Google’s three Ps

A company is nothing more (and nothing less) than three things: people, processes and purposes. In the language of the software engineer these would be inputs, algorithms and specifications. In the language of classical business analysis they are assets (or resources), organization structures and business models. In military theory, these are logistics, tactics and strategy.

This is the trinity which allows for an understanding of a complex system: the physical, the operational and the guiding principle. The what, the how and the why.

When approaching any analysis problem, these questions form the foundation of causal inference. What is it, how does it work and why does it exist?

When analyzing nature the sciences often help with the what and the how but rarely address the why.1 In contrast, man-made systems (e.g. systems of law, religion and commerce) require an answer to the why as there is a presumption of a will in their creation and preservation. The why allows ultimate judgement on the merit of an enterprise. The why may escape us but it’s assumed to always be there. For instance, in criminal law the motive is often a crucial piece of evidence but it’s not always found. In business, the motive for action or for organization is a crucial piece of the puzzle which often explains the what, who and how, but here the ultimate why is usually profit. This the characteristic of a for-profit business, the purpose is explicit.

Some companies try to define their purposes beyond profit but they are often too vague or merely speak of values represent a quality not causality.

This is the case with Google. The problem isn’t only that “don’t be evil” isn’t a priority or a purpose, but also that its resources are not applied to cohesive goals. In fact, there seems to be no interest in pursuing a direction aligned with generating income.

This is not in itself a bad thing. The notion of operating as a learning (vs. a deliberate) organization, informed but not driven by a goal, is the best approach when seeking new markets or discovering new needs and new business models. The difference with Google is that there seems to be no expectation of business model discovery. In other words, that the learning is not for any purpose other than learning itself.

This might be noble but learning for its own sake has not been attempted by public, for-profit organizations2 since there is an implicit fiduciary responsibility to generate profit and unrestricted experimentation, unguided by profit, is unlikely to ever learn the needs of markets.

The evidence I note supporting this is in the persona the company maintains, both internally and externally. There is no representation of themselves as a “business seeking profit” or even as a commercial entity. It’s not simply because their business model is embarrassing. It’s because all business models are embarrassing.

The representation is one of a research laboratory succeeding against difficult problems. Very similar to a successful academic or industrial laboratory sustained by grants from a benevolent (but messy) organization. Google becomes the embodiment of “big science” and “the world’s laboratory” unfettered by politics and unsoiled by commercial interests.

There is a business in Google but it’s a very obscure topic. The “business side” of the organization is only mentioned briefly in analyst conference calls and the conversation is not conducted with the same team that faces the public. Even then, analysts who should investigate the link between the business and its persona seem swept away by utopian dreams and look where the company suggests they should be looking (mainly the future.)

There are almost no discussions of cost structures (e.g. cost of sales, cost of distribution, operations and research), operating models (divisional, functional or otherwise) or of business models. In fact, the company operates only one business model which was an acquisition, reluctantly adopted.

It’s as if the management is not only uninterested in its own profit model but deeply scornful of it. For all the technology innovations the company can claim, it has not had one internally sourced business model innovation.

But is this wrong? Again, we need to ask if Google breaks with convention then maybe convention needs to be broken. This is the radical bet underlying the Google thesis: are business models necessary? This is in fact a bet many VCs are implicitly placing within the current start-up culture. The notion of making a profit or even having an interest in doing so seems passé. This notion is directly traceable to the Google ethos as it acts as the source of acquisition funding and is driving the agenda of VCs and entrepreneurs. This is leadership by example and the example is one of blissful ignorance of market constraints.

But we have to go back to the profit model, even if analysts, observers and the company itself sweep it under a rug. The reason is that this laboratory runs only as long as the grant money keeps coming. No bucks, no Buck Rogers. So far the money rains down from heaven, but that rain is not infinite nor permanent. The answer seems to be diversification, even the creation of a conglomerate. In other words, the answer seems to be that if enough great technology is developed or acquired, then a business model will appear (think about it as a probability problem) and the vulnerability of revenue sources is managed. Clever? Convenient? We’ll see.

But that’s not the only problem. The deeper problem is in us knowing their intentions. The absence of a purpose rooted in profit makes Google resistant to analysis. There might be a purpose, known only to the founders3, but it’s one that is potentially naive, amoral or too abstract to be useful. Shareholders are aware of this and have agreed to entrust control to only three individuals. The purpose of the organization is in their hands alone and reflects their priorities. Bearing in mind that the road to hell is paved with good intentions, they must be brave indeed.

This would not be too troubling if the effect would be restricted to the company stakeholders. The trouble lies in that organization also having de-facto control over the online (and hence increasingly offline) lives of more than one billion people. Users, but not customers, of a company whose purpose is undefined. The absence of oversight is one thing, the absence of an understanding of the will of the leadership is quite another. The company becomes an object of faith alone.  Do we believe?

1. Religion attempts to answer the whys which science leaves as unanswerable. [↩]
2. The Bell Labs story in an interesting possible exception but on deeper inspection it was the by-product of a  government sanctioned monopoly and hence a ward of the state [↩]
3. or not known at all [↩]