Author: Ariel Haney

http://nyti.ms/fVo5XX

Netflix could have lost its place as a video distribution market leader if they had failed to invested in a streaming video distribution model, much like Blockbuster lost its place as a leader in video disruption to a mail distribution, disruptive innovation developed by Netflix. Currently Netflix is a front-runner in streaming video technology and distribution. They managed to innovate from with and change their mail distribution model rather than being overtaken by an outside competitor. A key reason for this is the way they envision the goal of their business: “Reed Hastings, the chief executive and co-founder, had always thought of Netflix as an entertainment distribution service rather than a mail-order company.” Looking at the big picture of bringing videos to consumers, rather than myopically focusing on the process by which they achieved that goal helped inspire innovation from within.

http://nyti.ms/9yJVLP

A couple weeks ago I was craving Indian food. Being new to Berkeley, I took out my phone, went to my Yelp app and searched for ‘Indian’ under restaurants. Within a couple seconds I had a list of Indian restaurants nearby along with their ratings. This is exactly the kind of innovation Google is worried about. My information quest (in this case for an Indian restaurant) had bypassed them completely. If I had been looking for a restaurant a few years ago I would probably have gone to Google rather than a social network with my restaurant query.

Increasingly people are turning to social networks rather than search engines to get answers to their questions. The rise in social networks and the resulting change in consumer behavior is a disruptive innovation that has the potential to affect Google’s bottom line. As more traffic moves from search engines to social networks such as Facebook, Yelp and Twitter, Google looses ad revenue as well as valuable information about what is being searched. Facebook in particular is well posed to capitalize on this trend as the primary internet social network. Bing (Google’s main search competitor) has already tried to take advantage of Facebook’s social network by partnering with them so that things your friends ‘liked’ on Facebook in show up in Bing’s search results.

To compete with the social network innovation Google has also attempted to expand their business into social. However, they’ve had poor results: Buzz floundered, Google profiles are used by a small fraction of users and their social network Orkut only look off in India and Brazil. This fall Google is attempting another big push to, “take Google’s core products and add a social component, to make the core products even better,” according to the CEO, Eric Schmidt. Google is bolstering these efforts by buying innovative social companies such as Slide, Angstro, Aardvark and investing heavily in Zynga.

However, not everyone thinks that they will be successful, “The part of social that’s about stalking people, sharing photos, looking cool — it’s mentally foreign to engineers. All those little details are subtle and sometimes missed, especially by technical people who are brought up in a very utilitarian company.” Creating an algorithm requires sharp engineering skill which is a different business than the marketing and soft skills involved in looking cool. These soft competencies are needed for product diffusion into the marketplace. It remains to be seen if Google will be able to find a way to stay on top of their search business while integrating and capitalizing on social phenomenon or if more and more traffic will be diverted from Google as people turn to their social networks for answers to their search queries.