How Google got Bigger by Getting Better
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There is a story about Chick-fil-A founder Truett Cathy that I think provides a good foundation for any company that wants to grow. Back in the 1980’s when then upstart Boston Market was growing at a very fast clip and starting to creep into Chick-fil-A’s territory, the management team spent much time discussing how they too could get bigger in order to fend off the competition. After hearing his fill of this Cathy pounded the table and said, “I am sick and tired of listening to you talk about how we can get bigger. If we get better, our customers will demand we get bigger.” Too many companies are caught up in simply getting bigger but those that strive to get better first tend to ultimately get bigger as a result.
Google (NASDAQ: GOOG) has done a phenomenal job over the years striving to get better than the competition. They have worked hard to build a culture of innovation and have strived to create an exceptional work environment for their employees. In 2012 they moved to the top spot on Fortune’s best places to work, up from fourth place in 2011. As they’ve gotten better they’ve been able to hire more qualified employees to drive better products for their customers. These innovators are driven by the “Ten Things We Know to be True” which start by saying, “Focus on the user and all else will follow.” With this focus on making the user’s experience better with each passing day, Google has grown into one of the top technology companies in the world.
There are few that would argue that Google has developed a great search engine that’s revolutionized how we find information. They have made it their mission to “organize the world’s information and make it universally accessible and useful.” While users of Yahoo’s (NASDAQ: YHOO) search engine or Microsoft’s (NASDAQ: MSFT) Bing are highly successful in their searches over Google, they are not as widely used as Google. What Google has done is continually innovated their engine in an effort to make it better for their users. In the second of their ten truths they state, “It’s best to do one thing really, really well” and they do search really, really well. They’ve been on the forefront of trends and either built or bought what they needed to make their customer’s experience better. They’ve added additional products or services like Google Earth that have made their user’s search experience one that continually improves. They have been able to grow beyond simple search into related categories that continue to improve the lives of their users.
Google’s business model of offering great products to their users at no costs has been winning them fans for years. Customers want to have access to Google’s products; they want them to be bigger because it enables their customers to be better. Take their Android operating systems, in the eyes of their customers Google is offering a better product. They’ve now taken 50% of the smartphone market share to Apple’s (NASDAQ: AAPL) 30%, and in the process have relegated Research in Motion (NASDAQ: BBRY) to just 9% and a paltry 4% for Microsoft. Sometimes bigger and better go hand-in-hand as a wider array of free Android Apps is seen as a better value to customers over Apple or RIMM products. Whether it’s because Apple charges its developers more to develop Apps or because the platform has gained such scale, developers at least see the platform as a better place to place their Apps.
The final of the truth’s they knew to be true, “Great just isn’t good enough” keeps pushing them to innovate further to improve their user experience. Whether it’s YouTube, Gmail, or Google Earth, the products they develop make life better for their users. Google Docs have enabled open collaboration in a way that Microsoft Office hasn’t. As they’ve gotten better, they’ve gotten ever bigger which has driven more and more advertisers and revenue to their coffers. This has helped them grow both earnings and revenue at a 20%+ clip for the past five years. A key competitive advantage is found in those companies that don’t rest on their laurels but continually innovate to develop better products. Why does Google keep getting bigger? Because they simply keep getting better.
latimerburned owns shares of Apple and has the following options: Bull Call Spread and Synthetic Covered Call on Microsoft and a Bull Call spread on Apple. The Motley Fool owns shares of Apple, Google, Microsoft, and Yahoo!. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.