A little history
Microsoft, the world's largest software vendor, has been around for quite a long time. Its target market is mainly selling operating systems and office applications for the desktop computers. Microsoft products are sold to computer manufacturers, i.e. Dell Computers, who in turn install and ship Microsoft software package to the consumers. So in a sense, consumers end up writing Bill Gates a $100+ check without ever knowing it. This is how Microsoft became to dominate the computer desktop industry and turned Bill Gates into modern day Henry Ford.
Google, on the other hand, is a relatively new company. It blossomed during the dot com boom, and eventually came to dominate the online search engine business. Today, Google attracts more than 200 million unique queries on its search engine every day; statistically speaking, each query generates 12 cents for the company...that is 8 zeros multiplied by 12! Google, for the most part, profits through its search based advertisement technology known as Adwords. Adwords makes online advertisement approachable in terms of easiness and affordability. Adwords, combined with a similar technology called Adsense, made Google endless amounts of cash. Google, today, is the undisputed champion of the online world.
How they became enemies
"When you set out to take Vienna, take Vienna" - Napoleon
Until recently, both Google and Microsoft were living in harmony. The masses used Microsoft's Internet Explorer to surf Google's search engine. However, internet's seemingly unstoppable growth since the early 2000 began to attract the attention of many industries. Microsoft executives clearly saw Internet as the next big thing; possibly a market worth pursuing. Meanwhile, Google continued to make unprecedented strides within its search engine market. Having generated enough cash, however, Google took a different direction; founded by technology enthusiasts, Google began to enter various markets unrelated to its search business. Rumors began to spread that Google is building an online "free" Operating System and various other tools such as an alternative version to the dominating Internet Explorer. This, as you might have guessed, ticked off Microsoft, and it took the bait and decided to roll its war drums against Google. Microsoft, by the way, is not the only company that feels threatened by its presence. Other internet giants, such as AOL, Yahoo! and eBay, are also feeling the heat ever since Google embarked on its journey towards dominating any market of technological interest. Google innovated in markets that already existed and, surprisingly, came about to dominating them. For Microsoft, it was a threat worth neutralizing. Today, Google has its hands in web search, email, online videos, calendars, news, blogs, desktop search, photo sharing, online payments, social networking, instant messaging, WiFi, word processors, web hosting, web browser, search tool bars, spreadsheets, discussion groups, maps and more.
Before long, Microsoft, AOL, Yahoo! and eBay maneuvered to encapsulate Google's ever-growing strength. Over two hundred years ago, Emperor Napoleon, the Google of his day, found himself in a similar situation. Russia, Prussia, Austria and Britain had decided to go to war.
The drums of war
"Never interrupt your enemy when he is making a mistake" - Napoleon
Microsoft's take on this war is quite different from that of Google. Eric Schmidt, Google's chief executive, has repeatedly alleged that the online market is not a zero-sum game; in other words, it is possible for two or more players to dominate a large share of this market. Microsoft is not used to this. In the past it has decisively eliminated any competition, and taken the throne for itself. Consequently, Microsoft has publicly declared an all out war on Google.
Ironically, Google is the company that is on the attack; it has been aggressively pursuing Microsoft's market. However, using clever tactics, it has intimidated Microsoft to appear as the aggressor, while Google quietly carries on with its business. In other words, Google has lured Microsoft into a rash attack; when it ends up in disaster, Microsoft will have only themselves to blame, and everyone around them will blame them, too. Google will win both the battle of appearances and the battle on the field. Very few strategies offer such flexibility and power.
It takes more energy to take land than to hold it. Throughout history, defensive tactics have won more battles than the aggressors. After the first wave of siege, the aggressor loses the advantage of surprise attack and leaves himself exposed to a counter attack. The defender can clearly see his strategy and take protective action. Napoleon's most celebrated victory, the battle of Austerlitz was a counter attack, defeating a larger army with a kill ratio of 15 to 1. A defensive position has become the perfect way to disguise an offensive maneuver, a counter attack. Google has repeatedly asserted that it is not interested in competing with other businesses; it is a web search business only. They have used this facade to make Microsoft's concerns with the company seem paranoid; a clever move that worked. The fact remains that Google is a powerful secretive company, driven by smart people, and for a cause.
Do No Evil
"In war the moral is to the physical is as three to one"- Napoleon
In his day, most emperors preferred to hire mercenary armies simply because maintaining a healthy army of their own came at too much of an expense. Napoleon reversed this setback by recruiting young French loyalists more eager to fight for a greater France than for the money. As a result, during battle, French soldiers swiftly defeated much larger mercenary armies. My point? Bring people together around a cause and you create a motivated force.
With a 60% stake in the U.S. web search market, one might expect Google to have mottos of the kind "Let Google do the searching" or perhaps "Search fast, search Google". On the contrary, Google's motto is a simple "Do No Evil". Recently, web search companies were asked by U.S. intelligence agencies to transfer private data on user searches over to them; while other web search companies concurred with them, Google saw it as evil and denied. This decision alone drove Google's shares dwindling down several points on the NASDAQ, but Google remained true to its "Do No Evil" maxim. Google has come to be seen as a company driven not by the incentive of making money, but rather by the pursuit of knowledge through technological innovation; as a result, the company has used this justification to convince its competitors that it is not interested in defeating competition, but rather providing easier access to information for everyone, and hence making the world a better place. Google keeps its business silent and only attracts attention to the technological goodies it has brought to the masses. In fact, Google's Machiavellian tactics have worked so well that most of its users do not even know how or if Google makes money.
Google's army of 7000+ employees are loyal to the company. Over at Microsoft, the employees, especially senior executives, feel caged within the company; leaving Microsoft for Google might bring a lawsuit from the company, as it did for Kai-Fu Lee. To Microsoft's credit, Google is simply reaping fruit from the hype that Microsoft once enjoyed. Sooner or later, the quality and quantity of potential employees will inevitably decrease in size as the excitement around Google is neutralized.
Mobility through decentralized command
"Separate to live, unite to fight" - Napoleon
Genghis Khan, like Napoleon, was a master of mobility in war. In a very short period of time, his empire stretched from Korea all the way to Europe. Neither two conquerors could have expanded like they did if it weren't for mobility. Mobility was the key to decisive maneuvering during battle. Varying in size, from 15, 000 to 30, 000 men, each corps was a miniature army headed by a miniature Napoleon. Fluid, Fast, and Nonlinear. At the battle of Ulm, Napoleon completely surrounded the Austrian army within a few hours; cutting off any channels of escape or reinforcements. The Austrian emperor was forced to surrender an army of 30, 000 soldiers.
For a large company like Google, the hierarchy within the company is quite small. Google organizes employees in teams of three to five people. Each team is self directed, while the middle managers provide the required resources to support development within the teams. As a result, Google has fashioned a powerful self-directed decentralized approach towards product development. The consequence of such an arrangement is that there is no keystone employee or manager within the company. It is almost as if the company could run on its own even if it were divided into several smaller pieces. Forbes magazine described the phenomena this way: "Innovation will flourish for as long as the masses are running Google. When management forcefully steps in, the pace of change will slow." Microsoft, on the other hand, has a well known bureaucratic problem. There are over 12 layers of middle managers between executives and the developers. As a result, the company takes the course that its top managers set for it. Instead of allowing innovation to originate from developers, it flows from top level managers to code-monkeys at the lowest base. This is quite common in other companies as well. The natural tendency of a top manager in any company is to want to control the group, to coordinate its every movement, but that ends up tying the company to the past and to the slow moving armies in history. It takes strength of character to allow for a margin of chaos and uncertainty-to let go a little-but by decentralizing army and segmenting it into teams; company managers gain in mobility what they lose in complete control. A critical step in creating an efficient chain of command is assembling a skilled team that shares the same goals and values; once this is achieved, the top managers at Microsoft can contentedly allow the teams to think and direct on their own. As Joel Spolsky puts it, "The goal of any business owner should be to break his/her job into functional pieces that can be replicated over and over."
"The goal of any business owner should be to break his/her job into functional pieces that can be replicated over and over." - Joel Spolsky
Google Achilles:
"Four hostile newspapers are more to be feared than a thousand bayonets" - Napoleon
Napoleon demanded unprecedented loyalty from his men. When in 1815, Napoleon escaped from Elba and returned to the mainland, King Louis XVIII sent the Fifth Regiment, led by Marshal Michel Ney who had formerly served under Napoleon in Russia, to fight him at Grenoble. Napoleon approached the regiment alone, dismounted his horse and, when he was within earshot of Ney's forces, shouted "Soldiers of the Fifth, you recognize me. If any man would shoot his emperor, he may do so now". Following a brief silence, the soldiers shouted "Vive L'Empereur!" and marched with Napoleon to Paris. The strength of his image echoed in the hearts and minds of, both, his allies and enemies. He described this himself as "I have destroyed the enemy merely by marches"
Whatever a company's strength might be, it is actually a potential weakness, simply because the company relies on it: neutralize it and the company is vulnerable. A company's task is to put its competitor in a situation in which it cannot use its advantage. Google's advantage is its brand.
"Public opinion is the thermometer a monarch should constantly consult" - Napoleon
The Wall Street judges Google's worth in terms of its shares value in the stock market. As of July 29, Google is trading at $388.12 per share, the highest bid/share I have ever heard. However, Google's out of the charts performance in the stock market is a weakness in disguise. Wall Street isn't thrilled with Google's secretive style of management, so the investor loyalty could be swayed quite easily. Google will lose its extraordinary command of the NASDAQ as soon as conditions stop favoring them. Google might have a strong user base, but its investor loyalty is at dismay. Without Wall Street's backing, Google will lose its share not only in the stock market, but in the public relations department as well. Google feeds off its brand, so any successful attack on its image will cripple the company even when it continues to generate cash.
Google depends on its hype. But hype does not stick around forever.
What Can Microsoft Do
"To extraordinary circumstances we must apply extraordinary remedies" - Napoleon
Google is successful not just for its technological innovation, but also for the command structure that makes this innovation possible and. Hence, to solely attack Google's technology is a mistake since Google will always manage to innovate with quick decisiveness, as it has in the past. Google's Achilles heel is its Adwords system; its money machine. Without it, Google can neither grow nor innovate.
The general rule for defeating any large army is to launch the attack on as narrow a front as possible. Whereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place. By releasing, what seems to be a product every week, Google has stretched too thin. Aside from search and email, Google products are essentially at the mercy of another competitor, say Microsoft. Microsoft, with its MSN Search, cannot possibly defeat Google in search business, it is Google's core business and the company will protect it however possible. Sun Tzu stated this in the Art of War as "Put your enemies in a spot where they have no place to go, and they will die before fleeting. If they are to die then, what can they not do? Warriors exert their full strength. When warriors are in great danger, then they have no fear. When there is nowhere to go, they are firm, when they are deeply involved, they stick to it. If they have no choice, they will fight to death."
"Put your enemies in a spot where they have no place to go, and they will die before fleeting. If they are to die then, what can they not do? Warriors exert their full strength. When warriors are in great danger, then they have no fear. When there is nowhere to go, they are firm, when they are deeply involved, they stick to it. If they have no choice, they will fight to death" - The Art of War
Microsoft should adopt a partial non-competitive strategy. Instead of publicly and pragmatically target Google's main business, it should, with surgical precision, covertly attack products Google doesn't pay much attention to. Google's policy to let beta products become widely accepted organically is a weakness waiting to be exploited.
There are many non-conferential strategies Microsoft can adhere to:
1. The giant can enter markets that Google would never tackle; Microsoft's success in the gaming and music industry strengthens this point. Furthermore, Microsoft can let its allies (i.e. Yahoo!, AOL, eBay etc) confront Google in markets Microsoft wouldn't want to.
2. Google, with its recent release of Open Source project hosting, has subtly brought on its side a smart culture of developers who already dislike Microsoft. This form of passive strategy is what Google is best at. CEO Eric Schmidt once stated that a company's success lies in its programmers. Microsoft can hire more talented engineers. If there are two equally intelligent students competing for the top position, all they have to do is study 5 minutes more than the other would. Taking that one extra step in hiring employees will have a significant impact on the company's business.
3. Be more reserved. An attack kept silent has a better chance at succeeding than one that is clearly perceived and understood by the enemy. As Niccolo Machiavelli puts it "No enterprise is more likely to succeed than one concealed from the enemy until it is ripe for execution."
"No enterprise is more likely to succeed than one concealed from the enemy until it is ripe for execution." - Machiavelli
4. Decentralize product releases. Instead of passing product decisions through a layer of eleven managers, let the product innovation come from the engineers responsible for designing them. A much more effective road that Microsoft can take is to provide seed capital for other startups releasing products competitive to Google. This has several advantages. Startups are more focused and motivated. Microsoft wouldn't have to expend excess resources into startups since they can also rely on other VC's. Since startups can think and manage themselves, this will decentralize innovation and also rid Microsoft off its 11 layers of management.
5. As mentioned previously, Google's vital organ is its ad delivery mechanism. If Microsoft successfully releases a better system for delivering advertisements, it will decisively capture Google's hold on ad publishers. Due to Microsoft's huge hotmail user base, the company has an excellent opportunity at delivering more targeted advertisements.
6. Lastly, Google focuses a very small team, usually 3 to 5 engineers, on its beta products. Microsoft can take advantage of this by focusing more resources on similar products. Even though, smaller teams innovate faster, larger, more resourceful teams, have a better chance at success. A successful product requires the collective effort of more than just the engineering department.
"Between a battle lost and a battle won, the distance is immense and there stand empires" - Napoleon
Conclusion
Napoleon's tomb In the end, despite his genius, it was Napoleon who became overwhelmed by counter forces and lost. Unprecedented success often causes blindness. My advice for Google is to continue its rapid innovation but also put a tap on its uncontrolled product releases. As for Microsoft, despite the company's several ill conceived tactics, it has a lot of potential for improvement and much to learn from its rival, Google.
Notes:
(1) Some excerpts were taken from "33 Strategies of War".
(2) Despite the critical tone of this article, I can't help but think how dull the tech world would be without either of these companies. I will gladly take down any part of this article if anyone at, either company, is disturbed by it.
(3) I didn't write this solely for the purpose of comparing Napoleon's strategies with that of Google or Microsoft. I wanted to write a piece that gave a strategic analysis for both companies. I wish I could've written some more on this subject, but thought most readers would fall asleep. I can't write, I am an engineer.
(4) Any research on this article was done through Google. The article itself was written on Microsoft Word.