Fairly Recently: Must- and Should-Reads, and Writings (December 27, 2019)...

Ben Thompson: The Value Chain Constraint https://stratechery.com/2019/the-value-chain-constraint/: 'What matters is not “technological innovation”; what matters is value chains and the point of integration on which a company’s sustainable differentiation is built; stray too far and even the most fearsome companies become also-rans.... Google... has been predicated on “technological innovation”. This was possible because the company’s core product—Internet search—entered a value chain with no integrations whatsoever. On the supply side there were countless websites and even more individual web pages, increasing exponentially, and on the demand side were a similarly increasing number of Internet users looking for specific content. Crucially, all of the supply was easily accessible... and all of the demand was capturable.... This meant that the best search engine... could win, and so it did. Google was leaps and bounds better than the competition, thanks to its focus on understanding links—the fabric of the web—instead of simply pages, and consumers flocked to it. This set off the positive cycle I have described in Aggregation Theory: owning demand gave Google increasing power over supply, which came onto Google’s platform on the search engine’s terms, first by optimizing their web pages and later by delivery content directly to Google’s answer boxes, AMP program, etc., all of which increased demand, resulting in a virtuous cycle.... Things have not gone so well for Google Cloud.... The problem... is that the company’s value chain is completely wrong. The world of enterprise software is not a self-serve world (and to the extent it is, AWS dominates the space); what is necessary is an intermediary layer to interact with relatively centralized buyers with completely different expectations from consumers when it comes to product roadmap visibility, customer support, and pricing. It has taken Google many years to learn this lesson: Google Cloud remains a distant third to AWS and Microsoft with a strategy that simply wasn’t working.... The technical attributes of a product are only one piece of what matters to success in the enterprise. Just as important are customization, support, and the ability to sell. Google is widely regarded as being the worst in all three areas. In short, what Google Cloud needs is not a CEO that fits the culture, because the culture of Google is about making the best product technologically and waiting for customers to line-up. That may have worked for Search and for VMWare, but it’s not going to work for Google Cloud. Instead the company needs to actually get out there and actually sell, develop the capability and willingness to tailor their offering to customers’ needs, be willing to build features simply because they move the needle with CIOs, and actually offer real support.... Google Cloud is competing in a different value chain than is Google search, and it needs to build new integrations accordingly...


#noted #2019-12-27

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