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Strategic Innovation
Nuno Lourisela (152112007) | Prof. Adriano Freire | Católica School of Business and Economics
Advanced Strategic Management
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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
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Strategic Innovation Page 2
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
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Strategic Innovation Page 3
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
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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
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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