A recent high profile example serves as a valuable reminder. It illustrates how important it is to make the right strategic choices when investing in new lines of business in response to changing technology.

The example is discussed in the January 28-29, 2023 Wall Street Journal article “Google’s AI Now Plays Catch-Up to Newbies” by Miles Kruppa. The article discusses how Google needs to catch up with products like the more recently introduced AI application ChatGPT. According to the article, “Alphabet, Inc.’s Google, the pioneer of some of the technology that paved the way for a recent string of eye-catching developments in artificial intelligence, is now trying to play catch-up.” The article goes on to say, “Google executives have recently sped up work to review and release artificial intelligence programs to the general public” as well as “to work on new ways to integrate new developments into areas such as the core search experience.”

Addressing this topic more dramatically, a New York Times article (December 21, 2022) is titled “A New Chat Bot is a ‘Code Red’ for Google’s Search Business” and the article says this new technology “could reinvent or even replace the traditional internet search engine.”

Despite emphasizing Google’s need to catch up, however, the Wall Street Journal article does report Google’s explanation for why the company moved slowly with the AI applications it is said to need to catch up with. According to the article, a Google executive at a company-wide meeting said the company “had to move slower than start-ups because people place a high degree of trust in the company’s products and current chatbots had issues with accuracy.”

It is beyond the scope of this newsletter to evaluate how much of a threat new chatbot products like ChatGPT are to Google’s search business. I am not an expert on ChatGPT. But, as someone whose early career experience was as that era’s version of what today is called a data scientist, I do have some knowledge of AI. Also, based on my 25+ years researching business success and failure patterns, I have expertise regarding strategies for dealing with disruption and with business model transformation.

As I see it, the important lesson from this Google versus ChatGPT example is that companies need to make the right decisions regarding which new lines of business to invest in as technology changes. To make the right choices regarding the business model potential of new technologies, companies must pay attention to how well the new area fits with the strengths of their existing business.

This is an important issue for Google. Google does have the reputation of having great expertise in AI. But, Google’s highly visible AI achievements have been in driverless cars. Despite Google’s extensive investment in driverless car technology, the automotive industry is not a strong fit with Google’s core business. On the other hand, AI applications that reinvent or replace search engines clearly are a strong fit for Google. So, investing in AI that might reinvent or replace search engines should be high priority for a company like Google.

Again, it is beyond the scope of this newsletter to say whether Google has put enough emphasis on ChatGPT-like AI, or whether Google’s pace in this area is too slow versus adequate. Google going slow out of concern for the accuracy of chat bots may well be justified. After all, implementation challenges, such as bias and the need for human input, have emerged with AI. Furthermore, even the website of OpenAI, the company that makes ChatGPT, says in its limitations section, “ChatGPT sometimes writes plausible sounding but incorrect or nonsensical answers. Fixing this issue is challenging.”

Additionally, the Wall Street Journal article points out that “Google’s competitors have publicly released AI based programs that can generate images and text passages from simple prompts, capabilities that the tech giant (Google) has tested internally for years.” In my view, this may suggest that Google would only need to catch up on introducing, not so much on developing, what can compete with ChatGPT.

Although ChatGPT has content creation features that Google search curently lacks, ChatGPT is said to be very weak in providing citations of sources. Furthermore, companies typically succeed by building on strengths. Based on its roots from the time the business was founded, Google has a strength in citing sources and ranking the value of those citations. Google may have a potential advantage if it can incorporate a ChatGPT rival into its search product with much better emphasis on citation of sources than its rival, and/or if its prodict is more accurate due to moving forward more slowly.*

Regardless of what Google does, it is important for companies to invest in new technologies that fit their business, especially if those technologies might reinvent or replace their existing business. I discussed another example of the technology fit issue this past November in my blog post about Disney's streaming.**

Caution should be exercised if pursuing technology areas that don’t fit the business well, like Google’s situation with driverless cars. This is especially the case if pursuing the new technology means the company neglects or proceeds too slowly with technology that can replace the existing business. Google versus ChatGPT serves as an excellent reminder that encourages companies to make their technology investments in the right new areas.

Updates: Important information emerged shortly after this newsletter went out so it has been updated.
*This paragraph was added as an update.
**This sentence was added as an update.