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Is Google Facing the Beginning of the End?

Sun Set on Sun as It Tried to Be Microsoft

Sun had a similar effect on IBM as Google has had on Microsoft. The company was largely responsible for causing IBM to forget its successful model and break the formula. But Sun got fixated on Microsoft, so much so that it crafted a strategy that commoditized the industry even though Sun couldn't survive in a commoditized market. Sun caused Microsoft a significant amount of damage but, in the process, effectively went out of business.

Sun's was one of the most catastrophic examples of a company forgetting what it was and excessively focusing on another company's model. In reality, Sun should have realized that it wasn't a direct competitor for Microsoft and identified its primary rivals as companies like IBM, HP and, increasingly, Dell. Sun was at war with the outsourced model that Microsoft represented, but rather than following the path of Apple and tightly focusing on complete solutions and owning the solution, Sun tried to become Microsoft and stalled mid-transition.

Yahoo - The Saddest Story of Them All

Perhaps the saddest company in this group is Yahoo. Yahoo owned social networking before we knew to call it social networking. Even sadder was that AOL and Compuserve (which merged) owned it before Yahoo. Yahoo became entranced by Google, in which the company held a massive investment. But instead of leveraging the partnership and recognizing that Yahoo was actually closer to the goal of providing high-value advertising information than Google was (given a tighter customer engagement), company executives went after the shiny object apart from Google and chased search.

It is ironic that Facebook is now the greatest threat to Google, and neither Microsoft nor Yahoo has been much more than a prod that kept Google focused on search. In fact, I'll argue that if both had avoided search, Google would have both become regulated as an obvious monopoly and vulnerable to technology advancements it would have missed. In fact, taking a lesson from Netscape's mistakes, it is likely that if Yahoo and Microsoft had both stayed within their respective areas of competence, Google would have broken on both companies -- Yahoo on ad revenue and Microsoft on platforms and software. Now Yahoo has fully lost its way and is forced to sue Facebook for technology that it no longer actually uses. Now, instead of being the dominant social networking vendor, the company is kind of a pathetic example of what happens when you forget who you are.

Google In Denial, Edging Towards Evil

Google is in the ad business, yet it seems to be in some kind of extended denial. All of its focus should be on finding ways to make ads on the Internet more valuable and being the primary source for managing ad revenue for everyone. Its winning formula was monetizing the Web, which is actually a super set of ads, but it is clear, institutionally, that Google is in denial about the real source of its success.

Google should have worked to line up Microsoft and Facebook as partners, not competitors. Judging by the blog by the former Google employee that started us out, Google seems to be shifting from trying to be Microsoft to trying to be Facebook, and failing just as badly. What is particularly sad is that Google appeared to come to market with the idea of being an anti-Microsoft, with the implied perception that the software giant was evil. Today, if you search on both companies, you'll likely find more references over the last five years to Google doing evil than Microsoft. It suggests that in the best universities (and Google hires from the best) they simply don't teach much history and appear instead to focus on badmouthing whoever is in power, which indicates that the next generation is likely to come out of school wanting to kill Google, much like Google's generation, came out wanting to kill Microsoft, and Microsoft's generation entered the job market wanting to displace IBM.

Can Facebook Avoid Mistakes?

Given this trend, Facebook would seem in line as the next company to make the mistake of forgetting who it is and focusing excessively on another company. Pinterest has begun to emerge as a challenger to the crown, and while Pinterest is in Facebook's space, it would be foolish to try to be a better Pinterest if it meant abandoning anything that Facebook is acknowledged as doing well. For now, there is no indication that Facebook is making this mistake, but given the history of other firms, it is easy to imagine that it eventually will, whether it goes after Pinterest or some other company.

The 3 Easy Steps to Kill a Company

There appears to be a well-defined path to kill a successful company. It starts from inside with either forgetting or not understanding the formula that created the success in the first place. It follows with an excessive focus on a competitor, which causes the company to compete with that new competitor on its home turf. And it concludes with a series of poorly executed and increasingly panicked efforts to become the company that so frightens them.

Conversely, there are three easy steps to assure success. Know your formula for success and protect it. Focus on the goal -- the customer -- not the competitor. And look where the market is going and get there first, which typically means you need to drive the market to that goal because psychic CEOs don't seem to exist. IBM and Apple represent both what can happen when executives lose their way and, more recently, they are the benchmark for how to compete in a changing market. It would be wise for current executives, particularly those at Google, to step back and decide if they want to be the next IBM or Apple, or the next Netscape or Yahoo. I know which side of this I'd rather be, yet I continue to be surprised at the number of executives who are executing strategies that put them on the unsuccessful path.

What is the old saying? Those who fail to learn from history are doomed to repeat it? It would seem that, unless something changes, this could become Google's epitaph. At the core of this pattern are the concepts of confirmation bias, the notion that we favor reasoning that confirms our beliefs, and argumentative theory, a framework for explaining why reasoning so often results in irrational decisions. Once you understand these, you can explain why executives make these same mistakes, over and over again.

Rob is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance, and Security. Currently, Rob writes on emerging technology, security, and Linux for a wide variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.

Read more about web 2.0 in CIO's Web 2.0 Drilldown.

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