Understanding the Innovator's Dilemma in 2023: Google vs. the Bots

Is ChatGPT a Google Killer? 

With the rise of ChatGPT, Google is now facing a business-model problem for the first time in years. There's a new disruptive technology in town, and it's about to revolutionize the way humans find information online. Searching is out. Asking is in. 

Google makes money (~60% of revenue) when people skim through multiple search results and click on ads placed next to organic links, but soon there's going to be a superior way to get immediate answers without skimming and clicking.

Soon enough people will start asking themselves: why search for it when we can just ask?

 

With this disruptive innovation, Google is now facing an interesting innovator's dilemma: 

Google has similar AI capabilities (LaMDA) but chose not to release them, fearing wrong results will make people lose trust in the good old search brand. 

So while OpenAI positions ChatGPT as something experimental, evolving, and exciting, Google refrains from using similar technology in order not to risk its' existing business. 

Sounds familiar? 

Here are a few classic Innovator's Dilemma examples. In most of them, it ended up pretty bad for the incumbents:  

1. Kodak was a pioneer in the film photography industry, but the company struggled to adapt to the shift to digital photography. Kodak engineer Steve Sasson actually invented the digital camera in the '70s, but Kodak’s leadership rejected the idea, fearing it would cannibalize the existing film business. The patent expired in 2007 and Kodak filed for bankruptcy in 2012.

2. Blockbuster was a dominant player in the home video rental industry for many years, but the company failed to adapt to the rise of streaming services like Netflix. As streaming became more popular, Blockbuster struggled to keep up and ultimately went bankrupt in 2010.

3. Xerox was a leader in the copiers market, but the company struggled to adapt to the rise of cheap, smaller photocopiers from Canon and Ricoh. The market expanded from large organizations only, to a wide spread of personal photocopiers, and Xerox was left behind. 

4. Blackberry was ubiquitous in the smartphone market. They basically invented the smartphone as we know it, and put it in the hands of millions of business people, but the company struggled to adapt to the rise of the iPhone and Android. While consumers quickly adopted the all-touch smartphones, Blackberry insisted on physical keyboards and enterprise play, dropping from 43% market share to 5% in just 3 years.

5. In 1996, General Motors rolled out the EV1, an innovative electric car. GM produced 1,117 EV1s but made them only available for lease. The car was popular among environmentalists and celebrities like Tom Hanks and Mel Gibson. Despite creating traction, GM decided to stop the EV initiative fearing electric vehicles would cannibalize its conventional business. Then came Tesla, and the rest is history... 

6. Microsoft, once the all-mighty king of personal computers, struggled to adapt to the rise of mobile computing. Microsoft CEO back then Steve Balmer was quoted saying about the iPhone: 

"That is the most expensive phone in the world, and it doesn't appeal to business customers because it doesn't have a keyboard."

As an instinctive reaction, Microsoft tried to position its' old Windows Mobile as a legit mobile OS. When it failed to gain significant market share, Microsoft eventually acquired the smartphone business of Nokia and developed the Windows Phone operating system, but it was too little, too late. As a result, Microsoft had to shift its focus to cloud computing and other areas in order to remain competitive.

Each time a disruptive technology emerged, between half and two third of the existing companies failed to maintain their leadership position in the market. So if history tells us anything, Google should be very worried right now. 

Solving the innovator's dilemma

But wait, surely there are contradicting examples where leading companies were able to successfully navigate the Innovator's Dilemma and reinvent themselves? 

Here are 3 of them: 

1. Apple has been able to disrupt its' own technology a few times: when the iPod was released, it had a unique user experience with the click wheel, easy music sync, and direct purchase of songs. As cheap copycats started to gain popularity and iPod sales started to erode, Apple built smaller, more convenient, and cheaper models. First with the iPod Mini, and later with iPod Nano. If this is not enough, Apple made the iPod obsolete (and then killed it) with the release of the iPhone and Apple Music streaming services. 

Apple has a reputation for not listening to its customers. Instead, the company focuses on building great products with superior user experience, and then persuading the customers they should love them. 

The iPad as another example. was a product nobody asked for, that had the potential to cannibalize the Mac business, and yet, Apple decided to release it and by doing so invented a new product category. 

By taking this approach, many believe Apple was able to bend all the rules of disruption, and successfully navigate the Innovator's Dilemma (at least for the time being).

2. Amazon started as an online bookstore, but quickly expanded into other areas such as electronics, home goods, and even grocery delivery. In parallel, Amazon created AWS and invested in artificial intelligence, which has helped the company stay ahead of its competitors.

3. Netflix started as a DVD-by-mail service, but quickly adapted to the rise of streaming video and pioneered the online streaming market. As it evolved, Netflix reinvented itself as a content production company, which has helped it stand out from its competitors.

Back to Google: 

Google may have missed the opportunity to wow the world with its' own AI, however, it has similar capabilities to the ones demonstrated by ChatGPT and can easily promote it to its billions of users (over 90% market share). 

The question is: will it continue to play defense, trying to protect existing search behavior, or will it try to disrupt its own business with real innovation.

So far Google has been very cautious about making radical changes in Search. Recent enhancements did include some smart additions such as a highlighted summary at the top and a few popular questions & answers - usually above the fold. 

I see those changes as playing defense, but now that the bots are starting to take over the world, maybe it's time to go on the offensive? 

. . . 

Follow me on Twitter @gilbouhnick or subscribe to my occasional newsletter and become 27% more awesome than average.