This week we examine competition in the technology space, how companies can differentiate themselves and we go on an acronym adventure
The Good Old Days
A little more than a decade ago, and almost to the day, Eric Schmidt, then CEO of Google joined a music company as one of its board of directors. The CEO of that music company said “Eric is obviously doing a terrific job as CEO of Google, and we look forward to his contributions as a member of the company’s board of directors. Like our company, Google is very focused on innovation and we think Eric’s insights and experience will be very valuable in helping to guide the company in the years ahead.”
A strange thing happened three years later. Eric had to resign from this music company and the CEO said “Unfortunately, as Google enters more of our core businesses, with Android and now Chrome OS, Eric’s effectiveness as a Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on our Board.”
Now these companies compete in phones, home devices, possibly autonomous cars, TV devices, app stores, maps, and computers. Essentially they compete in almost everything. So, who was that music company:
Since Schmidt left, the Google/Apple/Facebook/Amazon, or GAFA* consortium have come to compete with each other in almost everything. Cloud providers, home devices, phones, advertising spend, everyone is dipping into each other. But up until this point, and as seen by the five year performance of each stock price, companies have been stealing share from other industries. Cloud providers steal from IBM/Dell/HP, Amazon steals share from essentially every retailer and we forget that Research in Motion, IE Blackberry and Nokia were once behemoths.
When does GAFA start destroying each other?
With the number of other industries to break into winding down, they will soon be left battling each other. The most recent example is just this week, Google and Walmart teamed up in the battle against Amazon, allowing Google Home users to order products from Amazon. Cloud computing is a good example of how intense things can get, where pricing is constantly cut between each vendor, partnerships are announced to suit every type of user and companies offer a year free to sign up. Cloud providers have already integrated AI/ML features into their cloud and most of them have locations all over the world. While Amazon is the leader in terms of revenue, other companies are clearly looking to steal share.
Who will win the war?
There are two ways in which companies can win. First, a company could release another game changing iPhone like product (maybe autonomous cars) which either steals share from a GAFA company or another industry. Since there hasn’t been anything like the iPhone in quite some time, I would not expect this to happen. Don’t count on ML/AI to give you something game changing as even though Alexa/Google Home/Apple Home are neat ideas based on AI, this represents what is possible now and its certainly not producing an iPhone like shift in usage.
While it’s not the most exciting idea, the biggest opportunity I believe for each of these companies is applying AI/ML to its own industries to increase productivity, increase margins and lower costs. Google applied its AlphaGo algorithm to its own data centers and was able to reduce its cooling bill by up to 40%. As mentioned in a previous Cloudy, Amazon is pretty much looking to automate the whole shipping industry. Imagine if Google started helping Walmart out and applying their own algorithms to Walmart’s shipping and logistics?
Since I don’t watch Game of Thrones, I can’t end with some sort of epic battle like quote, but you get the idea.
*Really we should be swapping Facebook with Microsoft, to make MAAG, but while we are playing the acronym name game…
FIGMAA – would be the leaders in the AI sector Facebook/IBM/Google/Microsoft/Amazon/Apple
OMIGA – Cloud providers Oracle/Microsoft/IBM/Google/Amazon
TUNA FIG – That would be autonomous cars Tesla/Uber/NVIDIA/Alphabet Ford/Intel/GM (Needed another A, so swapped Google for Alphabet)
NAFTA – If Trump purges the North Atlantic Free Trade Agreement, we could pay tribute by pairing Netflix/Apple/Facebook/Telsa/Alphabet for no apparent reason
FAGIN – While we are 4 years past the 175th anniversary of Oliver Twist, Facebook/Apple/Google/IBM/Netflix could have paid tribute to Fagin, the leader of the pick pocket group
You could spend a whole weekend doing this…