Google's Real Innovation: Recognizing The Power Of Complementary Goods

from the the-nicholas-carr-enigma dept

Of business pundits these days, I think the one I enjoy reading the most is Nicholas Carr -- and it's not because I agree with him, but because he's the most challenging to understand when I think he's wrong. Carr is amazingly smart, often sifting through a lot of hype to pull out some really key and important insights and making them clear and easy to understand. What's amazing, however, is that all too often, he takes all of those really great insights and jumps to a totally ridiculous and unsupported conclusion. As I've pointed out before, as you read what he says, you agree with all those really smart insights, and if you're not careful, you can accidentally agree with the conclusion he draws -- even if it's not supported by all those insights. His latest is an article where he argues that Google is not a company worth emulating when it comes to innovation because it has a unique business model that is really based on providing complementary goods (basically almost any use of the internet) to encourage more sales for its key good (ads). The fact that Google uses complementary goods to help make its core business bigger is a key insight that too few people have expressed clearly, so it's great to see Carr call that out.

However, where he goes off track is in suggesting that this is somehow a unique situation and there isn't much to learn from it. Instead, he should be pointing out that this is the key insight that plenty of companies should be paying attention to -- as the key to building sustainable competitive businesses in the digital age is understanding the economics around complementary goods. Almost every successful business recognizes this and learns to exploit it. Intel always did a great job of this, building up businesses that seemed unrelated, but were always about driving more advanced uses of computing to increase the demand for more chips. As we've discussed at great length, the entertainment business has always been about using content to sell complementary goods, whether it's movies to sell admission tickets or DVDs or music to sell concerts and CDs. The newspaper business has always been about that too. Using "the news" as a complementary good to sell eyeballs to advertisers. In fact, Techdirt's own business is based on this core concept as well -- though, I'll leave it as an exercise to the reader to figure out how (and, no, it has nothing to do with advertising).

Carr, unfortunately, leads people astray by suggesting that understanding complementary goods isn't important unless you're Google. He is right to point out that this is a key point to Google's on-going success (rather than the silly things the press often talks about, such as its free food and "20% time"), but he's way off in suggesting that there aren't important lessons that others can learn from this recognition of basic economics concerning complementary goods.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Se7en, Nov 28th, 2007 @ 8:33am

    Carr

    Weird, Mike. I have the exact same reaction to Rough Type (Nick Carr's blog). I read his preambles, and am impressed with the disparate facts he's gleaned from the internet about companies, various statements, etc...then he invariably goes off on some wild speculation, that isn't really supported by all the information he's gleaned (I suppose, thats why its call "speculation :p ). In some ways, he reminds me of Cringely in that way :p

     

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  2.  
    identicon
    fredjkl', Nov 28th, 2007 @ 10:23am

    Sorry, I'm trying to wick out the eggdrop soup I just spilled onto my keyboard. It seams to be working for now though.

     

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  3.  
    identicon
    Shun, Nov 28th, 2007 @ 11:04am

    Car, Cringely, Dvorak...wish I had that job

    Man, who pays these folks? They must be highly intelligent, can-see-the-writing-on-the-wall types, but at the last minute, they take an abrupt U-Turn? OK, well in Dvorak's case, he's often just dead wrong, but man, who puts these guys up?

    There's a meme going on in Slashdot that says that these pundits exist to drive traffic to the website of their hosts, so people can flame them. "There's no such thing as bad P.R." as they say. If you're mad, at least you're talking about them.

    Still, I'd like to have the job where I lay out all of my foundational statements, and state a conclusion that's on the opposite end of the spectrum.

    Also, Google is investing in renewable energy because, well, they use a lot of energy, duh!

     

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  4.  
    identicon
    Le Blue Dude, Nov 28th, 2007 @ 11:51pm

    Techdirt

    Well DUR techdirt is a consulting firm. Says so at the top of the blog. The blog is a complementary good to the consulting.

    You sell 'insight'

     

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  5.  
    identicon
    Anonymous Coward, Jul 31st, 2008 @ 2:14am

     

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  6.  
    identicon
    Anonymous Coward, Jul 31st, 2008 @ 2:15am

    pop

     

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  7.  
    identicon
    dfsfsf, Jan 26th, 2009 @ 5:26am

    Re: Carr

     

    reply to this | link to this | view in thread ]


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