CC BY
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PûMKoea fi. W. Rozhkova D. Yu.
Candidate of Economic Sciences, assistant professor KPMG, FSEBI HE «Financial University under the Government of the Russian Federation», Moscow, Russian Federation
Экономика и управление в отраслях и сферах деятельности
Буй Фыонг Ань Bui Phuong Anh
Bachelor's Student, International Finance Faculty, FSEBI HE «Financial University under the Government of the Russian Federation», Moscow, Russian Federation
PoMuoea H. K. Rozhkova N. K.
Doctor of Economic Sciences, Professor of Accounting, Audit and Taxation Department, State University
of Management, Moscow, Russian Federation
УДК 338.2
EXAMINATION OF SINGULARITIES OF GOOGLE'S
INNOVATION MODEL
The article considers existing models of innovative development of the enterprise. On the example of a leader of innovations — the company Google (Alphabet Inc.) it has been revealed that the company uses a hybrid model of innovation or a mixed strategy of innovation development. It involves use of both an open and a closed model of innovation. The authors give a description of the main forms of the innovation process in the company, as well as the innovative measures implemented. Based on data from 2005-2016 a correlation analysis was performed. It is proved that innovation activity influences the competitiveness of the company. Obtaining new patents, purchase of new property and equipment and producing publications have very strong correlation with revenue (the correlation is more 0.9). Meanwhile acquisitions have positive but not so significant correlation. As for R&D expenditure, it has quite strong positive correlation which indicates a good relation of these variables.
In conclusion, three main principles of the innovative model of Google has been shown. The first principle — capabilities to be proactive means constant changes in the company on the basis of a systematic review and use of existing information in the company for future projects. Many of the ideas that could not be realized at a certain point in time, became attractive using modern advanced technologies.
A duplicitous organization: in terms of daily responsibilities Google applies managerial control, while in innovation it allows flexibility, openness. Google has a practice to encourage non-traditional, unique thinking in the implementation of innovative activities.
The third principle is an open organization that networks with its surroundings openness of the organization: Google has connections with the internal and external environment, an open and closed innovation model is practiced. At the same time, it's implemented an encouragement and stimulation of innovation in all areas of the company by any employee of the company.
Key words: innovation, model of innovative development, strategic management of innovations, strategic management of innovations, strategic analysis, innovative strategy, types of innovative strategies, conditions for the formation of innovative strategies.
ECONOMY AND MANAGEMENT iN BRANCHES AND FiELDS OF ACTiViTY
ВЫЯВЛЕНИЕ ОСОБЕННОСТЕЙ ИННОВАЦИОННОЙ МОДЕЛИ КОМПАНИИ GOOGLE
В статье рассматриваются существующие модели инновационного развития предприятия. На примере лидера инноваций — компании Google (Alphabet Inc.) — выявлено, что компания использует гибридную модель инноваций или смешанную стратегию инновационного развития. Она предполагает использование как открытой, так и закрытой модели инновационной деятельности. Авторами дана характеристика основных форм инновационного процесса в компании, а также выявлены осуществляемые инновационные мероприятия. На основе данных 2005-2016 гг. проведен корреляционный анализ. Доказано, что инновационная деятельность влияет на конкурентоспособность компании. Патентная деятельность, покупка новых основных средств и публикационная деятельность очень сильно коррелируют с доходами (корреляция — более 0,9). Между тем стратегия поглощений имеет положительную, но не столь значительную корреляцию. Что касается расходов на НИОКР, то он имеет довольно сильную положительную корреляцию, которая указывает на взаимосвязь переменных. В заключении выделены три основных принципа инновационной модели компании Google. Первый принцип — способность к проактивности означает постоянные изменения в компании на основе систематического пересмотра и использования существующей в компании информации для будущих проектов. Многие из идей, которые невозможно было реализовать в определенный момент времени, становились привлекательными с использованием современных передовых технологий.
Двусторонняя организация: с точки зрения ежедневных обязанностей в Google применяют четко организованный управленческий контроль, в то время как в инновационной деятельности приветствуется гибкость, открытость. У Google есть практика для поощрения нетрадиционного, уникального мышления в рамках осуществления инновационных мероприятий.
К третьему принципу относится открытость организации: у Google налажены связи с внутренней и внешней средой, практикуется открытая и закрытая инновационная модель. При этом поощряются, стимулируются инновации во всех сферах деятельности компании любым сотрудником компании.
Ключевые слова: инновации, модель инновационного развития, стратегическое управление инновациями, стратегический анализ, инновационная стратегия, типы инновационных стратегий, условия формирования инновационных стратегий.
In the conditions of globalization and depletion of resources, the economic entities target to build strategic management system in order to achieve long-term goals through innovations and innovative development of organisation.
An innovation is a new technological breakthrough. When talking about innovation process, basically there are five models of innovation that exist: linear, coupling, interactive, open and closed.
1. Linear model of innovation can be divided into two types: technology push (1950s/1960s), market pull (1970s) [1].
In technology push innovation starts with researchers' work, testing and then if everything turns out successful, it is moved to the next stage — manufacturing, afterwards the product is marketed to potential customers and finally, get
sold. In market push model difference appeared along with the change in marketing concepts, marketing philosophy. So instead of doing researching work at the first place, ideas for innovation are born by studying needs, preferences and desires of potential customers. In this model the customer is the main focus.
2. Coupling model (1980s) is more upgraded model developed by Mowery and Rosenberg, which integrate manufacturing, research and development and marketing to innovate [2]. Knowledge within all three organizational functions supposed to be combined for innovation to work. This framework requires an organization to establish good communication within the internal and external environment; the science base, innovative organization and the market.
3. Interactive model of innovation (1990s) created by Rothwell and Zegveld is a more complex model that connects 2 different types of linear model [3, 4]. In this model there is no starting point but continuous relations among the participants. The centre of it is research and development (R&D) manufacturing and marketing. Along the whole innovation process both science and technology advances and marketplace's needs are considered which gives more flexibility and better final output.
4. Open and closed models of innovation (2000s). In order to successfully innovate a company needs closed model of innovation where it can come up with and develop its own idea without external distortions. Additionally, this model allows a company to focus on in-house R&D, as well to protect its intellectual property from others copying it.
In open innovation model it is vice versa. From the 21st century companies started turning to open instead of closed model. As H. Chesbrough defines: «Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology» [5]. External ideas may come from partnership with others such as universities, rivals, government, suppliers etc. Another variant is competition, contests where everybody can submit their own ideas. That was the way companies such as Xerox, Intel, P&G and Cisco used. This model allows a company gets access to a huge pull of ideas to develop into the next innovation that will make changes. Another advantage is feedback from users which helps to perfect, improve the product.
When it comes to talk about Google, most people definitely say about its great and fast search engine. However, Google has also achieved a significant success in innovation and producing new products and services, from e-mail and online document creation to software for mobile phones and tablet computers. And it is broad product portfolio and size makes it one of the top four influential companies in the hightech marketplace, along with Apple, IBM, and Microsoft. Google is corporation specializing in
Экономика и управление в отраслях и сферах деятельности
Internet-related services and products including online advertising technologies, search, cloud computing and software.
To study how Google performs innovation it is vital to understand its innovation model. The company uses hybrid model of innovation or a mixed strategy of innovation development [6]. It implements both open and closed innovation models and at times it can follow no specific model. However, it can be said that Google in great part uses open innovation when it comes to test, to research its products and services. It applies different channels to communicate, share and collaborate with outsiders to obtain new ideas, suggestions, feedbacks, reviews on its ongoing or upcoming products and services.
And as any companies it also follows a closed innovation model where there is no external influence. The exampled product of such model is Google Wave. Open innovation model usually tends to produce incremental, sustainable innovation while closed one tend to create disruptive innovation such as Google Glass and Driverless Car.
To our understanding innovation in Google comes in two forms: top-down and entrepreneurial (is also called bottom-up) innovations (Table 1).
Table 1. Top-down vs. Entrepreneurial Innovations
Top-down innovation Entrepreneurial innovation
1. Researchers, PhDs 1. All employees
2. Big ideas from the top 2. Ideas from everywhere
3. Close environment 3. Open and shared environment
4. Formal research proposals 4. Informal proposals
5. Papers — patents — product 5. Prototypes — products — papers
Top-down innovation is when the people set the ideas, targets and communicate it down to others. The key examples of it are Google Books and Google Translate. On other hand, entrepreneurial innovation is when employees have opportunities to innovate. The company believes innovation can come from every worker and encourages entrepreneurial spirit inside the company providing with necessary resources for development. However, not every project has a chance to get out of the company. This form will
Economy and management ín branches and fíelds of actmty
sieve the best innovations from ones that not good enough to see the world as there is a fierce competition for financing and collaborators inside the company. Only best ideas with great potentials attract other employees to join the project as the company does not decide or distribute the people to the projects except for ones related to the core business. Hereby, entrepreneurial innovations help Google addressing the innovation dilemma pointed by C. Christensen where start-up companies take out the market or create new markets [7].
According to the worldwide innovative company's ranking prepared by Boston Consulting Group in 2017 and in 2018, Google is on the second place, just after Apple [8]. Then it is reasonable to consider that the company performs many innovative activities and has an excellent management system. The major innovative activities at Google are purchases of new patents, new companies, new technology and know-how; training human resource; investing in start-ups; publishing papers, articles, research; in-house technology building; R&D.
Google is one of the companies with high R&D spending. The company has many different labs and research centres. The major R&D centres of Google are Google X and Google Research. Google Research deal with R&D relating to the core business such as Data Management, Algorithm, Electronic Commerce, Machine Translation, Machine Intelligence, Speech Process and many others. As for Google X, it is aimed to tackle global problem with radical solutions. That is why R&D mainly dedicated to new breakthrough ideas.
— Purchases of new patents, new companies, new technology and know-how.
Google frequently enrich its patents portfolio through acquisition and purchases of other companies. For instance, Google is considered one of the biggest buyers of IBM's patents (16 % of IBM's total sold patents since 1990) [9]. In 2015, the company launched a Patent Purchase Program where all patent owners can offer their patents by submitting the form on the site. Google does not stop on buying only patents, it also acquires, purchase the whole company with
its technology, employees and founders. The Time's analysis states Google has acquired at least 221 start-up founders since 2006 till 2014 [10].
— Training human resource. At Google there is variety of courses offered to employees where they can learn and practice at the same time, some may even may become others' teacher, mentor of others.
— Investing in start-ups. GV is the Google's venture that provides investments and technical support for new promising companies. Besides, there is also Google for Entrepreneurs which unites start-ups and helps them to realise their ideas into reality.
— Publishing papers, articles, research. Annually the company publishes hundreds of papers on different topics on Research at Google.
— Collaboration with external partners. Besides internal activities, Google also seeks for external resources. The examples are partnership with Oxford to develop artificial intelligence, partnership with libraries to enhance Google Books, partnership with various mobile companies to produce Nexus, Chrombooks, and the most recent one is partnership with Howard University to launch a program for IT black students. Besides, Google has 2 programs (Focused Award Program, Faculty Research Award Program) to collaborate with universities' researchers.
— In-house technology building. Google design and builds not only its products but as well the tools that support the company's operations, processes. For example, instead purchasing computers and creating data centres, the company creates its own [11].
To study whether innovative activities have some relations to the company's competitiveness, the correlation analysis has been done. Assume that revenue as representation of competitiveness (Y); while number of new patents (X1), R&D spending (X2), purchase of property and equipment (PE) (X3), acquisitions (X4) and number of publications (X5) as influencing factors. The data are taken from 2005 till 2016 based on financial reports of Google. Unfortunately, not all the innovative activities
can be transformed into numbers or there is no available data on it. That is why it was impossible to include it all into the analysis. Below is the result of the correlation analysis (Table 2).
Table 2. Correlation analysis
Y X1 X2 X3 X4 X5
Y 1
X1 0.91 1
X2 0.72 0.58 1
X3 0.92 0.92 0.62 1
X4 0.23 0.13 0.24 0.39 1
X5 0.96 0.83 0.75 0.82 0.22 1
As the analysis shows, obtaining new patents, purchase of new PE and producing publications have very strong correlation with revenue (the correlation is more 0.9).
Meanwhile acquisitions have positive but not so significant correlation. The possible explanation is that those acquisitions are not immediately found its implications. Thus, it has no effects in short-term. Indeed, this can be typical for Google as it buys, acquires many new patents, companies which it does not know what to do with. As for R&D expenditure, it has quite strong positive correlation which indicates a good relation of these variables.
Conclusion
To conclude, Google is an innovative company and its innovative spirit comes from inside inspired and encouraged by the tops. To
Экономика и управление в отраслях и сферах деятельности
our understanding, Google's model for innovation is based on following principles:
1. Capabilities to be proactive: Google has ability to meet the fast-changing world by refreshing, integrating and redirecting its internal and external competencies. The company never stops changing and all changes are based on its core beliefs and values.
2. A duplicitous organization: in terms of daily responsibilities Google applies managerial control, while in innovation it allows flexibility, openness. The example is the separation and creation Google X which mainly focuses on explore functions while Google Inc. focuses on exploit functions.
3. An open organization that networks with its surroundings: Google has indeed great networks with both internal and external environments by practicing both open and closed innovation model.
Having all the ingredients for innovation, the company can tickle the world's unsolved problems; conquer new markets through infinite possibilities. Nevertheless, innovation is an endless process. In such regard, the company should always keep improving and refreshing its innovation model. It is especially essential due the threats such as high, intensive competition, loss of employees and US and EU new laws and regulations that are not in favor Google. Furthermore, despite of its strengths there is still room for improvements.
Список литературы
1. Luong J.H.T., Male K.B., Glennon J.D. Biosensor technology: technology push versus market pull // Biotechnology advances. 2008. Т. 26. №. 5. С. 492-500.
2. Leydesdorff L. The triple helix: an evolutionary model of innovations // Research policy. 2000. Т. 29. №. 2. С. 243-255.
3. Rothwell R. Developments towards the fifth-generation model of innovation // Technology Analysis & Strategic Management. 1992. Т. 4. № 1. С. 73-75.
4. Rothwell G., Rothwell R., Zegveld W. Reindustrialization and technology. ME Sharpe, 1985.
5. Chesbrough H.W. Open innovation: The new imperative for creating and profiting from technology. Harvard Business Press, 2006.
6. Блинова УЮ., Щербинина Е.И. Основы выбора инновационной стратегии промышленного предприятия в России // Вестник университета. 2016. № 12. С. 136-138.
7. Christensen C.M., Raynor M.E., McDonald R. What is disruptive innovation // Harvard Business Review. 2015. Т. 93. № 12. Р. 44-53.
8. https://www.bcg.com/Images/BCG-Most-Innovative-Companies-Jan-2018_tcm9-179354. pdf.
9. https://www.iam-media.com.
Economy and management ín branches and fíelds of actívíty
10. time.com.
11. Huber J. The 10 Innovation secret of Google // Spencer Stuart. 2014. 14 p.
References
1. Luong J.H.T., Male K.B., Glennon J.D. Biosensor technology: technology push versus market pull // Biotechnology advances. 2008. T. 26. № 5. P. 492-500.
2. Leydesdorff L. The triple helix: an evolutionary model of innovations // Research policy. 2000. T. 29. № 2. P. 243-255.
3. Rothwell R. Developments towards the fifth generation model of innovation // Technology Analysis & Strategic Management. 1992. T. 4. № 1. P. 73-75.
4. Rothwell G., Rothwell R., Zegveld W. Reindustrialization and technology. ME Sharpe, 1985.
5. Chesbrough H.W. Open innovation: The new imperative for creating and profiting from technology. Harvard Business Press, 2006.
6. Blinova U.Yu., Shcherbinina E.I. Fundamentals of the choice of innovation strategy of an industrial enterprise in Russia // Vestnik universiteta. 2016. No. 12. P. 136-138.
7. Christensen C.M., Raynor M.E., McDonald R. What is disruptive innovation // Harvard Business Review. 2015. T. 93. № 12. P. 44-53.
8. https://www.bcg.com/Images/BCG-Most-Innovative-Companies-Jan-2018_tcm9-179354. pdf.
9. https://www.iam-media.com.
10. time.com.
11. Huber J. The 10 Innovation secret of Google // Spencer Stuart. 2014. 14 p.
