strategic innovation report - google

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Strategic Innovation

Nuno Lourisela (152112007) | Prof. Adriano Freire | Católica School of Business and Economics

Advanced Strategic Management



Strategic Innovation Page 1

About Google

Google is a search, advertising and applications company. Google's use of the term [Googol] reflects the company's

mission to organize the world's information and make it universally accessible and useful.

Business Model •  The way Google executes on this strategy is to improve speed and accessibility to the Internet. In other words,

B Y V I R T U A L L Y B E I N G EVERYWHERE AT THE SAME TIME

Overall strategy

• As the most important online search and advertising company in the world, Google’s overall strategy is to

GET PEOPLE TO USE THE INTERNET MORE

Competition

What is Strategic Innovation?

Why to use Strategic Innovation?

Products and services

available for the individual

users

Focus on the users

Networking effects

A service becomes more valuable as

more people use it

Two-sided market

Google’s clients who pay for the users: Advertisers =

Source of Revenues

B2B Model

Overall Strategy

Increase Internet Usage Match content of ads with what consumers want

The more time people spend on the internet, the more time they’ll engage in revenue generating activities such as viewing and clicking display ads a n d p e r f o r m i n g searches.

In order to generate more revenues, Google is trying to increase the l i ke l ihood o f users viewing and clicking the display ads by delivering ones that are targeted to t h e a u d i e n c e ’ s preferences and tastes.

• By broadening the scope of products and services, Google is facing a wider range of competitors.

• Competitors who are constantly developing innovations in areas such as web search, online advertising, wireless mobile devices, and web-based products and services and therefore might impact the company’s position and growth strategy.

• STRATEGIC INNOVATION is about understanding and choosing what are the best types of innovations that suits the company’s needs and how to sustain those innovations by creating barriers for competitors.

• STRATEGIC INNOVATION can be used to explore a broad range of poss ib i l i t ies , ident i fy s ign i f icant opportunities, make informed decisions about the most promising paths to pursue, and ultimately creates growth strategies, new product categories, services or business models that create value for the users, clients and lead to the company’s success.

Google Activities

Search Engine &

Paid Listings

Core Activities

Apps, OS and other unrelated

activities

Marginal Activities




Importance of Innovation @ Google •  The R&D of new, technologically advanced

products is a complex and uncertain process requiring high levels of innovation and investment from Google, as well as the accurate anticipation of technology, market trends and consumer needs.

•  As a result, Google must continue to invest significant resources in R&D and innovation, including through acquisitions, in order to enhance its web search technology and its existing products and services, and introduce new products and services that people can easily and effectively use.

. How to manage its innovation portfolio strategically?

GE / McKinsey Matrix – The “Innovation Matrix”

How is it used?

• Google must construct an innovation portfolio that is aligned with its strategy, creates synergies and produces the highest overall return while keeping the risk levels low.

•  It has to look at its current portfolio, choose where to invest more or less and in what type of innovations, develop growth strategies for adding new products and businesses to the portfolio and decide which businesses or products should no longer be retained (disinvest).

•  There are several frameworks/matrices that can be used to support these decisions. It follows three of them

Competitive Strength

Mar

ket/S

egm

ent

Attr

activ

enes

s

High Average Low

High

Average

Low

Concept Innovation Continuous Improvement Service Innovation

Process Innovation Technological reorganization Design innovation

Brand creation Reformulation Packaging innovation

• Taking into account the company’s competitive strength and the market/segment attractiveness, this matrix shows what are the types of innovations that provide the best strategic fit with the company’s strategy and therefore where Google’s investment efforts should be directed to: ü Concept Innovation – new offers that create value to the users ü Continuous Improvement – R&D investments for product/service improvements ü Process Innovation – increase search engine & paid listings efficiency ü Service Innovation– Layout and usability of the apps ü Technological reorganization – in order to improve competitive strength

•  It seems that Google has been following strategic innovation and it might try to “predict” the direction that each product is taking in terms of both variables and therefore target the right types of innovation to invest in order to differentiate and gain competitive advantage




How is it used?

•  Google’s core industry is Internet Advertising. Internet advertising had a market growth rate of 15,2% in 2012, indicating that it is in the Growth stage of the lifecycle. Therefore, this matrix gives us a similar conclusion as the one before. In addition, Google has to take into account that Internet usage is shifting towards Mobile and that Mobile advertising is still on its Introduction phase. With such a vast portfolio, Google’s marginal activities are related with other industries such as Social Media & Entertainment, Technology, Media & Telecom, Travel & Tourism (Google flights or city tours) and possibly in the future even Automotive (Google Driverless car). These are “growing and mature industries” and so, Google should also innovate in different ways such as Brand creation, or Reformulation.

How is it used?

Besides market attractiveness, one should also look into the industry lifecycle Google’s Innovation Ambition Matrix (“Ansoff” Matrix)

•  The matrix allows Google for surveying all the initiatives it has under way: How many are being pursued in each realm, and how much investment is going to each type of innovation. It also gives managers a way to discuss the right overall ambition for the company’s innovation portfolio. A company like Google might move toward the upper right, taking bigger risks on more-audacious concept innovations for the chance of bigger payoffs. Few organizations think about the best level of innovation to target, and fewer still manage to achieve it. Companies that allocated about 70% of their innovation activity to core initiatives, 20% to adjacent ones, and 10% to transformational ones outperformed their peers.

Google strives for this 70-20-10 balance.

Industry Lifecycle

Com

petit

ive

Stre

ngth

Introduction Growth Maturity

High

Average

Low

Decline Concept Innovation Process Innovation

Continuous Improv.

Service Innovation

Process Innovation

Technological reorg.

Design innovation

Brand creation

Reformulation

Packaging innovation

Process Innovation Brand creation

Continuous Improv.

Design innovation Service Innovation

Technological reorg. Reformulation

Internet Advertising

10% 20% 70%

Concept Innovation

Service and process innovations Technological reorganization Continuous improvement

Continuous Improv. Process, brand, service, design and packaging innov. T. Reorganization & Reformulation

Diversification

Product/Service or Market Extension

Market Penetration



Appendix Page 4

Mergers & Acquisitions

Partnerships

How Google diversificate?

Internal Development Core Business: Web Search & Internet Advertising

Applied Semantics Picasa

Keyhole and

Where2 Android Youtube Double

Click Zagat Slide.com

AdSense AdWords

Picasa Blogger

Maps Earth Android Youtube Adsense Places

Maps Google +

Orkut

NASA AOL Sun Micro systems

Microsoft, Sony

Fox IM, News Corp GeoEye United States Patent

and Trademark Office

Nanotech, computing

Search Service Informatics Telecom Search

Advertisin Google Earth

Google Patents

•  It can also be seen as “organic growth”. It is where strategies are developed that build on the business’ own capabilities and resources. Strategic innovation is one way of internal development. Google’s diversification comes from both inside out and outside in. From the inside, Google is able to grow on its own by hav ing an organizat ional cu l ture that emphasizes the importance of continuous innovation on a strategic manner and therefore the company comes up with innovative solutions that fit with its overall strategy.

Maps

Publishing Sharing

Mobile Apps

Statistics

OS

Others

Hardware

Desktop Apps

Related diversification Non-Related diversification



Appendix Page 5

Google is considered one of the most innovative companies in the world. How does achieve innovation leadership sustainability?

There are several barriers that make it hard for potential or actual competitors to imitate the way Google innovates and grows. •  First of all Google has a powerful brand and its products or services are highly seen as a synonym of quality, fun and user-

friendly. Moreover, financial power and a high number of partnerships further increase its protection against competitors. •  Secondly, most of the innovations created by Google are difficult to copy since it involves technologically-advanced

processes, experience and know-how. •  Thirdly, Google workforce includes outstanding employees, with entrepreneurial attitude and driven by success and

achievements and together with an organizational culture innovation-driven, Google is able to innovate at a faster pace than competitors.

•  Last but also important, Google protect itself by patenting innovations even before anyone knows what is coming.

Google: list of products, “product-related” industries, main competitors and some “product-based” competitors

Social Media & Entertainment

Technology, Media & Telecommunications

Travel & Tourism

Core Search & Online

Advertising

Google Adword, Adsense, Books, Images, News, Knowledge Graph, Chrome Web Browser, Google Now

Picasa, Youtube, Google +, Orkut, Play, Blogger, Hangout

Adnroid, Chrome OS, Chromebook, Nexus, Google Glass, Google TV, Google Fiber

Google Flights, Hotel Finder, Maps, Earth, City Tours, Transit

strategic innovation report - google

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