Google's announcement that it will invest hundreds of millions of dollars into alternative energy really got me thinking about the history of Microsoft and Intel.
This is one of those ideas that could be amazingly brilliant and help Google avoid a large number of problems that plagued Microsoft as it grew to dominance, or take Google down the diversification path that nearly wiped Intel off the map.
Early indications have me leaning toward the former more than the latter, but there is a very real reason to be concerned. Google's active participation in alternative energy could do wonders for Google's image and light a fire under the market for renewable energy.
Let's look first at the dangers and then at the opportunities.
Why This Could Be Nuts
Before Google announced this strategy, the only scary company hunting them was Microsoft, which clearly is not the power it once was. Now Big Oil likely will look negatively at Google. Many folks in that industry make Microsoft, even at its most powerful, look like a milquetoast. Incredibly rich individuals and governments involved in this industry likely will do anything -- and I do mean anything -- to ensure that oil remains the world's primary addiction and that the United States remains the largest addict.
Unlike the empty rhetoric of politicians who often can be heavily influenced by campaign contributions, Google has a deep set of resources and is generating cash at an impressive rate. This means to stop Google, the oil interests will have to get creative -- not something you want some of these folks to get.
Energy isn't Google's business or expertise, but it can be just as consuming as any other technology-based effort. At a time when the company faces increasing competitive pressure from companies such as Microsoft and Ask.Com, executive focus will be shifting to non-revenue-producing alternative-energy efforts. Recall when Intel decided it wanted to do hosting and consumer devices? The distraction took its eyes off AMD, which then took lots of market share and scared the heck out of the Intel executive staff and board. Eventually this all was reversed, but it took years to get the company competitive again.
This could create a big distraction right when the company needs all eyes on the ball.
Why This Could be Brilliant Why This Could be Brilliant
As Microsoft grew, it increasingly was seen as evil and Google appeared solidly on the same path. While Microsoft often was described as arrogant in the '90s, now that word more often is associated with Google. It's had a string of problems surrounding its acquisition of DoubleClick and efforts to digitize the world's libraries. Microsoft did not effectively counter its increasingly negative image and met a painful set of wake-up calls, first with the U.S. Department of Justice and most recently with the European Commission.
Typically, philanthropic activities are used to maintain a positive impression of a company, and alternative energy is in the spotlight these days , thanks to the war in Iraq and the price of gas. Third World countries are power-hungry, but lack the resources to build large-scale power infrastructure solutions. They can't afford the fuel to run them, either. Alternative sources of energy are life-savers in these emerging markets and, if they can be made more cost-effective, could solve a huge number of crime, health and even food issues in these areas.
In addition, the servers Google uses are incredibly power-hungry, leading the company to place large server farms near low-cost hydroelectric power supplies. Alternative energy sources, if they can be made more efficient, could substantially reduce Google's operating costs. These solutions could then be more easily marketed to other companies, and the Google foundation likely would benefit significantly.
Finally, Google believes charitable foundations should be profitable so they can, over time, have an increasingly bigger impact. Alternative energy seems to be poised to make huge financial gains, and by putting the Google Charitable Foundation on the path to make this happen, there is a good chance this foundation's work could have greater impact that the company itself.
Wrapping Up: Balancing Risks and Rewards
One of the advantages that a newer company like Google has over an old company like Microsoft is the willingness to take big risks that can pay off massively. The longer a company is established, the more risk-adverse and slow-moving it becomes. The potential for Google to overstep is much higher as well, but so far, its big risks have paid off handsomely, while often we point to Microsoft's failures on projects that had potential but lacked adequate effort.
This move by Google is certainly risky, but the payoff for the company could be huge and hit on a number of fronts. In the end, this effort could do for alternative energy what the iPod did to MP3 players. For some reason it reminded me of the conversation Steve Jobs had with John Scully when he recruited him to run Apple and asked him something to the effect of did he want to make sugared water or change the world?
Google is going to try to change the world and, at least with regard to renewable energy, that could be a good thing.