Google and Alphabet: Invention–and Commerical Success–is not Enough

Google-Alphabet-business-628x330It looks like most of the publications and pundits of the world had something to say about the surprise-of-the-decade: Google’s transformation into Alphabet (Techmeme provides a sample here). For me, the numerous questions they posed only triggered further questions:  Is the new holding company going to be like Berkshire Hathaway, or GE, or AT&T or an early retirement playground for Page and Brin, playing God instead of golf? Is Larry Page saying he does not want to be Bill Gates or does he want to be Thomas Edison Plus? Is it just a simple “re-org,” so typical of large and lumbering companies, masquerading as an “unconventional move”?

In his post (not in a conventional press release) announcing the surprising metamorphosis, Larry Page made sure to remind us that “As Sergey and I wrote in the original founders letter 11 years ago, ‘Google is not a conventional company. We do not intend to become one.’”

Google, now Alphabet, is indeed an unconventional company in many respects, not the least of which is that the aforementioned founders hold 54% of the stock’s voting rights, giving them full control of the company. But at its core, I would argue, it’s a conventional company in a conventional business.

“Invention is not enough,” Page has said (see James Altucher’s post). “You have to combine both things: invention and innovation focus, plus the company that can commercialize things and get them to people.”

For Page and Brin, the key invention was a better search engine. But they brilliantly coupled it, with the help of the bright people they hired, with two other inventions that made that original invention a commercial success: Developing their own computing infrastructure capable of handling Brontobyte Data and a completely new approach to selling advertising.

By relying on advertising for its livelihood (it still accounts for over 90% of Google’s revenues), Google has become a conventional media company. It has enjoyed the growing stream of advertising dollars shifting from print and other channels to online. But it will be the victim of its own success: As online advertising becomes more dominant, growth will slow and Google’s fortunes will rise and fall with the advertising market which typically follows the rise and fall of economy (online advertising in the U.S., growing at 13%, already accounts for 28% of the overall advertising market which will grow only 3.2% this year).

In addition, relying on a segment of the advertising market which is completely dependent on ever-changing technology is a challenge in and of itself, as we have already seen in the ups and downs of display advertising and the shift from desktop to mobile. If some bright young entrepreneur (or a PhD student) finds tomorrow a way to transmit advertising to our brains without the help of devices and the Internet and we readily accept it in exchange for some new, can’t-live-without service, there will be no Google as we know it. Ditto if that proverbial kid in the garage will invent the real “disruption,” a new way to promote companies and their offerings, without what we have called “advertising” for centuries.

That may happen tomorrow or may not happen for a long time, so Page and Brin will continue to have the funds to fuel their ambitions. It’s just that now they will not have to deal at all with the day-to-day management of what has become for them a boring cash cow.

Brin has already done that for a number of years, focusing entirely on “moonshots.” But Page apparently wanted to prove to himself in 2011 (not to the world—he probably doesn’t care much about other people’s opinions) that he can also be a CEO of a large company and could make it re-invent itself. In this (the re-invention part) he completely failed. It may not be a coincidence that we learned of the final demise of Google’s grand social experiment, Page’s attempt to out-Facebook Facebook, just before the surprise Alphabet announcement. (It may also not be a coincidence that the announcement came on the 20th anniversary of When Larry Met Sergey, the first milestone in the official Google history timeline).

The failures are insignificant light of the history Page and Brin have made by giving millions of people around the world, in exchange for their data, very useful tools, at no cost. But brilliant inventions turned into commercial success, however, are not enough for the likes of Page and Brin and they never liked where the money supporting their free services came from, channeling (probably preceding) Jeff Hammerbacher’s sentiment: “The best minds of my generation are thinking about how to make people click ads.” Their version of a mid-life crisis is to remove themselves from their very successful one-trick advertising pony and immerse themselves in attempting to make very big history or Brontobyte history.

Page and Brin are sometimes mentioned—and explained—together with Amazon’s Jeff Bezos as the result of Montessori education (see here and here). But I think there is something much more important at the root of Page, Brin, and Bezos’s ambitions and successful enterprises. In the words of Harry Louis Sullivan, describing Chicago in 1875:

“Big” was the word. “Biggest” was preferred, and “the biggest in the world” was the braggart phrase on every tongue. Chicago had had the biggest conflagration “in the world.” It was the biggest grain and lumber market “in the world.” It slaughtered more hogs than any other city “in the world.” It was the greatest railroad center, the greatest this, and the greatest that… what they said was true; and had they said, in the din, we are the crudest, rawest, most savagely ambitious dreamers and would-be doers in the world, that also might be true… These men had vision. What they saw was real, they saw it as destiny.

Continuing an American tradition (how “unconventional”), Page, Brin, and Bezos saw “big” as their destiny. Page and Brin named their company after a very big number. Bezos chose the largest river in the world to stand for “the everything store.” But Bezos has taken a different route to world domination, one that is not depended on advertising and using us as the product, but on changing the way we buy and sell goods and services, inventing new ways to consume while driving down the cost of consumption. His one-trick pony, selling books online, has metamorphosed into selling everything, including computer services, serving as a platform for other sellers, creating content, designing devices, and more.

Page has said “especially in technology, we need revolutionary change, not incremental change, “and “I think as technologists we should have some safe places where we can try out new things and figure out the effect on society.” Bezos believes in incremental change and doesn’t talk much about Amazon’s impact on society. In about ten years, we should have a better idea of which approach—Alphabet’s or Amazon’s—has left a bigger and more positive impact on the world.

An earlier version of this psot was published on Forbes.com

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The Landscape of HR Technology: Startups and VCs (Infogrpahic)

CBInsights_Periodic-Table-of-HR-Tech-1

CBinsights:

The top section of the table contains highlighted HR tech startups, while the bottom two rows list notable recent exits and top investors.

We broke down our list of HR tech startups into the following subcategories:

  • Recruiting marketplaces: Companies including HackerRank and Crew Labs create online marketplaces and information-sharing sites for job searchers and recruiters. These services help connect employers and candidates with the hopes of improving hiring outcomes.
  • Culture and productivity: Companies like Namely and HotSchedules make HR software that focuses on helping employers observe, evaluate, and improve company culture and individual productivity.
  • Recruiting tools: Companies such as Jobvite, Glassdoor, and Greenhouse Software create tools that help employers search for, attract, and hire qualified candidates.
  • HR operations management: Companies like Zenefits, BeneStream and Beisen create software that allows companies to manage their operations including payroll, compliance, and insurance on efficient platforms.
  • Recruiting contractors and temporary workers: Companies including PeopleMatter and Snagajob specialize in helping employers hire part-time or wage workers. These companies often target the restaurant, retail, and hospitality industries.
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How Fragile is the Internet? (Infographic)

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The Internet of Things (IoT): 9 Predictions and Facts

internet-of-thingsA number of new reports on the Internet of Things (IoT) provide a fresh look at the state of this hot market and forecasts for its future impact on the world’s economy.

IDC discussed The Internet of Things Mid-Year Review at a webinar on July 23, including findings from a survey of 3,566 companies in North America. IDC defines IoT as “a network of uniquely identifiable ‘things’ that communicate without human interaction using IP connectivity.” Tata Consulting Services (TCS) issued a report titled The Internet of Things: The Complete Reimaginative Force, based on a survey of 3,764 executives worldwide. TCS defines the IoT as “smart, connected products.” The McKinsey Global Institute (MGI) published The Internet of Things: Mapping the value beyond the hype. MGI defines IoT as “sensors and actuators connected by networks to computing systems” and excludes “systems in which all of the sensors’ primary purpose is to receive intentional human input, such as smartphone apps.” Finally, Business Insider (BI) issued The Smart City report on IoT initiatives in cities worldwide.

The economic impact of the IoT will re-shape the world’s economy

The IoT has a total potential economic impact of $3.9 trillion to $11.1 trillion a year by 2025. At the top end, that level of value—including the consumer surplus—would be equivalent to about 11 percent of the world economy (MGI). The Internet of Things (IoT) market will expand from $780 billion this year to $1.68 trillion in 2020, growing at a CAGR of 16.9%.  Sensors/modules and connectivity account for more than 50% of spending on IoT, followed by IT services at more than 25% and software at 15%. Traditional IT hardware accounts for less than 5% of total spending on IoT (IDC)

Investments in IoT technologies by cities worldwide will increase by $97 billion from 2015 to 2019. The cities’ IoT deployments will create $421 billion in economic value worldwide in 2019. That economic value will be derived from revenues from IoT device installations and sales and savings from efficiency gains in city services (BI).

There will be almost 30 billion of IoT devices in 2020

In 2015, 4,800 connected end points are added every minute. This number will grow to 7,900 by 2020. The installed base of the Internet of Things devices will grow from 10.3 billion devices in 2014 to 29.5 billion in 2020. 19 billion of these devices will be installed in North America in 2020 (IDC). The number of IoT devices installed in cities will increase by more than 5 billion in the next four years (BI).

The IoT will be primarily an enterprise market

In 2018, the IoT installed base will be split 70% in the enterprise and 30% in the consumer market, but enterprises will account for 90% of the spending (IDC). Business-to-business applications will probably capture more value—nearly 70 percent of it—than consumer uses, although consumer applications, such as fitness monitors and self-driving cars, attract the most attention and can create significant value, too (MGI).

Over the next few years, North America will still be the focal point for the IoT

The IoT has a large potential in developing economies, but it will have a higher overall value impact in advanced economies because of the higher value per use. However, developing economies could generate nearly 40 percent of the IoT’s value, and nearly half in some settings (MGI). 2020 will be a tipping point year for Asia, when it will become the geographical region with the largest installed base of IoT devices (IDC). North American companies will spend 0.45% of revenue this year on IoT initiatives, while European companies will spend 0.40%. Asia-Pacific companies will invest 0.34% of revenue in the IoT, and Latin American firms will spend 0.23% of revenue. North American and European companies are more frequently selling smart, connected products than are Asia-Pacific and Latin American companies (TCS).

The telecommunication industry leads other sectors in IoT investments

The Telecommunications, banking, utilities, and securities/investment services industries are the leading sectors investing in IoT in 2015 (IDC). In gaining benefits from the IoT, industrial manufacturers reported the largest average revenue increase from their IoT initiatives last year (29%), and they forecast they’d have the largest revenue increase from the IoT by 2018 (27% over 2015). Industrial manufacturers were also in the lead for using sensors and other digital technologies to monitor the products they sold to customers (with 40% of the companies doing so) (TCS).

IoT adoption is gaining momentum worldwide

36% of companies in North America have IoT initiatives in 2015 (IDC). 79% of companies worldwide already use IoT technologies, investing 0.4% of revenue on average. They expect their IoT budgets to rise by 20% by 2018 to $103 million (TCS).

Costs and customers are the key drivers of IoT investments

Lower operational costs and better customer service and support lead the list of significant drivers of current IoT initiatives. In large companies, business process efficiency/operations optimization and customer acquisition and/or retention also top the list (IDC). Companies with IoT programs in place reported an average revenue increase of 16% in 2014, in the areas of business where IoT initiatives were deployed. In addition, about 9% of firms had an average revenue increase of more than 60%.The biggest product and process improvements reported by companies were more customized offerings and tailored marketing campaigns, faster product improvements, and more effective customer service (TCS). Cities are adopting IoT technologies because they deliver a broad range of benefits for cities including reducing traffic congestion and air pollution, improving public safety, and providing new ways for governments to interact with their citizens (BI).

Security, culture change, determining priorities, and optimizing ROI are key IoT concerns

Security issues top the list of current barriers to IoT adoption (especially with larger companies), followed by funding the initial investment at the scale needed, determining the highest priority use cases, and changing business processes (IDC). identifying and pursuing new business and/or revenue opportunities that the IoT makes possible, and determining what data to collect, are key issues. Also important are getting managers and workers to change the way they think about customers, products, and processes, and having top executives who believe the IoT will have a profound impact and are willing to invest in it (TCS). Currently, most IoT data are not used. For example, on an oil rig that has 30,000 sensors, only 1 percent of the data are examined. That’s because this information is used mostly to detect and control anomalies—not for optimization and prediction, which provide the greatest value (MGI).

Microsoft leads the IoT market

The top 5 vendors mentioned as the IoT provider companies “plan to work with within the next 2 years” are: Microsoft, AT&T, Verizon, Cisco, and IBM. For large companies (more than 1000 employees), Microsoft and Cisco lead the list (IDC).

Originally published on Forbes.com

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The Life and Times of Airbnb (Infographic)

AirbNb

HT: Do Not Follow Your Passion

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4 Myths of Big Data Analytics and Data Science: The Facebook Experience (Video)

Ken Rudin, Facebook, at HP Big Data 2015

Four myths of Big Data Analytics:

  1. If you want to build a big data system you have to use Hadoop–way too narrow of a perspective
  2. Big data always provides better answers–not always true
  3. Data Science is a science–if you only focus on the science, you are going to fail
  4. Actionable insights is the goal for big data analytics or any analytics–that’s just plain wrong.
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What Policy Change Would Accelerate the Benefits of the Internet of Things? (IoT)

McKinsey Global Institute:

Joi Ito: It gets back to open standards, interoperability, and a focus on non-IP-encumbered technology.

Jon Bruner: Everyone is looking for clarification on the rules on drones.

Renee DiResta: I don’t know that I feel that policy is really impeding anything right now. Maybe I’m wrong about that. I read through the FCC1 report and didn’t get the sense that there was anything [holding back the IoT] on a fundamental policy level.

Mark Hatch: Maybe it’s bandwidth-related: How do we handle the frequency and the radio waves and all the telecommunication requirements? This is a Qualcomm Technologies question maybe, along with the FCC. I may be completely wrong on that, but it’s one of the things I am curious about. How do you handle all of the communication data flow that’s going on and keep things from running into one another?

Mike Olson: The globe doesn’t have a data-privacy policy. Europe does broadly, but not in detail. In the United States, we have precisely two data-privacy laws: HIPAA,2 which protects your healthcare data, and the Fair Credit Reporting Act. Those are the only things that happen nationwide in terms of data privacy. Everything else is left to the states, and the states are pretty clueless about it. If we could elucidate policies and create laws that were uniform, it would be a lot easier for us to build and deploy these systems.

Dan Kaufman: If I had to guess, it’s the ability of people to protect their information. The Internet of Things is based on this fundamental ability to share information, and if we can’t do that in a safe and secure way, we’re going to need policies and laws so that everybody understands what’s within reason.

Cory Doctorow: I would reform the Digital Millennium Copyright Act, the 1998 statute whose language prohibits the circumvention of digital locks. I think with one step, we could make the future a better place. Ironically, the US Trade Representative has actually gone to all of America’s trading partners and gotten them to pass their own version of the Digital Millennium Copyright Act. So, every country in the world is liable to this problem. Now, the great news is that if the US stops enforcing it here, then all of those other countries will very quickly follow suit, because there’s money to be made in circumvention. The only reason to put a digital lock on is to extract maximum profits from your platform.

Tim O’Reilly: To me, policy makers need to not be trying to prevent the future from happening. They should be just policing bad actors. A good example is in healthcare. We are already producing vast reams of health data. HIPAA, the health-information privacy act, is a real obstacle. If you have a serious illness, you want to share your data with anybody who can help. You want to put your data together with other people’s data, because this collective amassing of data is one of the great keys to the future. And yet here we have these overreaching privacy laws that are going to make it difficult. So, punish bad actors—don’t prevent good actors.

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