Three Strikes for Google, Three Strokes for Microsoft
The Three Strikes of bad strategy that hurt Google, and the Three Strokes of great planning that propelled Microsoft to the pinnacle of Big Tech
Today’s article is a collaboration between me, Ricky Sutton, author of Future Media, and Salvador Klein, author of Three Strikes Theory.
Salvador is a successful executive and entrepreneur, and an investor in my last AI company Oovvuu.
In Three Strikes Theory, he explores how any company, large or small, is only ever Three Strikes from disaster, or Three Strokes from success.
Today we’ve teamed up to apply the Three Strikes Theory to two of the worlds’ Big Tech companies, Google and Microsoft.
Three Strikes for Google - Ricky Sutton
Google CEO Sundar Pichai has the world on his shoulders.
His company is foundering, his rivals are trouncing him, 25-years of growth is slowing and efforts like Gemini have made the tech leader a laughingstock.
Whispers that his days are numbered are gaining volume, and he has antitrust cases right around the corner.
The line between success and disaster can be very thin. Mentor, investor and post-exit founder Salvador Klein has seen it first-hand.
His newsletter Three Strikes Theory shares how even massive companies exist just three strikes of misfortune away from disaster.
Many leaders use strategy, planning, resourcing, and implementation to grow. Only exceptional leaders know how to stop a strike of bad luck escalating to crisis.
Google failed to heed the warnings.
Strike one: Antitrust misstep creates a cascade of legal woes.
The first strike was to gouge the market so severely that it riled regulators and politicians enough to sue a great success story for antitrust, to break them up.
Despite its data and big brains, Google then misread the tealeaves.
It allowed its first antitrust case targeting the app store to be heard before a jury. They took less than an hour to find against Google and break their $48 billion profit centre.
At its second antitrust case over search, Google’s lawyers argued it couldn’t be a monopoly because the general search market isn’t a thing, despite having a 90% share.
The third is the blockbuster, as it goes after Google’s ad monopoly in September, from which the $1.7 trillion company derives 78 per cent of its revenue.
That’s again, before a jury.
Strike two: AI fumble costs them more than just the lead and the edge.
Everyone knew Google had the lead in AI, but then Microsoft quietly invested in OpenAI, and kickstarted the AI revolution.
By doing so, Microsoft put itself in the driving seat of the $2 trillion AI rocket that is now thrusting the digital economy to new heights.
Pichai didn’t have the right stuff. Fearing AI could go wrong, he told the company to go slow.
Investors slashed $112 billion off Google’s valuation. Now his job is on the line.
Strike three: Reputation takes a pounding.
Google’s reputation has taken a pounding over the past year, and it’s becoming more of a foe than a friend.
And losing its technological edge will make it harder than ever to rebuild its brand bank.
It rushed out a substandard AI rival, initially called Bard, then quickly replaced with a rebuild called Gemini, but then lied about its capabilities at the glitzy launch.
Ouch. In fact, it looks to the world like Google has lost the plot.
The convergence of these major events has eroded Google’s reputation so badly, depleting decades of a robust brand bank.
When a business we have considered a friend of social and economic innovation and growth becomes the enemy, the consequences could be truly mind-blowing.
Once famed for world changing innovations, it is having its Kodak moment. That’s hard to repair.
Now see Salvador’s take on Microsoft’s Three Strokes of genius that have propelled it to the top of Big Tech’s trillionaire league table.
Three Strokes for Microsoft - Salvador Klein
In January 2024, Microsoft leapfrogged Apple to become the world’s most valuable company. How?
Let’s explore how three strokes of good luck can be attributed to Microsoft’s great success, and probe what we can learn from this to know how to put ourselves in luck’s way.
So far we’ve seen that when Three Strikes (of bad luck) happen, it’s not the fact that they happen but the convergent timing of two strikes and their compounding effect.
In the case of Three Strokes (of good luck) timing is also crucial but - I believe it is not down to the convergent timing of any of the Strokes, but rather the broader market timing - the time in history - and the interrelation of each Stroke that combine to deliver great success.
Ricky has previously written that Microsoft's “Satya Nadella looks gangster” and that his success was the “result of a great execution of a great strategy, but even more than that, it’s the result of strong leadership, and a lack of leadership from rivals.”
Let’s explore.
It’s been 10 years since Nadella stepped in as CEO. Back in February 2014 Microsoft was:
Late to the internet.
Nowhere on mobile.
Average on social media.
Low on confidence or reputation and giving investors little to get excited about.
Then Nadella got strategic, put Microsoft in luck’s way, and delivered the Three Strokes that turned Microsoft into the world’s most valuable company.
Stroke one: investment in cloud ahead of the AI curve.
Nadella saw the future would be AI, and AI needed cloud, so he built Azure to be a strong challenger to Amazon’s cloud dominance.
Stroke two: the stalwart backing of a Board across a decade.
The Microsoft Board stood fast and continued to back Nadella and his strategy - over the course of a decade - through tough times.
Most boards would have demanded near term results from the CEO, and quick return on investments.
The impact of this cannot be overstated, and as Ricky wrote “bad boards kill good leaders”.
Stroke three: investment into, and quick deployment of, OpenAI.
In 2019, Nadella invested $1 billion into OpenAI, with the associated press release saying:
“We’ll jointly develop new Azure AI supercomputing technologies, and Microsoft will become our exclusive cloud provider - so we’ll be working hard together to further extend Microsoft Azure’s capabilities in large-scale AI systems.”
Nadella then embedded ChatGPT into Bing, Office, Edge and Azure. The result?
Microsoft revenue increased 13 per cent.
Azure revenue increased 24 per cent (in just over three months).
The investment in OpenAI was worth 300 per cent more.
Microsoft’s market cap rose 57 per cent in 2023, as of this writing it sits at $3.19 trillion.
So far, we’ve seen that when Three Strikes of bad luck converge, it is disaster for companies large and small, and this convergence usually occurs within a few months or years.
Interestingly, this case study and a number of others, show that Three Strokes of good luck may not need to converge in close succession, but I still believe that timing is very important.
Imagine if Microsoft’s investment into cloud happened five years later, or five years earlier. That timing may have impacted the stalwart support of the board, or the position of advantage to partner with OpenAI.
Hindsight is useful, but it can also be a b*@!ch. The challenge for the business leaders who are reading this is:
How to correct identify when a Strike has hit, as if you had the power of future hindsight.
How to put your company in luck’s way, to deliver a Stroke that drives towards success.
Big Tech and AI and strategy and luck affects literally every business on the planet, but our future is not written.
Fate is like a sword. It only works for those who wield it.
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