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Innovator's Dilemma: Is Google running out of time for the next Nokia?

Text丨Talk about wealth

Original production by Yan Cai

The strongest pension company in Silicon Valley initiated the final elimination, filling up the competitive atmosphere, Google$Alphabet-C (GOOG.US)$What are you afraid of?

Every time I have to think about something at the end of the year and the beginning of the year, the biggest surprise for me came from the rise of ChatGPT. The AIGC wave destroyed and rapidly developed into a new round of productivity revolution. All the giants couldn't sit still and started a new round of technological arms race. Among these, the competition between Google, the king of AI, and Microsoft is particularly remarkable.

Will Google, once the strongest king of AI, face a rift in the empire under the strong alliance between OpenAI and Microsoft?

Recently, I chatted with Google students to get a glimpse of a different Google from the perspective of a microscopic individual. Employees of the strongest pension company in Silicon Valley also had to face a large number of KPI assessments and final elimination, such as a 5% final elimination ratio.

Once upon a time, Google was dubbed “the strongest nursing home.” This statement probably stems from an opinion that Google provides a very comfortable working environment and rich employee benefits, so that employees can enjoy a relatively easy and stable working state in the later stages of their careers. This statement is not a “nursing home” in the literal sense of the word. It is a metaphor to describe Google as a technology company that provides excellent working conditions and benefits to its employees, including flexible working hours, comfortable office environment, rich employee activities and health protection, etc., but the most important thing is that Google has almost no final elimination system.

As a technology company, Google's human resources policies and management methods have always been the focus of attention within the industry. Traditionally, Google is known for its open, inclusive, and innovative corporate culture, which largely opposes strict elimination systems.

The final elimination system, also known as “mandatory ranking” or “mandatory performance distribution,” is a management practice that requires managers to rank employees and eliminate some of the worst performing employees. This practice is thought to improve organizational efficiency and competitiveness in some companies, but it has also received a lot of criticism because it can lead to poor work environments and unnecessary competition among employees.

In its early years and growth stages, Google placed more emphasis on employees' personal growth, teamwork, and innovative spirit. Google's management philosophy and practices are largely based on trust, autonomy, and employee empowerment, which is far from traditional elimination systems. Google has long been committed to building a supportive and encouraging work environment and encouraging employee creativity and productivity through various mechanisms. At least in public reports and general industry awareness, Google is not known for implementing a strict final elimination system.

Since my classmate joined Google in 2015, he believes that Google currently has the strongest competitive atmosphere, and the company is also worried about the impact of OpenAI's big model.

The core of Google's previous innovation was probably an inclusive ecosystem and encouragement for innovation. For example, scientists working in cutting-edge fields of innovation had almost no KPI pressure, which helped them to imagine and innovate in a far-fetched manner. The relationship between employee performance evaluation (KPIs) and innovation is a very interesting and complex topic. Indeed, there is an opinion that without clear performance indicators and corresponding pressures, employees may lack motivation to pursue innovation and efficiency.

However, on the other hand, excessive emphasis on KPIs and performance evaluations can also hinder innovation:

1. Innovation and risk:Innovation often comes with high risk and uncertainty. If a company assesses employee performance based strictly on short-term KPIs, employees may be tempted to avoid risky and uncertain innovation attempts and focus more on tasks that provide immediate performance improvements.

2. Long-term perspective:Innovation often requires time, patience, and tolerance for failure. In an environment that places too much emphasis on short-term performance, employees may have fewer opportunities to invest in long-term projects that may fail but ultimately lead to major breakthroughs.

3. Teamwork and collaborative spirit:Too much emphasis on individual KPIs can lead to competition among employees, which harms the spirit of teamwork. Innovation, on the other hand, often requires close cooperation across disciplines and departments.

Google encourages innovation and creative thinking, and also has a performance evaluation system. Their approach is likely to focus more on overall performance and long-term value rather than simply relying on short-term, quantified KPIs. For example, Google encourages employees to spend a percentage of their time working on projects they are personally interested in. These projects may not directly affect their immediate KPIs, but help cultivate a culture of innovation.

So, the key question here comes up. Since Google encourages innovation, and Google invests the most in AI, and now the foundation of the LLM model is also based on the Google team's Transformer paper, then why did Google miss out on getting Transformers to flourish, let the team go, and eventually incubate OpenAI?

“The Innovator's Dilemma”(The Innovator's Dilemma) is a classic business book written by Clayton M. Christensen (Clayton M. Christensen). The book's main idea focuses on explaining why large, successful companies often struggle to stay at the cutting edge of innovation, particularly in the face of disruptive technology or market changes.

The main ideas can be summarized as follows:

1. Disruptive technology and sustainable technology:Christensen distinguished two types of technological innovation: sustainable technologies (sustainable technologies) and disruptive technologies (disruptive technologies). Continuous technology refers to innovations that improve the performance of products in existing markets, while disruptive technology refers to innovations that initially perform poorly but gradually develop and eventually disrupt the entire market.

2. The dilemma of large companies:Successful companies often focus on sustainable technologies because they meet the needs of their most important customers. However, this focus has made them often overlook disruptive technologies that initially seemed unimportant or underperforming in the market. Successful companies often focus on continuous technology improvements to meet the needs of their most important customers. But this focus has led them to overlook or underestimate disruptive technology that initially seemed unthreatening. Successful companies tend to allocate resources to support existing, profitable businesses rather than emerging disruptive technologies with unknown possibilities.

3. Changes in market demand:Over time, disruptive technology matured in certain market segments and began to provide sufficient performance while attracting mainstream customers at lower costs and simpler usage.

4. Loss of market leadership:By focusing on existing customers and technology, mature companies often miss opportunities to switch to new technology and may eventually be replaced by more innovative and adaptable start-ups.

Jobs showed great admiration for “The Innovator's Dilemma,” and in large part stemmed from the book's core ideas echoing his experience at Apple:

Focus on disruptive innovation:Jobs values the power of disruptive innovation. He led Apple to successfully disrupt multiple markets, including the music, mobile phone, and PC industries.

Dare to take risks:Jobs understood that even market leaders need to continually seek innovation, even if that meant disrupting their existing products.

Insights on user needs:Jobs is good at understanding changes in market needs and trends, and he knows how to meet and lead market demands through innovation.

“The Innovator's Dilemma”It provides a framework for analyzing and explaining corporate failures and successes, which is very appealing to innovators like Jobs who aim to keep the market moving forward. The opinions in the book may help him better understand market dynamics and the complexity of corporate decisions, so that Apple can stay ahead of the fierce market competition.

Let's take a look at a few classic examples of industrial iteration:

1. The memory industry

Continuing technology and disruptive technology:In the memory industry, DRAM (dynamic random access memory) has long been a mainstream product. However, flash technology, such as NAND, initially performed poorly, but gradually became disruptive due to its lower power consumption, smaller size, and the ability to store data without a power source.

Changes in market leadership:Many traditional DRAM manufacturers did not adapt to this disruptive technology in a timely manner, resulting in a decline in market share. And companies like Samsung have successfully transformed and maintained their market leadership position by investing in flash memory technology.

2. PC industry

From desktop to mobile:The continuous development of the PC industry is a continuous improvement in performance and a reduction in costs. However, the advent of smartphones and tablets has become disruptive technology, providing greater portability and sufficient performance to meet the needs of most users.

Market response:Many traditional PC manufacturers initially failed to fully recognize the threat of mobile devices. Companies like Apple have successfully grasped the trend of mobile computing by launching iPhones and iPads.

3. Mobile internet industry

New application models:Mobile internet was initially not as good as traditional wired internet in terms of functionality and speed, but with the popularity of smartphones and the development of 4G/5G networks, mobile internet became disruptive technology.

The challenges of traditional companies:Many early internet companies failed to effectively move to mobile platforms and lost market share for emerging mobile apps such as Instagram and Snapchat.

4. cloud computing industry

Infrastructure changes:Cloud computing may initially be less performant and secure than traditional on-premise data centers, but its flexibility, scalability, and cost-effectiveness have gradually made it a disruptive technology.

The adaptability of the enterprise:Microsoft initially focused on its Windows and Office products, but then successfully transitioned and achieved leadership in cloud computing through Azure cloud services. In contrast, some traditional IT companies failed to transform in a timely manner and faced loss of market share.

“The Innovator's Dilemma”The disruptive technology described poses a real threat to market leaders. These examples highlight the need for companies to constantly adapt to market changes, be willing to invest in new technology, and sometimes fundamentally re-evaluate existing successful business models to maintain their market position and competitiveness.

Notable examples of failures due to failure to adapt to market changes or technological innovation abound:

1. The decline of Nokia

background:Nokia was once the world's largest mobile phone manufacturer, and dominated the market with its feature phones.

Reasons for failure:With the advent of the smartphone era, Nokia has failed to adapt to market changes in time. As Apple's iPhones and Android-based smartphones quickly took over the market, Nokia continued to use its Symbian system, which ultimately led to a sharp decline in market position.

II. Bankruptcy of the American Border Bookstore (Borders)

background:Borders was once one of the largest bookstore chains in the US.

Reasons for failure:With the rise of e-books and online retail, Borders has failed to effectively enter digital and online markets. In contrast, Amazon and other competitors have quickly adapted to new consumption models through online sales and e-books. Borders continued to rely on brick-and-mortar sales, which eventually led to it filing for bankruptcy protection in 2011.

III. The Decline of Kodak

background:Kodak is a pioneer and giant in the photography and film industry.

Reasons for failure:Despite Kodak's pioneering advantage in digital photography technology, the company failed to successfully transition from the film business to digital photography. As the market rapidly switched to digital photography, Kodak's business continued to decline, eventually filing for bankruptcy protection in 2012.

IV. Blockbuster's collapse

background:Blockbuster used to be the world's largest video rental chain.

Reasons for failure:With the rise of streaming and online video rental services, Blockbuster failed to adapt to this new trend in time. Companies such as Netflix have attracted a large number of customers through mail-in DVD rental and online streaming services, while Blockbuster remains focused on its physical store business. This strategy eventually led to the loss of its market position and filing for bankruptcy protection in 2010.

These examples show that even market leaders can fail because they are unable to adapt to technological innovation and market changes. They emphasized the importance of businesses continuing to innovate and adapt to market changes.

If we analyze the core causes of the decline of Kodak and Nokia from the perspective of disruptive technological innovation, we can apply the theory proposed by Clayton Christensen in “The Innovator's Dilemma” and use the principle of first nature to deeply understand:

The decline of Kodak

Disruptive technology: digital photography

Initial performance:The original digital cameras had poor performance and low resolution, but offered convenience and low cost.

Market changes:As technology advances, the performance of digital cameras has improved, and the popularity of smartphones has made digital photography mainstream.

First-principles analysis:

Cost and convenience:Digital photography reduces the need for film and printing, reduces costs and increases convenience for users.

Changes in consumer behavior:People are beginning to prefer the ability to instantly view and share photos, something traditional film photography can't offer.

Nokia's decline

Disruptive technology: smartphones

Initial performance:Early smartphones weren't as good as traditional feature phones, but they offered more computing power and versatility.

Market changes:With the development of technology, smartphones gradually have better performance, a more user-friendly interface, and a rich application ecosystem.

First-principles analysis:

Technology integration and versatility:Smartphones integrate various functions such as communication, entertainment, and information access to meet the diverse needs of users.

Platforms and Ecosystems:Smartphone operating systems such as iOS and Android provide developers and users with a powerful platform and ecosystem, greatly expanding the uses of mobile phones.

Common lessons from Kodak and Nokia

1. Ignoring disruptive technologies: Both companies failed to recognize the potential and impact of emerging technologies in a timely manner.

2. Adhere to the old model: Adhere to traditional business models and product lines, and fail to adapt to changes in the market and technology.

3. Insufficient innovation: There is insufficient motivation to innovate at critical times to provide products and services that match the new technology.

These two cases emphasize the need for enterprises to maintain flexibility and sharp market insight in the face of disruptive technology, and the importance of continuous innovation and adaptation to market changes. If they do not turn around in time, they will often quickly lose market share, and eventually fall from the course of history into a slightly sad glimpse of technology one by one.

Looking at 80 structural positive and negative adoption curves over the past 50 years, two things are clear:

1. The downside share loss in the destroyed industry occurred faster. Compared with emerging technologies using the Internet as a distribution channel, peak activity in the first 5 years fell by about 20%.

2. Over a longer period of time, the share of the destroyed industry also declined more severely, falling by an average of 40% from the peak period over a period of 15 years, while the market share of new entrants increased by 30% during the same period.

The release of new technology is a fatal blow to old manufacturers. After the iPhone was released, the stock prices of first-generation mobile phone manufacturers fell by an average of 50% within 2 years and by an average of 75% within 5 years.

These companies can get rid of the “challenge” label, but hybrid transformation and capital investment will take time. HMV, a former gramophone manufacturer, saw a significant decline in profits only 7 years after its stock price fell.

Therefore, I can feel that the pressure on Google is huge. Google is considered the inventor of the Transformer paper, but it wasn't easy to use. In the end, these people left Google and incubated OpenAI. This is a typical scenario in the dilemma of innovators. Will it be disrupted by OpenAI in the future? This is a big question mark.

More and more people are already using OpenAI's ChatGPT as the first entry point for Google. In the latest December visit rankings, Google Bard's 349 million visits are far different from ChatGPT's 1.65 billion and Microsoft's New Bing's 1.34 billion. If you consider the strategic alliance between OpenAI and Microsoft, 349 million vs. 2.99 billion, this is a 1:10 magnitude gap.

Google published a paper on the Transformer model in its research team. This model later became an important cornerstone in the field of natural language processing (NLP) and had a profound impact on subsequent developments such as OpenAI's GPT series. To a certain extent, this reflects the scenario described in “The Innovator's Dilemma,” where innovators may not fully utilize or commercialize their innovations, thereby giving other organizations or companies the opportunity to use these technologies to disrupt the market.

Disruptive Technology: Large Language Models

Technological advancements:Models such as OpenAI's GPT-3 demonstrate significant advances in natural language processing technology, particularly in terms of understanding, generation, and interaction.

Application diversity:These models show great potential in a variety of applications, from content creation to conversation systems to complex data analysis.

The pressure Google is facing is obvious. As a long-time leader in search engines and related technology, Google is now facing strong challenges from competitors such as OpenAI and Microsoft. These challenges mainly stem from the following aspects:

1. Disruptive technology:ChatGPT and similar AI-based interactive chatbots may represent a disruptive search technology that provides a different user experience than traditional search engines. The rapid development of companies such as OpenAI in the field of AI, particularly advances in natural language processing and generation models, is changing users' expectations for search technology and information retrieval.

2. Changes in user behavior:Users may be increasingly inclined to use conversation-based interfaces to obtain information, a trend that could change the traditional search engine market.

3. Increased competition:The alliance with Microsoft allows OpenAI to use Microsoft's resources and market share to strengthen its competitive position in the search field. The collaboration between Microsoft and OpenAI shows changes in the competitive landscape among big tech companies, which may affect Google's dominant position in the search engine market.

4. Speed of innovation:In such a rapidly developing field, continuous technological innovation and quick response to market changes have become the key to enterprise success. Google needs to maintain its leadership in innovation to meet these challenges.

5. The dilemma of Google and innovators:

Internal Prioritization and Resource Allocation:Within large companies, particularly those as diverse as Google, resource allocations and project priorities may cause certain innovations to be underappreciated or commercialized.

Cultural and structural limitations:The cultural and structural limitations that large enterprises may have may inhibit their ability to innovate quickly and respond flexibly to market changes.

6. The rise of OpenAI:

Focus and flexibility:As a younger company, OpenAI is able to focus more on specific technical areas, such as AI and large language models, and may be more flexible in decision-making and implementation.

Combining commercialization and innovation:OpenAI successfully combined advanced technological innovation with effective commercialization strategies to quickly launch products such as the GPT series.

Although Google faces fierce competition from companies such as OpenAI and Microsoft in the field of large-scale language models, it still has a strong technical foundation, a wide range of application scenarios, and rich resources, all of which are important assets for meeting challenges and maintaining and even expanding its market leadership position.

This is a time full of challenges and opportunities for Google. Whether it will be disrupted by OpenAI is currently difficult to say. Although OpenAI excels in specific AI fields such as large-scale language models, Google still has deep technical accumulation and market influence in AI, search, cloud computing, and many other fields. The future will depend on how the two companies continue to innovate, adapt to market demands, and effectively transform technology into user value and commercial success.

However, the speed at which AI innovation is iterating is amazing. There is not much time left for Google. What Google can do is not let the innovators' dilemma unfold again.

A Promise January 9, 2024

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