Never have I seen a more definitive example of Clayton Christianson’s ‘innovators Dilemma’ than what is being played out right now, in front of our eyes.
In summary, the dilemma is that dominating incumbent businesses are loathe to change the model that made them dominating incumbents. This results in them failing to innovate in ways that have potential to erode the cash flow from former successes.
Christianson had many examples in his book originally published in 1997, but none better than the existential crisis being faced by Google from ChatGPT, launched in November 2022.
Googles control of the search market is almost absolute, with a share of well over 90%. When you add in the rebranded search engines that simply use Google under another name, like Apples Safari, and discount the mistakes that lead to Microsoft’s Bing being clicked, it is probably 97% or above.
Ask Google a question, and the first 5 or 6 responses are ads. They represent potential answers to your question, but just potential from the indexed websites. The revenue from those ads that also follow you around the web is 80% of Googles total revenue, most of the balance coming from ad revenue on YouTube. After scrolling through the ads, you will have to skim and review a number of possible sites that may deliver you the answer you are seeking.
Ask ChatGPT the same question, and you get back one answer. No ads, yet. You may have to become increasingly explicit in the question you ask, but the response time is close to real time, and you get the best answer available. It may not be the perfect answer, although we can expect it to improve, but it will save heaps of time.
Google claim to have a similar system sitting on the shelf. In addition, they made a $400 million investment in an AI start-up called Anthropic in late November, just after Chat was launched. I’m sure they have the capability to deliver an answer to Microsoft, as they have been playing with AI for a long time. Perhaps they did not launch because it is not yet perfect, what new product ever is, but more probably they delayed because it is a threat to the existing revenue of the business.
Since the early days, Google has sat on its mountain of cash and not innovated. They have fiddled at the edges, as shown by their site that keeps tabs on their hits and misses, killedbygoogle.com but never confronted their cash cow, search, with any sort of innovation that might eat their breakfast. This is in stark contrast to what Apple has been prepared to do, several times.
Whatever else happens, ChatGPT and its backer Microsoft have taken the initiative, and I suspect this will be the best $10 billion investment Microsoft has made in decades. Incorporating ChatGPT into Bing suddenly gives Bing a reason to exist and a competitive advantage to which many will be attracted.
I can only imagine there are late nights in Sundar Pichai’s (Alphabet’s CEO) office currently as they try and figure out a way to combat this competitive threat while preserving their river of cash from advertising.
As I wrote this post, Google shares tanked and Microsoft announced a new generation of Bing running the next iteration of ChatGPT, customised for search.
Header: Google meets ChatGPT in the style of Monet in blogs used courtesy Dall-E, ChatGPT’s graphic AI stablemate.
Update No. 1. Feb 10, 3 hours after the original publication. probably the first of many.
I came across this Google post on their own site, via Visual Capitalist. If anything, it absolutely confirms the contention in the above post that Google have badly fumbled the ball. Timing is a much underrated quality in marketing. On several occasions, I have done the right thing at the wrong time, usually well before the market is ready, and failed as a result, only to see a competitor succeed at a later date.
