China and Google’s long-term strategy
There’s already been a torrent of commentary on Google’s policy decision with respect to Google.cn – with some of the clearest found in posts by Ethan Zuckerman, Evgeny Morozov, and Jonathan Zittrain, among others. The debate and points of interpretation mostly deal with Google’s potential motives. A purely cynical play or an attempt to live up to corporate values, maybe with some cost/benefit analysis of censorship technologies thrown in?
As a manager responsible for some measure of business strategy, I’m going to wager that Google’s decision is not that different from most business decisions (albeit one informed by better data). Define the problem, assess root causes, outline the risks and rewards of solution alternatives – and when you’re 80% confident in your decision, execute. You have to believe that the internal meetings that preceded this move made reference to Google’s core values at one point, at least. It’s a rare successful company that makes a critical strategy decision without asking is this really who we are? Purely cynical moves of this magnitude require a lot of purely cynical people, having the same discussion in the same conference room – as well as a level of clarity into consequences that is rare for most business decisions.
At the same time, it’s hard to see this as a deliberately planned triumph of values, as others have implied. Google had an immediate business problem: a security incident and theft of IP that challenged the “feasibility of its business operations [in China].” Consider this from the point of view of those operations (and for data here I’m going to rely in part on a new report by the search marketing firm Reform Digital) –
1. Google has a much smaller (~20-25%) market share in China than market leader Baidu (~64-76%) . While the near-term trend is unclear, the numbers haven’t moved much since 2007 – except for Baidu (for an alternative view on the last six months, look here).
2. The market may be splitting between a more educated and affluent segment (Google.cn) and the rest, including continued high volumes of new users (Baidu)…with what are probably better margins to Google.
3. Google’s ability to grow beyond search (remember, the business objective is about “improving access to information,” not just search) could be limited. Baidu runs the third-largest social networking site (after two other Chinese sites), and I’d guess there’s some questions around Google’s potential in the mobile (where Symbian is apparently dominant) market and browser market (where Google may or may not have a share in the second-most popular browser behind IE). This matters, of course, when you’re envisioning displacing the Microsoft model with Chrome’s browser-based OS and web-based applications.
This last point, I think, is where the question of corporate values comes in. You have a smaller but profitable market in which you’ve developed a compromise between the regulators’ objectives (censorship) and your business objective (improving access to information to deliver value to customers). You have an incident (security breach, IP theft) that threatens your ability to provide continued value to your core customers. You look at your longer-term strategy and question whether the compromise you adopted can really work with your plans for growth into adjacent markets – not just customer markets, but markets in different technologies. And here’s the critical point: you can’t disaggregate the question of values from strategy, because if Google decides to, well, acquiesce at this point, it fundamentally changes what Google.cn becomes over the next few years. Changing strategy in any significant way – whether internally or due to external pressure – changes how customers perceive your brand, with implications for both revenue as well as who you become as a company. If you’ve lived through this in a business, it’s easier to understand than articulate.
Thinking more broadly, another reason to consider this in light of Google’s long-term strategy is because Google’s long-term strategy does lay out a future for end-user computing writ large, starting with the Chrome OS as an alternative to the Microsoft and Apple models. Consider a 2015 scenario in which Google has departed China, but Chrome, Android, and Google Apps have reshaped personal and even corporate computing models for the average North American user – a scenario that might be realizable (see for instance, comment from GM’s CIO on the enterprise readiness of Google Apps). Does personal computing in China evolve along a parallel track led by different companies, or start to move in a different direction, with consequences not seen for another five or ten years? A bit of a stretch, perhaps, considering that data is data…but I think the historical evidence does suggest that national approaches to computing can diverge significantly, with the most important consequences not understood until much later.