Google And Intel, Welcome To The New American Conglomerate

Jan 10 2014, 10:43am CST | by

Google And Intel, Welcome To The New American Conglomerate

Announcements from Google and Intel in the first week of 2014 confirm a trend that was already pretty solid but overlooked in 2013. The American Conglomerate is back (transparency note – I own a few shares in Intel).

It’s back and its more interesting than ever. Google and Intel are but two of the companies that believe they can take on more or less any sector and win (Amazon is the original new American conglomerate).

Let’s look at this, because historically conglomerates come into fashion only to fade away again.

The reason they fade is few executive teams can master multiple sectors. Fund managers wise up to that. They think they have a better handle on how different sectors function – and feel more confident they, not business executives, can pick sectoral winners.

But we have just entered a new age of business. All businesses now have to deal with mobility and with speed. The smartphone is about to be distributed around the body, the car, the office and the house. Google’s willingness to take on risk across these application areas has pleased the market who rewarded it with a significant stock price increase in 2013, from a low of just over $700 in January 2013 to $1100 now. Fund managers are hoping Google can second-guess and craft new markets better than they are able to spread innovation risk in their portfolios.

Google is trying with Calico – health; Motorola (connected device production); TV (Chromecast); the connected car (through the Automotive Open Alliance), and in robotics, where it may well extend its Android platform and ecosystem operating model to the robotics operating system.

Intel is hoping to ape Google in this, to date with very little impact on the stock price. It’s TV project is not looking great – in fact it is widely seen as a failure). That in turn could impact on people’s perceptions of its other major adjacencies, particularly wearables.

I’ve been writing about radical adjacencies for a couple of years now, and the enterprise trend is really firming up. It means companies have to take on a range of new competencies and it’s not clear that enough of them understand that.

At CES, Intel made a pretty good fist of projecting its wearables strategy as an ecosystem play, having already set up a partnership with retailer Barney’s, fashion label, Opening Ceremony, and the Council Of Fashion Designers of America.

Moneybuilder had this to say about it here on Forbes:

In a nutshell, rather than run as a “me too” smartphone manufacturer or mobile chip maker, Intel is taking the lead in making your appliances, gadgets and, yes, even your clothes talk to each other.  And their vehicle for doing this is Edison, a Pentium-class computer the size and shape of an SD card you might put in a digital camera.  Despite its small size, it has Bluetooth and WiFi connectivity.

It’s nowhere near enough because that’s all technology, and plenty of companies do good tech. It’s simply not clear where Intel’s ecosystem is for wearables and why Intel would be a draw.

The big difference between the conglomerate today and yesterday is that in 1970 conglomerates bought up assets whereas in 2014 they will be heavily involved in new areas of business, designing and crafting new industries in collaboration with complex ecosystems. Platform and ecosystem is key to that. So too is high-level talent as companies like Intel become multiple companies, each in need of inspiring leadership.

By way of contrast to Intel and Google, Apple hired the CEOs of Yves St Laurent and of Burberry and then went quiet! And Google has that in people like Andy Rubin, now in charge of robotics, having established Android as the global smartphone OS of choice.

In people like Rubin, and Paul Deneve and Angela Ahrendt, Google and Apple have proven winners, people who are at the top of their game. Intel needs to do likewise because wearables are not a simple adjacency. They are a fast evolving new line of business.

But more than that these companies now resemble old fashioned conglomerates and the market is betting on their success across a widening range of industries. That means many more people of CEO calibre are needed inside the walls. Message to Microsoft – one CEO is not enough. But it also means we need need new rules of business.

In the meantime welcome back to the new American conglomerate – it’s different this time around.

Follow me on Twitter @haydn1701 or join me on Facebook. I am here on Google

Source: Forbes Business


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