Technology giants, the mobile obstacle and the possible alternatives
Oct 7, 2012
Technology giants struggle to adapt to the mobile platform, while the solution may lie in forming alliances rather than competing, as the speed of change threatens their dominance.
When a company has revenues in the billions of dollars, like Google (GOOG) and Facebook (NASDAQ:FB), and profits greater than 50% of their turnover, it is expected that there are no limits to what they can do. After all, money buys talent, and if this talent has the necessary resources, the sky is the limit. Even with this scenario, the two tech giants face, so far, an obstacle that might decide the future of the two companies in the medium term - the mobile platform, or mobile. If there is so much money at hand, why do the two companies still struggle more than necessary to achieve modest results given the investment?
Before we continue, a distinction needs to be made. Even if it does not have anywhere near the mobile role that it has in the rest of its operations, Google is in a much more comfortable position in the arena. Inferior to Apple's operating system or not, Android is a kind of Windows for Mobile, enabling all iPhone competitors and becoming the most popular mobile system in the world. In addition, tools like Google Maps and Mobile App are also benchmarks. This does not ignore launches that did not take off due to lack of harmony with the 'core' of the subject, such as Google Wallet, Reader, Navigation, Voice, among others. As happened with Google+, the company errs more than usual when it comes to mobile. The "why" comes next.
Facebook has a much worse situation than Google when it comes to mobile. Its apps are inefficient, deliver a much inferior experience to the desktop, and - more worrying than all this for the company - do not display the ads that are the company's bread and butter. Facebook's entire mobile strategy is poor, when the company promised exactly the opposite before launching its shares on the Stock Exchange (something that forced the change of the text of the initial public offering). The goals promised by Facebook to its shareholders are difficult to achieve with an exceptional strategy and performance for mobile and virtually impossible without monetizing traffic on mobiles, where it is estimated that, just this year, there is a potential revenue of around US$20 billion.
What explains why smart and intelligent executives fail when it comes to advancing into a new market? This has happened many times in history, with titans of their markets, such as PanAm, General Motors, Sears and more recently, Microsoft, varying between mediocre and deadly performance for their businesses. The answer lies at the heart of each company's culture and how its DNA is (or is not) programmed for change. If these changes are difficult, imagine changes under the pressure of a scenario that changes at supersonic speed.
This Forbes article is a great example of how Microsoft tied the shoelaces of each of its feet when it was still at the top of the tech industry. In the company, a distorted system of employee performance evaluation took the focus away from employees seeking innovation and forced them to participate in the political war within the company. The creative ones who were frustrated with the system left the company and stayed and evolved those who were cut out to make political alliances, even if they were mediocre at the task of creating innovative products. The problem was created by the company itself, meeting the demand of its internal culture. That is: Microsoft's mindset prevented its own creativity, and the condition of "largest company in the world" put a blindfold on for possible external solutions. Potential partners turned into competitors, and to this day, MS lives off the problems of its gigantism.
The example does not stop there. Google today tries to fight on practically all fronts with market leaders: tablets and mobile, with Apple, social networks with Twitter and Facebook, advertising, with a series of rivals (although it is the absolute leader) and even in "smaller" niches, such as gaming, productivity, and so on. Despite the dominance in many of these sectors depending on this tentacular strategy, it is undeniable that the company loses its focus - although it continues excellent in its 'core business', the search. The question is how long its dominance in search will last, and whether the delirium of multicompetition will not create a new Microsoft.
Facebook adopts a different approach. Although it has launched different products within its platform (such as Facebook Places, for example), it seems to understand that before venturing elsewhere, it needs to improve the basics - which used to be its web platform, but is increasingly the connection for mobile telephony. Not surprisingly, it bought a start-up that showed great competence in developing a mobile app, Instagram, and with the purchase of Face.com, a facial recognition software, it will have great versatility in ingesting content via mobile. Zuckerberg has not yet fallen into the temptation to create tentacles like Google, but in compensation, it has a revenue of just over 10% that of Brin and Page's team.
In a certain way, it is understandable that companies that have dominated the market for decades are so inflexible in relation to their own culture, but for relatively new companies like Google and Facebook, discovering this inability to think of solutions outside their lines of action. But if the speed of changes makes it difficult to open new fronts of competition, isn't it time to question whether this is really the best way out?
The migration of traffic to portable devices is happening faster than imagined and forces companies to accelerate their processes. If they don't, they end up being overtaken by start-ups that may even have less money, but have focus and determination for a particular subject and do not carry the dogmas of older companies. The process of natural evolution is accelerating at an ever faster pace and the giants need to learn to think like newcomers also. Alliances with "rivals" seem to make more sense than opening new divisions subject to the fundamental interest of the company. With the current state of affairs and the speed at which everything changes, the watchword is much more "association" than "competition". Otherwise, instead of a big winner, we will have many big losers.
There is an issue related to companies' presence on the Stock Exchanges. Wall Street only demands one result which is a bigger profit and there is rarely room for reflections typical of a paradigm shift. However, even the predatory pressure of financial services is beginning to show cracks (the LIBOR scandal with JP Morgan and Barclays in the spotlight, in addition to the 2008 crisis, shows this). As the tech industry is expected to be the basis of the future economy of the planet, it may be time to rethink. And the chance to rethink is passing now, but it may not come back.