Tag: google

Google and Microsoft show how online business is changing

Google and Microsoft’s quarterly reports show how all businesses are vulnerable in times of change.

Both Microsoft and Google yesterday reported their second quarter earnings for 2013 and both missed the targets expected analysts. Does this really mean anything?

Microsoft’s earnings were particularly notable as they included a $900 million dollar write off on Surface RT inventories, this almost certainly means a key part of the company’s tablet strategy has failed.

What’s striking in Microsoft’s earnings report is the terrible performance of the Windows Division which saw sales increase 10% year-on-year to 4.4 billion dollars, but earnings collapse by over 50%. Excluding the Surface RT write off, the division would still have seen a ten percent fall.

The company’s statement emphasised how the division is struggling with increasing costs.

Windows Division operating income decreased $1.3 billion, primarily due to higher cost of revenue and sales and marketing expenses, offset in part by revenue growth. Cost of revenue increased $1.2 billion primarily reflecting product costs associated with Surface and Windows 8, including the charge for Surface RT inventory adjustments of approximately $900 million. Sales and marketing expenses increased $344 million, reflecting advertising costs associated with Windows 8 and Surface.

At Google, the company’s 2nd Quarter report show trend is still upwards but the core business of online advertising is showing some cracks as the total number of paid clicks grows, but the value of each falls. At the same time traffic aquisition costs are rising at the same rate as revenues.

This could indicate that advertisers’ appetite for online links is fading. For smaller businesses, the cost of adwords campaigns has been escalating to the point where the old days of newspaper classifieds and Yellow Pages listings start to look cheap.

Couple the cost of advertising with the inevitable ‘ad blindness’ that web surfers have developed and a worrying trend for Google starts to appear. Overall Google’s net profit margin was 26%, down from 31% a year earlier.

While both companies remain insanely profitable – Google earned $14 billion this quarter and Microsoft $6 billion – both businesses are showing stresses as their markets evolve. It proves no business can afford to be complacent in these times.

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Politics, business and leadership

Google’s hiring processes raise some important points about leadership.

I’ve covered the New York Times’ interview with Google’s senior vice president of people operations, Laszlo Bock previously in describing what the business has learned from its scientific method of hiring people.

One striking aspect of that story that deserves further discussion is Bock’s thoughts on leadership;

We found that, for leaders, it’s important that people know you are consistent and fair in how you think about making decisions and that there’s an element of predictability. If a leader is consistent, people on their teams experience tremendous freedom, because then they know that within certain parameters, they can do whatever they want. If your manager is all over the place, you’re never going to know what you can do, and you’re going to experience it as very restrictive.

This is something that applies in all walks of life — whether you’re coaching a kids’ football team, running a corporation or leading a nation.

Sadly in many of these fields we’re lacking the consistent leadership Laszlo Bock describes. That could turn out to be one of the greatest challenges for the 21st Century.

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Google’s simple recipe for management accountability

Does keeping things simple help Google’s managers?

One of the big challenges for larger organisations is giving managers the feedback they need to do their jobs properly. The New York Times interview with senior vice president of people operations at Google, Laszlo Bock, covers some interesting aspects of how accountability in the workplace helps executives.

Google surveys its staff twice a year on how they think their managers are performing in a Upward Feedback Survey that pulls together between twelve and eighteen different factors which the company then uses to measure how their leaders are performing.

That bottom-up, data driven approach has proved to be successful as Bock told the New York Times.

We’ve actually made it harder to be a bad manager. If you go back to somebody and say, “Look, you’re an eighth-percentile people manager at Google. This is what people say.” They might say, “Well, you know, I’m actually better than that.” And then I’ll say, “That’s how you feel. But these are the facts that people are reporting about how they experience you.”

You don’t actually have to do that much more. Because for most people, just knowing that information causes them to change their conduct. One of the applications of Big Data is giving people the facts, and getting them to understand that their own decision-making is not perfect. And that in itself causes them to change their behavior.

Accountability matters – who’d have thought?

The other thing that Bock and Google’s HR team have learned from their measuring management performance is just how effective consistency can be.

We found that, for leaders, it’s important that people know you are consistent and fair in how you think about making decisions and that there’s an element of predictability. If a leader is consistent, people on their teams experience tremendous freedom, because then they know that within certain parameters, they can do whatever they want. If your manager is all over the place, you’re never going to know what you can do, and you’re going to experience it as very restrictive.

Sometimes we make things too complex – and Google’s experience with managers shows that simple accountability and consistency are far more effective than complicated KPIs.

Image by ulrik at sxc.hu

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Google and the workplace

Google’s evolution in hiring practices and HR policies describes the risks of relying on gut feelings and the importance of workplace accountability.

Over the years Google has attracted attention for its employment practices, particularly for its quirky interview questions which challenged many a genius.

It turns out those brainteasers have proved to be less than effective, as has the interminable interview process that saw job candidates endure dozens of meetings before being offered a role at the company.

A recent New York Times interview with Laszlo Bock, senior vice president of people operations at Google, discusses some of the company’s employment experiences along with some of the ways the organisation manages staff.

What’s notable is Bock’s findings on Google’s gruelling interview process with its brain teaser questions;

We looked at tens of thousands of interviews, and everyone who had done the interviews and what they scored the candidate, and how that person ultimately performed in their job. We found zero relationship.

The New York Times interview is particularly interesting as it reveals much of Google’s legendary employment criteria – particularly that of hiring only graduates with high university marks – turned out to be effectively useless.

Most telling though is what Bock found about managers and leadership;

We’ve actually made it harder to be a bad manager. If you go back to somebody and say, “Look, you’re an eighth-percentile people manager at Google. This is what people say.” They might say, “Well, you know, I’m actually better than that.” And then I’ll say, “That’s how you feel. But these are the facts that people are reporting about how they experience you.”

You don’t actually have to do that much more. Because for most people, just knowing that information causes them to change their conduct.

Who would have thought that accountability would make people behave better and more effectively?

Despite Google’s learning on hiring and management, things still go wrong. Business Insider’s Nicholas Carson has a wonderful story on the difficulties at restaurant review site Zagats which was taken over by the search engine giant and absorbed into their maps and geolocation divison.

The problems at Zagats though owe more to a cultural mismatch, as Carson writes;

It’s about the collision between the wealthy dream world of the technology industry and the scratch-and-claw meager existence of freelance writers.

One of the notable things about the current dot com boom is the contempt technologists and entrepreneurs have for content creators.
In the Silicon Valley view of the world founders and coders deserve to be generously paid but artists, musicians and writers should be thankful for the exposure they get and the odd dime thrown their way.
Google’s struggles with Zagats also exposes another problem with the tech industry’s hiring practices – that of ‘permatemps’ who never get on the payroll and have few benefits and no security. For years this was a problem at Microsoft and it remains a common practice today.
The story of Google’s evolution in hiring practices and HR policies is something all managers should read as it describes the risks of relying on gut feelings and the importance of workplace accountability.

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IT industry feuds are buried as business models collapse

The collapsing personal computing and server markets are forcing once powerful competitors to bury animosities and feuds as industry giants face a troubled future.

The collapsing personal computing and server markets are forcing once powerful competitors to bury animosities and feuds as industry giants face a troubled future.

Samsung’s exit from selling desktop computers illustrates how quickly the PC industry is collapsing which underscores Michael Dell’s urgency in his attempts to take Dell Computer private along with the spectacle of once hostile competitors like Oracle and Microsoft embracing each other.

Earlier this week Microsoft Australia hosted a briefing at their North Ryde office to show what the company is doing with their Azure cloud computing service, which is part of the company’s quest to find revenues in the post-PC world.

Microsoft are quickly adapting to the new marketplace. This week in Madrid, the company hosted their European TechEd conference where they showed off their Cloud First design principles of software built around online services rather than servers and desktop PCs.

One important part of Microsoft’s cloud strategy is establishing pairs of data centres to provide continuity to the various zones, including China, across the globe. Each individual centre is at least 400 miles apart from its twin to avoid interruptions from natural disasters.

Interestingly, this is the opposite of Google’s data centre strategy and quite different from how Amazon offers its data services where customers can choose the zones and level of redundancy they want.

There’s no real reason to think any of these three different philosophies are flawed, it’s a difference in implementation and each approach brings its own advantages and downsides which customers are going to have choose between.

While Microsoft is showing off its new direction, HP CEO Meg Whitman was in Beijing proclaiming that “HP is here to stay” and laying out the company’s path to survival in the post-PC world.

Like Microsoft, HP is putting bets on cloud computing and China, Whitman emphasized the work she’s been doing engaging with Chinese companies while promising “a new style of IT” and that “HP is in China for China.”

A key difference to Microsoft and Dell is that HP is doubling down on its desktop and server businesses with a focus on selling into the Chinese market. This is a high risk move given China’s investment into high speed networks and the global nature of the cloud computing movement.

One of the boasts of Whitman and her management team is that HP have added a thousand Chinese channel partners over the last twelve months, this is an effort to replicate Microsoft’s market strength in mature markets which has given the software giant breathing space against strong, cashed up competitors like Google and Apple.

Whether this works for HP in China remains to be seen, in the meantime Microsoft are trying to move their huge channel partner community onto the cloud with various offerings that give integrators who’ve traditionally made money selling servers and desktops some opportunity to sell online services.

A selling point for Microsoft is yesterday’s announcement they will offer Oracle databases on their Azure platform. The ending of animosities between Microsoft and Oracle is an illustration of just how the collapse in the PC and server markets is forcing market giants to forget old feuds and build new alliances.

With the server and personal computing markets being turned upside down, we’re going to see more unthinkable alliances and pivoting corporations as once untouchable industry giants realise the threats facing them.

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NBNCo’s storytelling failure

Why Australia’s National Broadband Network gets bad press

One of the baffling things in reporting the Australian tech and business scene is how the National Broadband Network project manages to get such bad press.

Part of the answer is in this story about Google Fiber sparking a startup scene in Kansas City.

Marguerite Reardon’s story for CNet is terrific – it covers the tech and looks at the human angles with some great anecdotes about some of the individuals using Google Fiber to build Kansas City’s startup community.

This is the story that should have been written in Australia about the National Broadband Network.

I’ve tried.

Failing to tell the story

Earlier this year I travelled to Tasmania to speak to the businesses using the NBN and came back empty handed.

In Melbourne, I finally made it to the Hungry Birds Cafe – vaunted by the government as the first cafe connected to the NBN – to find they do a delicious bacon roll and offer fast WiFi to customers but the owners don’t have a website and do nothing on the net that they couldn’t do with a 56k modem.

I’ve found the same thing when I’ve tried to find businesses connected to the NBN – nil, nothing, nada, nyet. The closest story you’ll find to Cnet’s article are a handful of lame-arsed stories like this Seven Sunrise segment which talks about families sending videos to each other, something which strengthens the critic’s arguments that high speed broadband is just a toy.

Businesses need not apply

This failure to articulate the real business benefits of high speed broadband after four years of rolling out the project is a symptom of a project that has gone off the rails.

It’s not surprising that businesses aren’t connecting to the new network as NBNCo and its resellers have continued the grand Australian tradition of ripping off small businesses. Fellow tech blogger Renai LeMay has quite rightly lambasted the overpriced business fibre broadband plans.

Even when small business want to connect, they find it’s difficult to do. The Public House blog describes how a country pub was told the cost of a business NBN account be so high, the sales consultant would be embarrassed to reveal the price.

“The cost for exactly the same connection (and exactly the same useage) is so much higher for a business that you wouldn’t be interested.”

The whole point of the National Broadband Network is to modernise Australia’s telecommunications infrastructure and give regional areas the same opportunities as well connected inner city suburbs.

Failing objectives

If businesses can’t connect, or find it too expensive, then the project is failing those objectives. So it’s no surprise that NBNCo’s communications team can’t tell a story like Kansas City’s because there are no stories to tell.

Apologists for the poor performance of NBNCo say it’s a huge project and we’re only in the early stages. In fact we’re now four years into a ten year project and we still aren’t hearing stories like those from Kansas City.

Telling the story should be the easy part for those charged with building the National Broadband Network, that they fail in this should mean it’s no surprise they are struggling with the really hard work of building the thing.

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Little shots at the moon

Everyday there’s thousands of people risking all on their own little moonshots.

Today I wrote a story for Business Spectator on the Google Loon project, a pilot program to see if high altitude balloons can provide affordable internet access for the developing world.

What really fascinates me about Loon and the projects in the Google X program is the concept of the ‘moonshot’. Google explain it on their solve for [x] website.

Moonshots live in the gray area between audacious projects and pure science fiction; instead of mere 10% gains, they aim for 10x improvements. The combination of a huge problem, a radical solution, and the breakthrough technology that might just make that solution possible is the essence of a Moonshot.

Great Moonshot discussions require an innovative mindset–including a healthy disregard for the impossible–while still maintaining a level of practicality.

Missing in that definition is the concept of risk – it’s easy to propose a radical, audacious solution to a problem when it’s not your money or career on the line.

On the other hand, most organisations that have the resources to experiment with breakthrough technologies stifle any thought of true innovation or radical solutions.

The advantage Google has is that parts of the organisation encourage those moonshots, although there are divisions of Google which are just as bureaucratic and staid as a chartered accountant’s or quantity surveyor’s office.

Interestingly Apple were the reverse with only one guy allowed to do moonshots and everyone below him followed him either to the moon or hell, as this wonderful story tells.

Which brings me to the little folk – the startups, small businesses and backyard inventors who don’t have the resources of Google, Apple or the US space program.

For that matter there’s also the writers, painters, musicians and other artists who are risking everything for their vision.

Everyday these people are risking everything for their little ideas as their homes, livelihoods and sometimes their relationships are on the line for their one big idea or audacious vision.

These are the real risk takers and every day they are taking little shots at the moon.

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