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Summary:

One of the only endearing aspect of the 2001-to-2005 technology downturn was that people focused on their core business, and tried to build profitable franchises and stayed away from projects that were sure shot money losers. Well, no longer. Now everyone is in everyone’s business. Google […]

One of the only endearing aspect of the 2001-to-2005 technology downturn was that people focused on their core business, and tried to build profitable franchises and stayed away from projects that were sure shot money losers. Well, no longer. Now everyone is in everyone’s business.

Google is going to sell books, taking on Amazon. Amazon in turn wants to take on Apple and do movie and music downloads. (Never mind no one is making money in that music download business except Apple.) Microsoft wants a piece of the Search action, and is going all guns blazing after Google, which in turn is going to try and do online word processing. Oh it will also do payments, taking on eBay’s Paypal.

Just thinking out loud – whatever happened to the core competency? Is the pressure of meeting the quarterly numbers and pleasing the Wall Street so much that companies are once again taking their eye off the ball. Jeff Bezos should be making sure that his online super-mart stays profitable instead of blowing up big dollars on a download service which may or may not become a big business.

Apple, for all its faults has that focus thing down pat. Okay maybe I am just being old-fashioned….. hmmmmph!

  1. It’s called convergence for a reason :-)

  2. While Google tackling Amazon doesn’t really make sense to me, Google tackling MS makes total sense- their options are (1) work very hard to make the OS less relevant to everyone or (2) sit tight and print cash until MS pulls a Netscape on them, at which point they take their ball and go home. Make no mistake, you can’t do (1) unless your OS alternative platform of choice (in this case the web) has a competitive office suite (Linux gets killed on the desktop in large part because OOo is not very interesting), and I can’t imagine that (2) is very appealing either.

  3. Its not convergence when you are getting into the business of others. It smells like fear.

    Each model wants domination and reshape itself into a one stop mall. They want the consumer to be glued to their site. Thats tough in a ADD driven world.

    Consumers go to: Amazon for books (then get lured into other categories… but those are not their core cometencies just offerings and who cares if they video/movie downloads). Netflix is for renting DVD’s and if Netflix were to get into the movie download business it would make sense.

    They could probably benefit by focusing on what they do best and deliver it with a better experince for the consumer. Rather than bombarding the consumer with the we have it all “street vendor” voice. No wonder the charm of boutiques still exists. Eventhough Amazon wants to be like Wal-Mart.

    Core competency is key for a brand to succeed in the long run. It maybe old fashioned but thats the essence of a brand.

  4. Amazon going into digital downloads is understandable because CD and DVD sales will be affected by it, altho I don’t know what percentage of Amazon sales that is. Apple is in that space purportedly because it needs content to sell its devices (core competency), but Apple is on record back in 2000 (or 2001) as saying they want to be “one of the ten biggest Internet companies.”

    As for Google going after MS, they both seem to think they need to defend themselves from each other. MS going after search to protect Windows and Office; and Google going after apps to expand and protect its search franchise.

    So being “paranoid” per Intel’s Grove is still the key thought, altho for some of the other places of expansion that you mentioned, it does become hard to see the connection.

  5. While core competency is essential, its a case of diversified risks and leveraging existing traffic. The issue is that the giants are trying to fight on too many fronts rather than focusing on a few that would be the real growth drivers .

  6. It is not convergence. Rupert Murdoch is a prime example of sticking to his core competency at News Corp. which is publishing content and distribution of content! Whether he publishes books (Harper Collins), television shows (Fox studios), distributes television shows (BSkyB), or publishes web pages (MySpace), its all about publishing content and distributing it. That’s called core competency, not convergence.

  7. Mainly it’s google that lately has invested much more in this game of diversification. What they come out with nowadays is too far from their initial search focus. If this is pure management greediness or customer demand, this is still left to be seen.

    Anyways this has triggered safety mechanisms in all other big online players; which are now hunting each other. What we will hopefuly witness is an overall increase in quality, and long-tail low margins on more and more online services. The Internet market has yet to mature and 50-es economic monopoles have to go away.

  8. Yes, what did ever happen to “core competency”?

    Here where I work, the sales and marketing departments attempt to pad their assigned budgets by pitching new ideas to the CFx for products no one asked for.

    It seems to be a great way to divert attention from the lack of sales.

  9. It turned into the edge competence.

  10. While I agree that a lot of these companies are overreaching, I don’t think that any of the examples you cite are really cases of this.

    In the case of Google, they have book search. Which is fantastic. But imagine going to the main Google search engine, and then being unable to click on any of the links to read the web sites found – that’s effectively what book search is. Selling the book (in some form of e-book, I’m sure) makes perfect sense – it gives me the chance to get the information I found immediately, rather than trudging to the library or Barnes and Noble.

    As for Amazon, why doesn’t digital downloads make sense for them? If I’m not mistaken, physical media makes up a double-digit percentage of their sales, digital media would be a natural extension of that. The fact that they do sell the physical media even gives them a leg up. Buy a DVD, and get access to the digital version till the DVD ships, or something like that.

    As for the Google Office thing, it only seems to be diversification if you think their core competency is search. Personally, I think it’s advertising. Any product that they launch which either displays adsense or provides them data to match ads to you fits in with their core competency – if they do it by search, by providing tools for small businesses, by taking down Microsoft, or becoming a “web operating system”, it all still traces back to maximizing AdSense revenue. Their only real deviation from that philosophy to date has been with Google Video – but even in that case, it might yet wind up being ad supported.

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