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The Dynarnlc Enuironrnent 65---- - ---- -PART 1 Integrative Running CaseWhat's Mew at Google?

What's new at the world's leading online search finn?In a word, the answer is everything.Everythingabout th is company is innovative and inventive, from its technology to its organization culture, fro mits recruiting techniques to its impact on the competitive environment. Google is one of today's mostpublicized, studied, and acclaimed firms. The company exerts considerable influence on whatmodern businesses do and how they do it.T h e story of two twenty-something graduate students creating the hottest company in the worldis a familiar one. Larry Page and Sergey Brin met on the Stanford campus in 1995. The two arguedabout everything but realized they had mutual interests. Both were intrigued by the b a t method offinding a particular piece of information in the vast quantities of data accessible via the In ternet. By1998, the two had developed a new search method that examined links between various websites asa way to rate a site's usefulness. They called on several established firms and venture capitalists forsupport in marketing their product, only to be rebuffed. One search firm C EO told them, "As longas we're 80 percent as good as our compe tit~rs,hat's good enough. Our users don't really care aboutsearch." +T h e friends decided to go i t alone, raising almost $1 million from friends and professors. Pageand Brin set up their first office in a fellow student's garage. They named their company Google,after "googol," the number 10 raised to the 100th power (a 1 followed by 100 zeros). T he nam ereflected the company's ability to organize an immense amount of information.T h e pair's breakthrough technology works like this: Google users enter a search term and then arepresented with a list of matchm g websites. The process uses 500 million variables to search and indexbillions of pages on the World W ide Web. Th e company's unique search algorithm gives higher pri-ority to the most relevant results. The service is free to users. Google's revenues come from charges toadvertisers for sponsored links and display ads. Google makes a small amount each time a user clickson an advertisement.From 10,000 daily searches in 1998 to 100 mil lion in 2000, Google grew by kaps and bounds.By 2004, Google had held its initial public stock offering (IPO), raising almost $2 billion dollars onshares initially valued a t $85 each. Growth continued at a brisk pace, with increases in pqso nnel,

, .* "&lid is; users, iidvertiBersi i d proti&&. The cornp& Gsq grew through the ?&pisition of morethan 50 fimis, in~ lud ing the 006'~urchaseo f ~ o u ~ i b eor $1.65 billion and the purchase of Dou-bleCiick for $33 billion in '2008.Today, Google is a t the top o fits game. In March 2007, Google became the most visited globalwebsite when 528 millibn unique users-almost 10 percent of Earth's population-accessed Googlethat month. It has remained the most visited site since that time. Daily searches are in the billionsand Google enjoys a market share of 77 percent for Internet search in the United States.In a market where every firm's offerings are similar, Google is differentiated from competitors inthree ways. First, the search function is very effectivea t findingand prioritizing relevant sites. Second,

it is always clear to users which results are sponsored, so there are no hidden marketing motives. Third,the results page has a clean design that minimizes distraction.Over the Goog le has added numerous feanues and capabilities to its basic search function.Features include searches for images, maps, books, and scholarly articles. In addition, Google offe rsfree softw are that supports email, blogging, photo shar ing, instant messaging, and language transla-

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66 Introduction to Organizational Behavior

Its varied offerings and reliance on user-based statistics in its search function put Google at thehea rt of the Web 2.0 trend . "Web 2.0" is a term that describes a maturing phase of Internet-basedindustries, with a focus on creativity and collaboration , embodied in companies such as craigslist andWikipedia. Google is a Web 2.0 com pany for allowing users to t ag maps and images, as well as forits blogs and document-sharing capabilities. The Google subsidiary, YouTube, is also a Web 2.0firm.Technological and marketing successes have led to financial success. Shares are now worth nearly$600, although that am oun t is down from the peak of over $700 in Octobe r 2007. In the first quar-te r of 2008, revenues from paid clicks and ad sales were $5 billion. T h e company had about $12 bil-lion in cash and that amount was increasing by about $1 billion each quarter. Today, Google is themost powerful global b rand with a brand value of $86 billion, beati ng Microsoft and Apple.

Google has tremendous competitive advantage and powerful resources, but it will need all of thatto maintain its top position in the complex and dynamic Internet services industry. On e elem ent ofthe rapidly changing environment is the t rend toward globalization . Google's site is available in 160different local counu y domains and 117 languages. In each country, the com pany faces differentopportunities, different consumer expectations, and different restrictions.In Europe, Google's strategy and market share are similar to those in the United States.Advanced features such as Google Maps and Google Mail are widely used. In Africa, however,Go ogle is focused o n increasing 1Gerne t usage-less than 1 percent of Africans are online. Infra-structure is challenging and high-speed Int ernet connections are nonexistent, making it difficult forusers to view videos online.

In Japan, where Google is the second most popular search engine, the company test markets newproducts with millions of technologically savvy consumers. "People's expectations are very high herecompared to other regions," says Google engineer Ken Wakasa. "That's why we get good feedback."

Google has had a tough time penetrating the market for online search in China. Local firmBaidu.com controls more than a 50 percent market share. Google has been criticized for cooperat-ing with the censorship of the Chinese government. The company, like all Internet firms, is legallyrequired to filter search results to stop consumers from viewing some types of information, includ-ing BBC News. Google also sharply limits email, blogs, and chat in China, following incidents in2006 in which Yahoo! released personal information that led to the arrest of several Chinese' who

Another important aspect of Google's"The divmiy ofour employees and partners s e m as e n ~ o nm e n ts workforce diversit);. Thethe foundation for US t o better serve O U ~iverse customers company'swebsite sates, ''The d ivers iv ofand stakeholders all over the world.'" our employees and partners serves as the--Google website foundation for us to better serve our diversecustomers and stakeholders all over the'

world. We continually work to perfect a work environm ent that is inclusive, collaborative, and innova-tive." Google personnel include one-third women and one-third racial minorities. Benefits such ashealthcare insurance, childcare assistance, telecomm uting, and tuition reimbursem ent support diverseemployees. Employee-driven groups for diversity support include Google Women Engineers, BlackGooglers Network, H ispanic Googlers Network, and the Gayglers. However, Google has been acdusedof age discrimination. JustQ2 ercent of itsworkforce is over 40, although most of its senior managers areat least that. T h e average age of a Googler is 29.

Google is also experiencing rapid changes in its competitive and technological environmen ts.'Inits primary market, Google is effectively dominating rivals Yahoo!, AOL, and MSN, owned by

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I

Th e Dynamic Environment 67

NIicrosoft. In addition , the industry is undergoing a convergence of technologies, with the blendingof media, communications, entertainment, personal and office software, gaming, and more. Google,for example, has recently introduced a suite of online software products that manage documents,presentations, and spreadsheets. Go ogle Docs is similar in function to Microsoft Office and is free,while MS Office costs at least $150. With an increased range o f product offerings, Google placesitself in direct competition with competitors including Microsoft, Yahoo!, Apple, Viacom, andAT&T, among others.

Breakthroughs in personal computer hardware have an important effect on Google too. Thecompany does not disclose these details, but experts estimate that the company uses between500,000 and 1 million computer servers worldwide, making it by far the largest global buyer ofservers.

Google is also involved in several ethical issues. On e se t of concerns is about the natural envi-ronment. G oogle's com puter servers lrkely consume eno ugh electricity to pow er several midsizedAmerican cities. O n the other hand, G oog le is one of the largest companies to enthusiasticallyembrace and prom ote energy-saving technologies. In 2007, t he company installed solar panels thatmake up the largest corporate alternative energy system in the U nited States. T h e com pany plans toreduce its carbon foo tprint, its contributio n to global warming, t o zero by the end of 2008.

Google's energy initiatives are supported by the company's nonprofit charitable foundation,Google.org. T h e foundation was established in 1994with $1 billion of corporate profits. Th e organ-ization focuses on three global causes: climate change, public health, and poverty. Among the foun-dation's projects are development of a plug-in electric vehicle and more efficient and affordable cleanrenewable energy sources.

Another ethical issue that concerns critics of Goog le is click fraud. Click fraud occurs when aperson or autom ated program imitates a legitimate Internet user, clicking on a pay-per-click onlinead without any tru e interest in the link. Th e extent of click fraud is unknown, but on e 2006 reportestimated that one-fifth of all clicks were invalid. To the extent that click fraud is occurring onGoogle's website, t he company stands t o benefit at the expense of its advertising customers.

User privacy is an additional area where Google becomes involved in thorny ethics. T he searchfirm tracks user information using "cookies," bits of stored inform ation about the user and the web-sites he or she has visited. Cookies contain personally identifiable information tha t some users donot want to reveal. Google's cookies persist for longer than many competitors' cookies. GoogleEarth, which offers detailed maps and satellite images, also has been criticized. Some individuals areupset, for example, by oniine satellite images in which their faces can be identified. Some coun triesand security-sensitive facilities are concerned tha t detailed maps could aid terrorists. Nuclear powerplants, regions in conflict along the palcistan-~ndiaborder, and the W hite H ouse are all clearly seenusing Google Ear th.Goog le is facing many challenges, bu t clearly has advan tages and resources to help the companysucceed. Parts 2, 3 , and 4 of this case will examine various aspects of Google in g reat er detail.CASE QUESTIONS1. Based on what you have read, how would each type of management skill be important to

Google's success? Give specific examples to explain you r answer.2. Consider Goo gle as a system. Give an example of each type of input available to Google. Giveexamples of transformation processes and outputs at Google. W hat impact does the environment

have on Google and what impact does Google have on t he env ironment?

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68 Introduction to Organizat~onalBehavior -3 . Wh ich en vironm ental force (globalization, diversity, tech nolo gy and competition, or ethics) do

you think will provide the most benefits to Google in the near future? W hich force d o you thinkwill provide th e most difficulties o r problems? W hy?

REFERENCES"Corporate Information," Google website, www.google.com on May 3, 2008; Gemma Simpson, "GoogleBeats Microsoft, Coke in Brand Stakes," CNet Nms, April 23,2007, www.news.com on May 3,2008; VerneKopytoff, "Google Surpasses Microsoft as World's Most-Visited Site," San Francisco Chronicle, April 25,2007,www.sfgate.com on May 7,2008; Alex Halperin, "Google's S udng Safari,"FastCompany, April 11,2008,www.fastcornpany,com on May 2,2008; Kenji Hall, "Japan: Google's Real-Life Lab," Business Week, February14,2008, www.businessweekcom on April 29, 2008; Erick Schonfeld, "Yahoo's Chma Problem," Business 2.0,February 8,2006, www.cnnmoney.com on May 27,2008; "Cookie Monster," Finamid Ems,April 23,2008,~ww.ft.comon May 2,2008 ;Mchael Liedtke, "Lawsuit Alleges Google Discriminates Against Older Work-ers," USA Todoy, July 23,2004, wv.usatoday.com on May 27,2008; jay Greene, "Inside Rlicrosoft's WarAgainst Google," Buszness Week, May 19, 2008, pp. 36-40.