Is Google finally getting disrupted? With ChatGPT taking off, it seems we’re closer than ever to finding out and Google is in a real innovator’s dilemma.
This article is based on a YouTube video, if you want the full analysis, please make sure you check out the video below, the article continues under the video.
The innovator's dilemma, coined by Harvard Business School Professor Clayton Christensen, describes the dilemma that companies face when choosing between investing in sustaining or disruptive innovation.
- Sustaining innovation is when companies make incremental improvements to existing products or services to remain competitive.
- Disruptive innovation, on the other hand, is the introduction of new technologies or business models that fundamentally change the way products or services are created, delivered, or consumed.
Companies have to stay innovative, but choosing the right path of innovation is where it gets tricky. Investing in sustaining innovation can lead to short-term gains, but it can also make companies vulnerable to disruption in the long term. Meanwhile, investing in disruptive innovation can be risky and uncertain, but it also has the potential to create new markets and opportunities.
The innovator's dilemma is a real challenge for companies of all sizes and industries, but it’s also what creates opportunities for startups, as they depend on disruptive innovations, since they don’t have anything to sustain yet. On the other hand, bigger, more established companies are actually faced with a choice: do they invest in sustaining innovation or disruptive innovation? And that’s exactly what the innovator’s dilemma is.
As a startup founder, I certainly prefer disruptive innovation, but I can see the beauty in going with sustained innovation. In recent years, we have seen a number of companies struggle with the innovator's dilemma, from Eastman Kodak - the company that somehow invented the digital camera AND was disrupted by it - to Blockbuster to Blackberry. And now, some are wondering if Google may be the next company to fall victim to this challenge.
ChatGPT, a service from OpenAI, is an AI-powered computer that can answer any question in seconds by analyzing data from the internet. It’s like chatting with a friend who has memorized the entire internet.
ChatGPT's ability to understand natural language and provide relevant information could disrupt Google's search business, which relies heavily on algorithms and keywords. If ChatGPT becomes the preferred method of searching for information, Google's search business could be severely impacted - something they’ve had a monopoly on for the past 20 years.
So what should Google do? They can choose to disrupt search, but that would break their business model. When you Google something, the first thing you see is a list of links with ads. From a user perspective, it would be great if Google could spit out just one answer when asked a question, instead of the user doing the majority of the work. However, Google makes money off of these ads, so they would need to revamp their entire business model - something that’s likely not very enticing to the company.
The funny thing is that Google probably has the best AI out of any company out there, so they did invest in disruptive innovation. However, when it came to actually releasing something, they went with sustained innovation which was fine until the disruptor - ChatGPT - came along.
Now, Google is scrambling with the release of Bard AI which - likely due to the rushed release - has its own set of flaws, and hasn’t taken off the way its competitive AI chat did.
So, is it that simple? Did Google just fall victim to the innovator's dilemma and will it disappear in a few years?
To answer this question, we need to go back in history a bit. Before there was Google, there was AltaVista. But, as we all know, Google quickly ended up dominating the search engine market. The difference here is that back then moving from one search engine to the next was easy for the user - it really cost them nothing more than changing the URL.
In the past many years of market domination, the Google leadership team has made sure they wouldn’t suffer the same fate as AltaVista. They built products outside of search to lock users in, with products such as YouTube, Android, Google Maps, Google Chrome, Gmail, Google Ads, and more that are loved by billions of users.
All of these services that Google offers, will significantly delay users in moving to a new platform. But it’s only a delay - Google must build a better search engine that can compete with ChatGPT, and other competitors that are bound to surface as the market is now disrupted.
So, how can companies avoid falling victim to the innovator's dilemma and stay ahead of disruption? First, it’s important to note that you have to do a bit of both - some sustaining and some disruptive. The key here is long-term thinking, so if your time horizon is 1-2 years you should always do sustaining innovation, but if you’re truly thinking long-term, you should go with disruptive innovation.
Let’s take a look at some companies that haven’t been disrupted in years, and how they’ve done it.
- Apple kept showing that they were willing to be disruptive. Most famously, when they were about to release the new iPhone - Steve Jobs was asked if the new iPhone was going to cannibalize the iPod (a hugely successful product at the time), to which he responded “if you don’t cannibalize yourself, someone else will.” I couldn’t agree more, and this is exactly what’s happening to Google.
- Microsoft let other companies think long term and instead made smart acquisitions such as LinkedIn, GitHub, and now a big investment and alliance with OpenAI. But before acquiring or investing in these companies, Microsoft really left them alone to do the disrupting. This has put the company in an incredible position where they could implement ChatGPT into Bing and for the first time really challenge Google’s search engine.
What we can learn from these companies is to diversify and think long-term. Most companies don’t do this, and that’s why they get disrupted.
We all win from competition - Google search is not as good as it should be and if they had had more competition in the last 20 years, we would have a better search engine in 2023.
The innovator's dilemma is a real challenge for companies, as they look for growth and to stay competitive. By understanding the difference between sustaining and disruptive innovation and adopting strategies to stay ahead of disruption - as well as learning from companies that have fallen victim to the innovator’s dilemma - companies can avoid the fate of Blockbuster, Kodak, Sears and many others, and position themselves for long-term success.