Where is Gemini, the ChatGPT killer?
Google has delayed the release of its ChatGPT killer, Gemini, until 2024.
Introduction
Google has delayed the release of its putative ChatGPT killer, Gemini, until 2024. It presents a case study of two interrelated issues: the increasingly sclerotic and risk-averse nature of large companies, and the Innovator’s Dilemma.
The Innovator’s Dilemma is an idea first propounded by Clayton Christensen, a business consultant and academic. His book The Innovator’s Dilemma was first published in 1997. The book explored how successful companies can do everything “right” and yet still lose their market leadership, or even fail, as new, unexpected competitors rise and take over the market. He introduced the idea of “disruptive innovation,” which explains how smaller companies with fewer resources can successfully challenge established incumbent businesses, specifically by targeting sectors or customers overlooked by those incumbents.
Let’s examine this in the context of Google. Google derives most of its revenue from its vaunted ads platform. When you perform a search on Google, you’re served ads in exchange for the service. (This assumes you don’t use something like AdBlocker.) The problem that Google faces right now is that to the extent people replace Google’s familiar search functionality with an LLM-based searched functionality, there’s no great way to insert ads into the LLM environment. The irony here is, of course, that it was Google itself which invented the Transformer model on which ChatGPT relies1.
This is all somewhat abstract and theoretical, so let’s look at some concrete examples of companies that faced existential crises arising from this dilemma:
Kodak and Digital Photography: Kodak, once a leader in photographic film, failed to fully embrace digital photography. Despite inventing the first digital camera, Koda prioritized its lucrative film business. As digital photography advanced and became mainstream, Kodak’s film-based business model became obsolete, leading to its decline.
Blockbuster and Online Streaming: Blockbuster, the giant in video rental, missed the opportunity in online streaming. Netflix, initially a DVD rental service, shifted to streaming, recognizing the potential of the internet. Blockbuster focused on its physical rental business and failed to adapt quickly, which resulted in its failure as streaming became the norm.
Nokia and Smartphones: Nokia, once dominant in mobile phones, struggled to adapt to the smartphone era. The company was slow to recognize the significance of user-friendly software and touch interfaces. This lack of innovation and adaptation to market shifts led to Nokia’s failure.
Google’s Innovator’s Dilemma with Large Language Models (LLMs)
Google faces a classic Innovator’s Dilemma with the rise of LLMs like ChatGPT:
Primary Revenue Source: Google’s primary revenue source is advertising, particularly through search. Integrating LLMs into search could disrupt this model, as LLMs reduce user interaction with search ads.
Internal Development of LLMs: Google has the capability and resources to develop advanced LLMs. However, deploying them in a user-friendly manner without cannibalizing ad revenue is a challenge.
Market Demand and Competition: With the increasing demand and popularity of LLMs, Google risks falling behind competitors if it doesn’t adapt. Users may prefer LLM interfaces for information retrieval, which in turn will reduce reliance on traditional search engines.
Ad Integration Challenge: Integrating ads seamlessly into LLM responses is complex. The nature of LLMs—providing direct, concise answers—contrasts with the traditional ad-based model where user engagement and click-throughs are key.
Strategic Response: Google may need to explore new revenue models or innovative ways to integrate ads without compromising the user experience of LLMs. This might involve creating specialized, premium services or finding novel ways to embed advertsing that aligns with LLM interactions.
Google has the ability to lead in the industry in artificial intelligence. But doing so risks cannibalizing its principal revenue source of search-based ads. The company’s response to this challenge will be critical in determining its future.
Organizational sclerosis and risk aversion
In addition to the Innovator’s Dilemma, Google also faces the related issues organizational sclerosis2 and risk aversion. These issues are inherent to all large companies. But when you combine these two problems with the Innovator’s Dilemma, you have the recipe for an existential threat to a company.
Organizational sclerosis and risk aversion impede a company’s ability to innovate and bring new products to market. Let’s examine these two issues in more detail.
Organizational sclerosis
Bureaucracy and Inflexibility: As companies grow, they often develop complex bureaucratic structures. This red tape can lead to inflexibility, which slows decision-making processes. This hinders a company’s ability to adapt to a changing market.
Resistance to Change: Larger organization become resistant to change. Employees and management prefer maintaining the status quo. This is especially true when, as with Google, the current business model is successful. Company executives become reluctant to explore disruptive or innovative ideas.
Internal Politics: Projects that are politically advantageous may be prioritized over those that are truly innovative but riskier or less understood.
Resource Allocation: Large organizations struggle with effectively allocating resources to new initiaitves. Established departments or product lines command more resources, starving innovative projects of the necessary support.
Risk Aversion
Fear of Cannibalizing Existing Products: Compaies hesitate to introduce products could compete with or cannibailize their current successful offerings.
Short-Term Focus: Public companies face extraordinary pressure to met quarterly earnings expectations, which leads to a short-term focus at the expense of long-term innovation and risk-taing.
Failure Aversion: Risk-averse cultures fear failure, which leads to a preference for safe, incremental improvements over bold innovations. This stifles creativity, and and discourages taking on the risk to develop breakthrough products.
Lack of Diverse Perspectives: Risk aversion also arises from homogeneous leadership. This leads to groupthink, in which ideas about market shifts are not adequately considered or valued.
If a company can overcome its tendency towards sclerosis and risk aversion, it can adequately deal with the Innovator’s Dilemma. So let’s take a look at some ideas about how to overcome sclerosis and risk aversion.
Encourage a Culture of Innovation: Foster a culture that values risk-taking and tolerates failure as a part of the innovation process.
Decentralize Decision-Making: Empower smaller teams with autonomy to make decisions quickly and act on innovative ideas.
Diverse Teams: Ensure diversity in teams to bring different perspectives and challenge the status quo.
Long-Term Vision: Balance short-term goals with a strong focus on long-term strategy and innovation.
Separate Innovation Units: Create separate units or teams dedicated to exploring and developing new technologies and business models, insulated from the core business’s pressures and constraints.
While all of these suggestions are conceptually simple, in practice implementing them is hard or impossible for sclerotic and risk-averse organizations. Organizational sclerosis and risk aversion can significantly hinder a company’s ability to innovate and adapt in fast-evolving markets. Addressing these challenges is curcial for large organizations to remain competitive and capitalize on new opportunities. The question for Google is whether it can adapt the the new market realities that ChatGPT has foisted upon it.
Here is the research paper which first discussed Transformer models, and kicked off this new age of AI in which we find ourselves.
For a deep dive into this from someone who was on the inside, see this piece, about the experience of a founder whose company was acquired by Google. While the challenges of integrating an acquisition into a large company are different from those of releasing a new product to the public, the symptoms of those challenges—sclerosis and risk aversion—are familiar.