Business – IT – Organizational Strategy. Google Case

I was supposed to work on the business case at school with regard to the relationship between business, IT and organizational strategies. For some unknown reasons, other than the obvious one – my stupidity – I picked the wrong case. Nonetheless, I figured: why not using it for my blog instead of wasting a few hours of work? So here we go. In this piece, I am going to cover how Google has been a fine example of integrating business, IT and organizational strategies.

Critical Facts

Founded late 1990s, it has taken Google not so long to become one of the biggest corporations in the world. As of this writing, Google or Alphabet, its current parent company’s name, is valued at approximately $751 billion (Yahoo). Google’s original mission is “to organize the world’s information and make it universally accessible and useful”. Originally, its primary revenue stream used to be advertising with the two programs: AdWords and Adsense. In 2015, all that changed. Google’s founders created Alphabet (D’Onfro, 2015), which immediately became the parent company of Google. Sergey Brin and Larry Page became the showrunners at the parent company while each of the affiliated companies is run by its own CEO (D’Onfro, 2018).

  • Google – the biggest affiliated company. Led by Sundar Pichai
  • GV – Venture Capital Fund. Led by David Krane
  • CapitalG – Growth Equity Investment Fund. Led by David Lawee
  • Verily – Healthcare and Managing Disease. Led by Andrew Conrad
  • Calico – Biotech with Focus on LifeSpan. Led by Arthur Levinson
  • Jigsaw – Technology & Geopolitics Think-tank. Led by Jared Cohen
  • Nest – Smarthome Device Maker. Led by Marwan Fawaz
  • Chronicle – Cypersecurity Firm. Led by Stephen Gillett
  • DeepMind – Artificial Intelligence. Led by Demis Hassabis
  • Waymo – Autonomous Vehicles. Led by John Krafcik
  • Sidewalk Labs – Urban Innovation. Led by Dan Doctoroff
  • X – Secretive R&D Lab. Led by Astro Teller
  • Access – Internet Provider with no current CEO

Google org

Alphabet’s Organizational Chart (Sullivan, 2017)

Alphabet is no longer about search. It is created to allow the company which is now a collection of subsidiaries “to do more, and to do important and meaningful things with the resources we have” (Alphabet). As Alphabet now functions in different industries or verticals, its revenue no longer flows through exclusively advertising. 99.5% of Alphabet’s revenue in 2017 was from Google while the rest was from other businesses. Within Google, almost 86% of its revenue came from advertising while 14% came from other businesses such as apps from Google Play, Google Cloud Platform or Hardware (Alphabet, 2018).

Regarding Google’s advertising business, it generates revenue through two programs:

  • AdWords, which allows businesses to place ads on Google and its network of publishing partners
  • AdSense, which pushes advertisements on publishing partners’ Web sites targeting specific audience and shares ad revenue with the publishing partner

In order to make the targeting work and attract traffic, Google offers a host of free services such as YouTube, Google Map, Google search function itself, Gmail…

At Google, creativity and innovation are the key. The company does many things to grow those two important factors. All employees are given 20% of working time on personal projects. Employees are informed on all projects of the whole Alphabet and encouraged to provide input into new features at meetings. Perks at Google include free meals, on-site gym, internal dentist and washing machines to make employees comfortable and spend more time on premise.

Information and data security are of utmost importance to companies like Google. Though employees do not encounter stifling policies, but instead enjoy quite a high degree of freedom with their own freedom, the company focuses intensely on prevention, detection and security infrastructure.

Analysis

This analysis will revolve around the connection between mission statement, business strategy, information strategy and organizational strategy. The frame work is as follows:

strategy triangle

The Information Systems Strategy Triangle (Pearlson & Saunders, 2013)

To fulfill its original mission, Google was set out to collect information online as quickly as possible, and offer it to users for free. Fighting against the Internet behemoths at the time in Yahoo or AOL, Google chose to focus on search instead of spreading their resources on email, weather forecast or finance. They also concentrated on making the user interface of the search engine as clean and user-friendly as possible (Iqbal, 2016). Plus, their PageRank algorithm was superior to that of their competitors, yielding fast & accurate results and making Google search engine popular among Internet users in a short amount of time (Hormby, 2013). From the very beginning, Google adopted the Focus strategy. They relentlessly strove to be the best in search rather than invested and competed on multiple fronts such as Yahoo. Had they tried to emulate Yahoo, I doubt they would have been as successful as they have been. Once their search engine gained traction and attracted users, the increase in user base allowed them to fine-tune their search algorithm even more, making it return search results more quickly and accurately.

Their mission guided them to offer free access to information to Internet users. Once they had significant traffic, they allowed advertising on their platform to generate revenue. I’d say that early Google’s business strategy was spot on and very in line with their mission statement.

To support the business strategy, Google adopted a shrewd information strategy. While Yahoo opted for an architecture that was fast to build and easy to use, Google chose to painstakingly build their infrastructure in a way that could support future services, endure and scale efficiently (Aron, 2016). It took the Mountain View-based company 4 years to bring their infrastructure to a point where it could support critical operations. The patience paid off. While Yahoo struggled to use their resources efficiently and scale effectively, Google suffered no such trouble, responding to the changes in user demand and technology more quickly and efficiently than Yahoo.

Google also made critical and strategic acquisitions that permitted them to strengthen their information systems and support the business strategy. In 2006, Google bought YouTube for $1.65 billion (AP, 2006). In 2007, they acquired DoubleClick for $3.1 billion (Story & Helft, 2007). The former allowed Google to feed useful and interactive content to users, making them stick around on their platforms longer. The latter improved their advertising algorithm by being a liaison between users and advertisers. Geary (2012) argued that DoubleClick gave advertisers cookies to collect user data and a self-serving feature to run targeted ads. Coupled with their focus on scalable and reliable infrastructure, these acquisitions formed a robust foundation for Google’s meteoric rise and beat the competition. In 2008, Google’s ads revenue already doubled that of Yahoo. (Evans, S.D., 2009)

google profits

Google’s profits up to 2010 (Fuchs, 2012)

Google puts a lot of focus on security, especially on infrastructure level. There is constantly an army of security engineers to look for threats and monitor their environments (Google for Work). Moreover, Google employs a team of audit and compliance officers whose job is to constantly audit their environments to make sure they meet the highest standard of security. On top of that, Google implements authorization and access management, giving access to sensitive information to only authorized personnel. They also customize their data centers which are located around the globe in disaster-free locations (Google, 2012). In my opinion, it is a wise decision. Google cannot afford to have their system contaminated or their intellectual (patents, projects) stolen or downtime. In the age of Internet, being secure and safe from threats can also be considered a strength and competitive advantage.

Regarding organizational strategy, Google’s organizational structure and culture are designed to foster collaboration and innovation. As the case stated, employees are given resources to work with and encouraged to stay on campus with perks as long as possible to work in teams. They are also informed of what is going on in the whole Alphabet. Steiber & Alänge (2013) argued that their unyielding focus on recruiting the right personnel that fit the culture and flat organization foster innovation and the obsession with users. Allegedly, Larry Page is still very involved in the hiring process. To ensure that everyone understands the overall culture and uses it as the guide for their actions, Google publishes their 10 core values widely (Google).

Google is also famous for allowing employees to work on personal projects 20% of their time. Some of their best products came from this policy. For example, Gmail was originally a side project of an employee at Google (Mckracken, 2014). This policy is a testament to the commitment to innovation at Google and also contributes to the business strategy. Projects derived from this policy contribute to the ecosystem Google tries to build and enhance user experience. When users use more free services that Google offers, Google collects more data and becomes more valuable in the eyes of advertisers.

Later on, when Google grew so big and became a subsidiary of Alphabet, the founders were wise to hand over the day-to-day business of each subsidiary to a CEO. This type of delegation allows focus and maximizes the expertise of their personnel.

As I mentioned above, Google originally adopted the Focus strategy to beat Yahoo in the search war. Over the years, they have relentlessly offered new free services to users in order to bolster their grip on the search dominance and generate more revenue from advertisers. When their host of ventures grow beyond search, they restructure the company and allow subsidiaries to focus on each vertical individually.

Conclusion

Of course, it is exceedingly challenging to pinpoint and isolate a few factors that can explain the astronomical success of a company like Google or Alphabet. Rather, I focused on the connection between business, IT and organizational structure at Google, mostly, and how it evolved over the years.

Based on what I have gathered and analyzed, I think that Google has been brilliant with their strategy and focus. They based their business strategy on the vision and mission from the founders and committed their personnel and resources to support the business strategy. As soon as the company grew substantially and took on other verticals than search, they shrewdly changed organizationally to maintain the type of focus that was there from the very beginning, and support the new vision that their founders had. It’s no longer to give access to information to users only. It’s to make their life easier and contribute to the human life, including the original mission.

Looking ahead, I think Google will be a technology giant for a foreseeable future. They have a monopolistic competition in search. Their offerings at Google are now more diverse than ever, especially the growth at Google Cloud Platform. The business is reportedly earning $4 billion annually (Novet, 2018). The revenue stream is getting more diversified. I imagine that the revenue from cloud platform will grow in the future with the explosion of cloud adoption. Google will lessen the risk of over-reliance on advertising. In their annual report 2017 (Google, 2017), the company mentioned the risk of over-reliance on advertising and the increasing pressure from regulations and laws, especially those on data privacy. These risks can significantly affect the cash cow of Google. Hence, generating revenue from other businesses can help alleviate such risks.

In other bets, if they succeed, the bets can be a significant source of revenue in the future such as Artificial Intelligence or autonomous cars. Personally, I quite doubt that these highly adventurous businesses will materialize anytime soon.

Reference

Alphabet. https://abc.xyz/

Alphabet. (2018). Form 10-Q. https://abc.xyz/investor/pdf/20180423_alphabet_10Q.pdf

AP. (2006). Google buys YouTube for $1.65 billion. http://www.nbcnews.com/id/15196982/ns/business-us_business/t/google-buys-youtube-billion/#.Wvw03tOUtfQ

Aron, M. (2016). Why Google beat Yahoo in the war for the Internet. https://techcrunch.com/2016/05/22/why-google-beat-yahoo-in-the-war-for-the-internet/

D’Onfro, J. (2015). Google is now Alphabet. Business Insider. http://www.businessinsider.com/google-officially-becomes-alphabet-today-2015-10

D’Onfro, J. (2018). Here are all the businesses owned by Google’s parent company and how they contribute to revenue. Business Insider. https://www.cnbc.com/2018/02/02/alphabet-business-units-revenue-contribution-and-ceos.html

Evans, S. D. (2009). The Online Advertising Industry: Economics, Evolution, and Privacy. Journal of Economic Perspectives. Vol 23(3): 37-60.

Fuchs, C. (2012). Google Capitalism. Journal for a Global Sustainable Information Society. Vol 10(1).

Geary, J. (2012). DoubleClick (Google): What is it and what does it do?. The Guardian. https://www.theguardian.com/technology/2012/apr/23/doubleclick-tracking-trackers-cookies-web-monitoring

Google. Ten things we know to be true. https://www.google.com/about/philosophy.html

Google. (2012). Google’s approach to IT security. https://static.googleusercontent.com/media/1.9.22.221/en//enterprise/pdf/whygoogle/google-common-security-whitepaper.pdf

Google for Work. (2014). How Google protects your data. http://services.google.com/fh/files/blogs/googlesecuritysummary.pdf

Google. (2017). Form 10-K. https://abc.xyz/investor/pdf/20171231_alphabet_10K.pdf

Hormby, T. (2013). The Rise of Google: Beating Yahoo at Its Own Game. http://lowendmac.com/2013/the-rise-of-google-beating-yahoo-at-its-own-game/

Iqbal, U. (2016). Google business secrets. Journal of Internet Banking and Commerce, 21(2), 1-2. Retrieved from https://search-proquest-com.leo.lib.unomaha.edu/docview/1826918010?accountid=14692

McKracken, H. (2014). How Gmail Happened: The Inside Story of Its Launch 10 Years Ago. http://time.com/43263/gmail-10th-anniversary/

Novet, J. (2018). Google says its cloud now brings in $1 billion per quarter. https://www.cnbc.com/2018/02/01/google-cloud-revenue-passes-1-billion-per-quarter.html

Pearlson, E. K. & Saunders, S. C. (2013). Managing & Using Information Systems – A Strategic Approach 5thEdition. John Wiley & Sons.

Steiber, A., & Alänge, S. (2013). A corporate system for continuous innovation: The case of google inc. European Journal of Innovation Management, 16(2), 243-264. doi:http://dx.doi.org.leo.lib.unomaha.edu/10.1108/14601061311324566

Story, L. & Helft, M. (2007). Google Buys DoubleClick for $3.1 Billion. https://www.nytimes.com/2007/04/14/technology/14DoubleClick.html

Sullivan, M. (2017). Will Alphabet’s new structure make Google’s business more transparent, or less?. Fast Company. https://www.fastcompany.com/40462340/alphabet-google-xxvi-holdings-restructuring-reorganization-transparency

Yahoo Finance. https://finance.yahoo.com/quote/GOOG/key-statistics?p=GOOG

 

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