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Running Head: DIAGNOSING THE CHANGE

DIAGNOSING THE CHANGE

Diagnosing the Change

Within Google and YouTube Using the Star Model

Abstract

This paper uses the star model to diagnose how Google and YouTube execute their change mission. Both websites are under the Google Inc. leadership, whose goal is to provide free useful information, while profiting from online advertising. Google Inc. supports its strategy by investing in research and development, outlining a clear mission statement for employees, and rewarding network members by sharing advertising revenue. The paper also covers Google Inc.’s SWOT analysis. It is a leader in the web search and video sharing industry, and makes most of its profit from the growing internet advertising business. However, Google Inc. is facing steep competition from other companies in the industry, and some of its attempts to explore other ventures have failed.

Introduction

The internet continues to grow exponentially as more people from around the world gain access. One of the most interesting things about the internet is that it is very democratic. Anyone can purchase a web page with very little capital and share their opinions. Another reason for the growth in internet usage is that there are more platforms with internet usage capabilities, such as cell phones, and motor vehicles. Advertisers cannot ignore this growth in internet usage. In fact, the revenue from internet advertising is catching up with the revenue of TV advertising. This creates opportunities for web-based companies to increase their profits. Google and YouTube are profiting from this shift in advertising by adopting advertising based platforms. This paper covers their strategies, people and practices, structure, rewards system, and SWOT analysis.

Strategy

Google and YouTube are under the same leadership, with very similar strategies to success. As mentioned in previous papers Google and YouTube lacked direction when both companies began. Under new leadership, profitability was added to the equation, using an advertising model. The new leadership saw both companies as game changers due to the competitive advantage of the growth in internet use, the popularity of search engine use, and the increasing power of video sharing. Both companies were/are leaders in their sectors.

Google Inc’s leaders had a clear vision for both companies, to provide free and useful information/products, while profiting from advertising. This way, users of the free products and information can advertise Google and YouTube, reducing the need for a widespread advertising campaign. For example, college students learn about various topics watching YouTube videos, while drivers all over the country benefit from Google maps. When those users talk about the benefits of using these features, Google Inc. gets free advertising, while profiting from businesses advertising on both websites.

People and Practices

Its highly motivated staff and their guiding principle carry out Google Inc’s mission. Google Inc invests a lot of revenue and labor in research and development. According to Google Inc. (2008):

Its R&D spending in 2007 grew at 72.6% to $2,120 million from $1,229 million in 2006. During 2003–2007, the company yon an average invested about 10.5% of its revenue in R&D; the spending has grown from 6.2% of the total revenues in 2003 to 12.8% in 2007. Its R&D staff also grew to 5,788 by the end of FY2007 from 3,695 in 2006” (p. 6)

In addition, principals that are presented guide its research heavy team to carry out the company’s mission. The first principal is to put Google users before shareholders. An example of this is on the Google search page. “The company doesn't sell placement in its search results, and the rule for advertising on the site is that it ‘must offer relevant content and not be a distraction’ (Enough Sun Tzu?, 2005). The next principle is that it is best to do one thing well. Google Inc. focuses on excellence when it takes on new projects, instead of just spreading talent thin. Third, Google continues to push search speed limits with new algorithms because speed is king, and restlessness pays off. Fourth, consumers get the most cited information on Google and YouTube due to the design of their search engines. Fifth, Google is pushing information access beyond known limits, by focusing on mediums of access such as cell phones and cars. Sixth, Google advertising is tailored to adapt to searched material in order to provide relevant information, and not misleading information. Seventh, Google pushes its employees to continue adding information to their search engine due to the belief that there is always information out there. Eight, Google believes that information crosses all borders, that is why people from all over the world post videos on YouTube, and information on Google spans over a hundred languages. Next, Google focuses on excellence, but it puts the well-being of employees first, by providing services like free food. Finally, Google believes that change is the only reality, and therefore employees are constantly reminded that consistent improvement is one of the main goals of the company.

Structure

Google Inc’s structure is aligned to its strategy to provide free accessible useful information for consumers while profiting from advertising. Google’s focus on constant improvement of existing services leads to meaningful upgrades and updates of their services, in order to satisfy users. First, Google is improving the capacity of its search appliance by pushing Minis and GB 1001s. “For as little as $2,000 per month, a licensee can jump from the GB 1001 to the 4 million document capacity GB 5005” (Arnold, 2009). Second, Google has been upgrading its product line. For instance, its calendar and Gmail service has seen constant upgrades. One of the most interesting additions is Google chart for Gmail. This Skype-like video conference service has the potential to exceed Skype’s 14-million users. Third, Google’s investment in research and development was covered previously. Investing in research and development helps the company continue improving its services. Lastly, Google Inc.’s structure allows entrepreneurs shape their content from outside the company. This keeps the material on Google search and YouTube unique and unpredictable.

Reward Systems

As mentioned previously, Google Inc. has several guiding principles that help employees meet company goals. Google’s culture of always seeking improvement fosters an employee culture of thinking outside the box. Additionally, Google Inc’s investment in research and development helps their highly motivated team to create and improve free provisions enjoyed by customers, while profiting from advertising. “The Android operating system was developed and offered for free to the mobile phone companies by Google. This helped Google get a foothold in the mobile market” (Evans, 2013).

Google and YouTube have a rewards structure for entrepreneurs that own channels, or websites, on their respective sites. YouTube rewards entrepreneurs with a large following with advertising revenue, and Google rewards website owners based on how much traffic they have on their website. This reward system is pro growth for both websites, because it encourages entrepreneurs to put out more content, and promotes healthy competition. In addition, content grows the volume of information on both websites, which is one of the goals of Google Inc., and growth attracts a wider range of users and advertisers.

SWOT Analysis

Google Inc.

	Helpful to achieving the objective	Harmful to achieving the objective
Internal origin (attributes of the system)	Strengths · Leading search engine globally (strong market position) · Most efficient search engine technology and infrastructure · Generates revenue from advertising	Weaknesses · Venture into social networking is weak · New launched products have little in common
External origin (attributes of the environment)	Opportunities · Internet usage continues to rise · Online advertising is on an upward trajectory · Investments in new cutting edge products	Threats · Threat from other search engines · Reliance on network members for revenue · Challenges of cultural and privacy issues

YouTube Company

	Helpful to achieving the objective	Harmful to achieving the objective
Internal origin (attributes of the system)	Strengths · Leading video sharing website globally (strong market position) · Efficient video sharing technology and infrastructure · Generates revenue from advertising	Weaknesses · Revenue being earned by its entrepreneurs is small · The company is still not profitable after all these years
External origin (attributes of the environment)	Opportunities · Internet usage continues to rise · Online advertising is on an upward trajectory · Investments in new cutting edge products	Threats · Threat from other video sharing sites · Reliance on network members for revenue · Challenges of cultural and privacy issues

Analysis Comparison

The reason why YouTube and Google have very similar SWOT analysis is that they are under the same leadership. Both companies are leaders in their industry, and use advertising as a primary source of revenue. They both share their revenue with network members in order to encourage the expansion of material on both websites. The only difference between both companies is that YouTube is a video sharing website While Google is a search-based website. Both companies have a solid business plan because internet usage and advertising is projected to grow. This means that both companies can expect more profits from advertisers. Additionally, Google Inc’s investment in technologies such as cell phones, and vehicle technologies, is increasing access to Google and YouTube.

Areas of Resistance

Companies that connect people to web-based information are threats to Google search. Microsoft and Yahoo are its main rivals because they provide alternate web search services that are increasingly popular. “Microsoft has developed features that make web search a more integrated part of its Windows operating system and other desktop software products” (Google Inc., 2008). If any of Google’s competitors comes up with a better search engine with information that is more relevant, advertisers and users may migrate. This would lead to a reduction of the Google network, which will lead to revenue loss. Google and YouTube rely heavily on network members, which mean that a loss of members to competitors might be disastrous for both companies.

Another area of concern for both companies is cultural problems from countries around the world. Different countries have difference standards of what is appropriate for their citizens to view on the internet. This means that both companies have to understand several cultures in order to filter content appropriately. A third area of concern is that Google Inc has failed in some of its investments, and that some of its investments have nothing in common. For instance, Google Inc’s efforts to make a mark in social media have been a failure so far. A similar problem is that YouTube is very popular and yet the company has not made any profits for Google Inc. after all these years. A final problem is that their sharing of advertising revenue with network members does not provide enough money for their entrepreneurs to keep providing needed content. This might pressure them to stop adding content, and it can force Google Inc. to cut down on its free services.

Conclusion

The revenue generated by internet advertising is catching up with the revenue generated by television advertising. This is because internet usage keeps growing, as access to the internet becomes easier, and more affordable. Using the star model, the author was able to analyze the change within YouTube and Google that allowed them to take advantage of the growing internet-advertising model. The areas of resistance faced by both companies are threats from companies having similar platforms, and their heavy reliance on network members. Google Inc. has to diversify its sources of revenue, and altar its business model in order to secure its position as the leading search engine and video sharing company.

References

Arnold, S. (2009). Google AND THE Cuculus STRATEGY. KM World, 18(3), 17. Retrieved from http://eds.a.ebscohost.com.proxy.devry.edu/eds/pdfviewer/pdfviewer?vid=32&sid=88e05 af9-3895-427f-b38d-ecd5b1e4a050%40sessionmgr4002&hid=4203

Enough Sun Tzu?. (2005). Strategic Finance, 86(8), 56. Retrieved from http://eds.a.ebscohost.com.proxy.devry.edu/eds/pdfviewer/pdfviewer?vid=24&sid=88e05 af9-3895-427f-b38d-ecd5b1e4a050%40sessionmgr4002&hid=4203

Evans, D. (2013). All Eyes on Google. Plastic Surgery Practice, 23(2), 8. Retrieved from http://eds.a.ebscohost.com.proxy.devry.edu/eds/pdfviewer/pdfviewer?vid=17&sid=88e05 af9-3895-427f-b38d-ecd5b1e4a050@sessionmgr4002&hid=4205

Google Inc. (2008). Google Inc. SWOT Analysis, 1-11. Retrieved from http://eds.a.ebscohost.com.proxy.devry.edu/eds/pdfviewer/pdfviewer?vid=38&sid=88e05 af9-3895-427f-b38d-ecd5b1e4a050%40sessionmgr4002&hid=4203

PORTFOLIO STRATEGY: GOOGLE INC. (2008). Treasury & Risk, 33. Retrieved from http://eds.a.ebscohost.com.proxy.devry.edu/eds/pdfviewer/pdfviewer?vid=27&sid=88e05 af9-3895-427f-b38d-ecd5b1e4a050%40sessionmgr4002&hid=4203