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The Chastisement of Google

March 15, 2010 Leave a comment

Pride goeth before destruction, and a haughty spirit before a fall“- Proverbs 16:18

Organisations are like people: products of their experience and history. Some are old and wise, and take the long view. Some are young and hotheaded and certain to feel the fierce lash of society’s chastisement before long. Others are spoiled by sudden success young in life, and high on hubris, headed for a fall. One such is Google.

Google is one of the world’s most valuable brands, but an over-rated company. More than 90% of its profits come from its first product, search advertising. Google didn’t invent the search engine or its advertising model. Its success was a combination of luck, the prodding of early investors (the founders didn’t want to sully their search results with advertising but were forced to do so by VCs) and a laser focus on search. None of Google’s more than 120 other products make any money.

Nonetheless, cash mountains and rapid growth have created a monumental cultural hubris in Google. A megalomaniacal self-confidence has led to recent product debacles, unfocused diversification, privacy missteps and rash maneuvers, such as the decision to unwisely threaten to pull out of China, a bluff the Chinese government looks likely to call.

Google Groupthink is in evidence. With a leadership so spoiled by success and certain of its own divine infallibility, there is no dissenting voice to counsel caution. The tides will turn for Google, and the lessons will be hard.

 

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Categories: Business Tags: , , ,

The Enemy of my Enemy is my Friend

March 10, 2010 Leave a comment

In business, be careful whom you offend. This salutary lesson may be a bitter one for Google as it threatens to find itself pincered between the ruthless jaws of Microsoft and the venomous claws of Apple.

Not too long ago, Apple and Google enjoyed a touching bromance. Google CEO Eric Schmidt served on Apple’s board. Both loathed Microsoft, and all was well in the world. Then Google’s hubris, stoked by their swift and sweeping success, urged a fatal error.

Google announced an operating system, Chrome OS, and later released a phone, the ill-fated Nexus One. Apple CEO Steve Jobs fumed at this direct attack on his beloved iPhone. He declared war on Google, after Eric Schmidt resigned from Apple’s board. The former allies slowly morphed into bitter competitors.

Meanwhile, Microsoft hates Google with an unforgiving and unholy passion. They too had seen their crown jewel products, Windows and Office, assaulted by Google’s Chrome OS and Google Docs products. With Apple now accusing Google of crossing the line into the competitive arena, it looks like Microsoft is making affectionate noises in Apple’s direction.

Google should have stuck to its core business of search and advertising. By casting its net in too many directions, it is picking up competitors and enemies it doesn’t need. It may learn the hard way to pick its fights more wisely.

Boeing and BA, Ups and Downs

December 16, 2009 Leave a comment
dreamliner

Steady now...

It’s interesting times in the airline industry. As emerging markets join the global economy and worldwide supply chains snake around the earth like throbbing tentacles, worldwide air travel is set to surge over the coming decade. This creates unprecedented challenges for the industry.

The first is flatulence. Airplanes burn tremendous amounts of fuel, and emit prodigious amounts of carbon as they haul themselves through the ether. This flies in the face of the environmental movement, which apparently prefers international businessmen to bike from London to Beijing for their meetings.

Thus the Boeing Dreamliner. The long-delayed revolutionary aircraft is designed to connect the world’s aviation hubs in short, point-to-point networks. Made basically of plastic, it is supposed to be lighter and 20% more fuel efficient.

With such a noble provenance, it’s a pity it lacks the cachet of the Airbus A380 (the world’s largest passenger airline) or Concorde (the most gorgeous passenger aircraft ever designed). Basically, it looks like a re-purposed cargo plane or a particularly portly insect. But at least it’s airborne, which might be more than we can say for BA if its unions have their way. Communism, it’s what’s for Christmas.

Xmas Shopping: Complex Solutions to Simple Problems

December 11, 2009 Leave a comment
bullrunning

10% off!

As gift-giving days approach, the restless natives of the world’s cities exhibit rising anxiety levels in anticipation of the dread annual ritual called The Running of The Shoppers.

During this festival, vast herds of jostling humans, armed with credit cards, descend upon shopping malls to compete for consumer goods. It is a bracing tournament, exhilarating in its cutthroat intensity. Victory is often cause for rapturous celebration.

However, some would prefer not to participate. For those couch shoppers, this company has created an elaborate Internet facsimile of London’s Oxford Street, so shoppers can make virtual tours of the shops and purchase online. New York is next.

If their business survives, that is. There’s already something that helps couch-potato shoppers find what they’re looking for. It’s called Google. And it doesn’t limit them to Oxford Street or any other geographical area.

Large shopping centres exist as clusters because it’s convenient for shoppers- they know all the shops they need are within a certain area. On the web however, this physical clustering has no value: location is irrelevant, and because the best bargains can be found anywhere, shoppers have no reason to prefer Oxford Street shops.

Categories: Business

Tiger, Tiger, Burning Dim

December 10, 2009 Leave a comment
Close shaves

Close shaves

The marital and extra-marital travails of Tiger Woods are a fine media feast, garnished with fine sprinklings of schadenfreude, prurience and secret envy. For Amusis however, it is a tantalising study in economic incentives.

Once it was announced that one alleged mistress was being paid money to keep quiet, a whole rash of them sprung out of the woodwork, hoping to cash in while the loot was being distributed. Marginal cost, an eternal reputation as a money-hungry slattern. Marginal benefit, a few million dollars. Easy decision.

A sadder incentive was the rumour that Mrs. Woods was having her prenup sweetened to induce her to remain married. Think of the perverse incentives created by paying someone to remain married to you: the Net Present Value of all your future transgressions could amount to $1 billion or more.

Then there are the sponsors. Gillette is daintily distancing itself from Tiger. Presumably, the men who buy Gillette products don’t like adulterers. Actually, we’re not so sure. Considering that Mr Woods’ mistresses were gorgeous blondes one and all (the kind usually seen in Gillette adverts draping themselves around the hunk with the smooth shave), he might actually now be the ultimate spokesman. And if Gillette disagrees, well, there’s always Durex.

Virgin Galactic: To Infinity and Beyond

December 8, 2009 1 comment
He called it what?

He called it what?

One advantage of being aboard The Titanic was being a part of history. In her day, the mighty ocean liner was the largest steamship in the world. So the passengers’ trauma at drowning in the freezing ocean may have been lessened by the knowledge that they were at the forefront of maritime technology.

Such comforts may be expected to soothe the first batch of space tourists to die in the stratosphere. More than 300 have already signed up for the privilege.

Master-brander Richard Branson (who could justifiably be re-christened Richard Branding) has somehow made the prospect of dying in space and floating off into cold eternity appealing enough for people to pay $200k for the privilege.

He has done this as only a master of branding can: first, he named his space tourism company Virgin Galactic. The very name stirs the blood. Then he rounded up celebrity endorsers to sign up to die first. John Travolta baulked, citing the pressure of lost earnings, but others like Stephen Hawking and Victoria Principal are (or rather, will be) on board.

And now, in a final marketing masterstroke, he has christened the flagship The Enterprise, after the iconic spacecraft from Star Trek. Live long, and prosper.

The Benefits of Buzz

December 2, 2009 Leave a comment
No, she's no Beyonce

No, she's no Beyonce

Scottish Chanteuse Susan Boyle has scored chart-dominating success on both sides of the Atlantic with her debut album. This is remarkable, because her album comprises no original music, and unlike the typical best-selling female singer, she sports no skimpy outfits, wiggling hips or glittering ensemble.

In fact, to call her plain would be to flatter the case. So why the success? At risk of being unkind, it has precious little to do with the quality of her singing: talented she is undoubtedly, but so are millions of others who will spend their lives singing in total obscurity.

No, her success illustrates the importance of understanding the social cues that make people buy what they do: what these days, they call buzz. Think about it: if this unknown church-singer had somehow created the same album without first becoming the Internet sensation that she was, who would have bought it? Maybe three people in her church.

But we buy what tingles our social nerve-endings, to be part of the zeitgeist, the trends, the fashions, the buzz of the day. This is why there’s no such thing as bad publicity, and why quality is over-rated. We don’t buy products, we buy social inclusion.

Categories: Business Tags: , ,