Google vs. Microsoft: Competitive Strategies and Innovation Culture

Introduction: Two Tech Giants in Competition

Both Microsoft and Google have emerged as catalysts of remarkable growth in the high-technology industry. Each company has a unique, finely tuned set of strategies for managing the innovation process, including the steps each relies on for creating new services. Both have also demonstrated remarkable success at delivering disruptive innovations in their core markets and across global consumer markets. This track record of success is no accident; there is a fierce level of intensity and competitiveness both within each company's culture and across their vast global ecosystems of suppliers, customers, and shareholders.

Both companies are working to dominate the lucrative online advertising business, a model showing the potential to become a multibillion-dollar industry over time (Finkle, 2012). Both have invested heavily in contextual search as well as in-car navigation systems, and in Google's case, a fully automated driverless car (Finkle, 2012). Both are also solidly positioned to lead the next generation of cloud computing — Microsoft with its Azure platform and Google with its AppEngine series of online platforms (Cusumano & Gawer, 2002).

The cultural strengths of Google emanate from the highly competitive academic environment of Stanford University, where the two founders graduated less than two decades ago. The culture at Stanford, and now at Google, places a high value on solving complex, challenging theoretical problems with elegant yet powerful algorithms (Dollinger, 2006). Google is also highly selective in hiring, concentrating on choosing only the most qualified candidates. This creates a culture of continual intellectual challenge and a strong focus on shared intelligence and knowledge (Badawy, 2008). It also produces a galvanizing effect in teams composed of some of the world's smartest people in a given field.

Contrary to this approach of unified effort through a shared intelligence base, Microsoft is a more fragmented organization that thrives on internal competition and the continual effort to outperform other groups with more innovative and elegant algorithms and programming (Love, 2006). The goal of this analysis is to show how the cultures of Google and Microsoft continually benefit from competition with each other. A projection is also offered regarding how each company will continue to change and grow rapidly under its current corporate culture. As with any forward-looking analysis, assumptions must be made, and they are included here.

How Google and Microsoft's Competition Drives Each Other

One unique cultural trait both companies share is the ability to focus their best programming and engineering talent on extremely difficult problems and resolve them quickly, while ensuring that solutions are integrated back into existing programming platforms (Finkle, 2012). This is especially evident in how quickly Google moved past Microsoft in the area of mobile operating systems and in the rapid development of Google Glass, which features a contextual operating system for wearable computing (Finkle, 2012). Microsoft, for its part, partnered with Nokia and worked on a variation of its operating system capable of supporting advanced smartphone functions. Both groups regularly benchmark their performance against each other through competitive analysis and ongoing evaluations (Finkle, 2012).

Google holds the overall speed advantage, particularly because the company is much more focused on innovation driven from the engineering teams outward. Microsoft's development approach reflects a more fixed mindset, while Google allows its engineers to invest 20% of their time in new product ideas of their own choosing — a practice known as the Rule of 20%. This strategy has been highly successful for generating new product ideas; many of the company's greatest innovations have emerged from it, including Google Docs and other applications used by millions of people daily (Finkle, 2012). Google's culture attracts a specific type of engineer who actively seeks out complex, challenging problems that require creative solutions, which in turn continues to accelerate the pace of innovation in search and broader technology markets (Badawy, 2008).

Innovation Models: Google's Rule of 20% vs. Microsoft's Agile Hierarchy

Where Google embraces the open, exploratory Rule of 20%, Microsoft operates a much more hierarchically based model centered on regimented approaches to agile product development (Love, 2006). Google thrives on a comparatively chaotic approach to giving engineers creative freedom, while Microsoft maintains strict discipline in its development cycles. Microsoft was also intentionally designed to promote internal competition — founders Bill Gates and Paul Allen believed that internal rivalry was a critical driver of better software and greater innovation. This drive for internal competition, however, has at times made Microsoft more myopic and siloed in its organizational structure (Love, 2006). The rapid growth of the internet and its security demands have also pushed Microsoft into a markedly different competitive posture relative to Google (Cusumano & Gawer, 2002).

Three principal ways each culture benefits from the other's competitive strategies can be identified. First, Google is racing to keep pace with the enterprise market that Microsoft dominates on the desktop, and is further challenged by how advanced Microsoft has become in cloud computing platforms, including Azure and hosted office automation applications (Finkle, 2012). Second, Microsoft perfected the agile development methodology and has institutionalized it within its organizational structure; Google still struggles to transform the sheer volume of ideas generated through the Rule of 20% into fully viable products (Shaw, 2004). Third, Google is continually learning how to create more effective personal and office automation applications by competing against Microsoft's dominance of the desktop.

Conclusion

For Google to protect its sizable market share in search and advertising, and for Microsoft to expand beyond its Office franchise, both will need to refine their cultures in the context of continual learning and development (Cusumano & Gawer, 2002). This will be the only path available to each company to sustain its growth trajectory. The competitive dynamic between these two technology giants — each pushing the other to innovate faster, think more broadly, and execute more effectively — will continue to reshape the high-technology industry today and into the future.