not shy away from high risk high reward projects which in turn foster a culture to promote individual creativity, driven from the bottom up. Google’s 70/20/10 rule is a powerful motivator for staff but the question is whether this energy is being directed towards a broader vision for Google that can result in clear outcomes. Is Google’s
approach a case of “a solution looking for a problem”? Certainly, Google have recognised that “setting priorities was a challenge” (p. 7). Focussing the energy of the team of engineers is challenging for the business. Tight alignment of values and culture to the innovation program are the key parameters of a bottoms-­? up approach to innovation, where innovation is spontaneous and driven from FUGLE CONSULTING INC. THE DYNAMICS OF TECHNOLOGICAL INNOVATION AT GOOGLE SOURCES OF INNOVATION Dynamic Dimension Macro Environment Key aspect of evidence Appraisal Source: Eisenmann & Herman (2006) unless stated Source: Eisenmann & Herman (2006)
unless stated Ideas mailing list that allows ideas to be circulated company wide, and rated and ordered for priority (p. 18). Google’s macro environment focus has been in three aspects. One focusing on the user, and two focusing on content (information) providers, and three focusing on advertisers. There is little focus on complementors and collaborators. Furthermore, Google tend to be a “follower” from a product perspective, following its competitors into markets, rarely playing the role of the first-­? mover. ideas and entrepreneurship within Google’s engineering team in particular (Deschamps, 2008). Important step to unleashing an
individual’s creativity (Schilling, 2008, p. 18). Further promotes bottoms-­? up approach to innovation. While Google’s approach covers off some aspects to sources of innovation within the macro-­? environment, two key components missing are complementors and collaborators through collaborative knowledge networks. This is restrictive to creating synergy within a knowledge network that will greatly increase innovation speed and output (Vittorio & Raffaella, 1998). Furthermore, it is restrictive on the creation of open standards to facilitate standardised approaches within the industry (Vittorio & Raffaella, 1998). Table 1 – Appraisal

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