An Exploration of Parallels Between the Google of Today and the IBM of Yesterday

Ubiquity is key for only so long. When the digital age began in earnest in the 1980s and 1990s, numerous longstanding American companies sought to carve out their own corner of the Technology market to build their kingdom for the coming era. Most of them didn't survive. And the ones who took the thrones quickly lost their crowns to the new kids on the block.

The biggest problem with tech giants is that the explosive growth which gives them household name recognition and an aura of invincibility comes with its price. Larger companies become slower to move, becoming reactive rather than proactive. Spending money on every project which might be the next great leap forward indiscriminately dilutes focus on the Company's vision. Without a focus on innovation and a balance of taking risks but being fiscally responsible, many large companies lose sight of why they succeeded where so many others failed. The last ones standing then often find themselves shambling towards their own graves, dragged down by the weight of their own success.

For most people who grew up around technology in the late 90s and early 2000s, IBM was the stuff of legend: here was a technology company that existed for almost a century, had been one of the dominant forces of the dawn of the Computer age, and was responsible for decades worth of ground shattering innovations.

Were they really all that?

The Architects of the Modern Age

IBM laid some of the bedrock of today's modern technological world. A shortlist of some of the company's impactful innovations for the everyday person: hard disk drives, DRAM, magnetic stripe cards, and UPC bar codes. Most PCs are now switching to solid state drives, which are more durable and faster. However, the hard disk which IBM pioneered offering persistent memory is a crucial part of modern computing as we know it. DRAM stands for Dynamic Random Access Memory, which is typically used for a PC's main memory. Main memory – more commonly just called RAM – is the data drive used directly by the CPU to run a computer and only stores information when the power is on. In essence, IBM was responsible for the bedrock innovations that built computer memory in the modern age. The other two innovations on this list? They're the foundational innovations for shopping in the modern age. UPC bar codes are still in use today in just about every store in America. So are credit cards. While others have iterated on these innovations, IBM stands as having conceptualized and delivered the starting points for these cornerstones of modern computing and commerce.

IBM had humble beginnings in a different world from that in which the company gained its fame. IEEE Spectrum has a great summary of IBM's origins available for reading. A brief synopsis goes as such: IBM began in the late 1800s and early 1900s as multiple different companies which handled time recording, tabulation, and computing equipment (think counter scales for grocery stores). Charles Flint, after acquiring all these companies, stitched them together and called the joined companies Computing-Tabulating-Recording Co., or C-T-R. In 1914, Thomas J. Watson joined C-T-R, reorganized the company, and increased its American market share significantly over the next decade. By 1924, Watson was looking to the rest of the world for Business once the Great War was over. To illustrate this grand ambition, and in recognition of the C-T-R name being a bit clunky and unimaginative, Watson rechristened the company International Business Machines, or IBM.

In 1933, IBM purchased Electromatic Typewrites, Inc. This helped lay the path the company would take across the next few decades, starting when Thomas J. Watson's son – also named Thomas Watson – took over the company in 1952, and IBM focused on electronic data processing systems. Britannica points out that by the 1960s, IBM built the overwhelming majority of computers worldwide.

While IBM had the mainframe market on lockdown, the personal computer fight was heating up, and IBM came to the game late. The company introduced the IBM Personal Computer in 1981, a full four years after the “Trinity” released: the Apple II, the Commodore PET, and the Tandy TRS-80.

Commodore folded in 1994.

The Tandy Corporation eventually switched to using the name of a chain of electronics stores they purchased in 1962: RadioShack. Tandy got out of the game in 1993 when they sold their computer manufacturing to AST Research who would then be acquired by Samsung in 1997 and shuttered entirely in 1999.

Apple is worth $2.77 trillion today.

Big Blue Turns A Little Green

IBM's downfall started with its handling of the personal computer market, as detailed in this article by Leaders. IBM had the opportunity to get in on the ground floor, but dragged their feet for a few years in responding to the desire for computers in the home. When they finally did, their customers still picked their competitors' offerings over the IBM Personal Computer because the IBM PC was simply more expensive. In one fell swoop, IBM stopped being innovative, and landed on the backfoot. Once an unstoppable force of nature starts reacting to an industry they used to anticipate, it spells troubled waters ahead. IBM's troubles were just beginning. With their late arrival to the game, they ceded market share, and shook people's certainty in the juggernaut that was IBM. Between 1982 and 1992, IBM's share of the market on PC inverted: where in 1982 they had 80%, by 1992, they held only 20%.

A significant contributing factor to IBM's struggle was a tragedy entirely outside of the company's control. In April 1985, Delta Air Lines Flight 191 crashed just short of runway 17L at Dallas Fort Worth International Airport. On board was IBM's Vice President of Manufacturing, Don Estridge. Estridge was the visionary being the IBM PC. Without his vision to help navigate the personal computer industry, IBM fell further behind. Therein lies of newer employees not understanding a company's culture: institutional memory is lost in tragic circumstances.

In addition to being slow to adapt to the desire for personal computers, IBM made one other crucial mistake that cost them in the 1980s. In 1980, they hired a young entrepreneur and his company to give them an operating system for the IBM PC. IBM used their contractor to acquire the developers of the desired OS, but agreed to a non-exclusive contract wherein the contractor retained the rights to sell to anyone they wished. Bill Gates then sold that operating system to other computer manufacturers which helped build Microsoft into the titan it is today. When consumers are faced with the choice to pick Microsoft's software on a less expensive computer than the IBM PC, why wouldn't they chose the cheaper option?

When IBM's next CEO came aboard in 1993, it signaled a new direction for the company that, ironically, was closer to its older direction. Louis Gerstner was the first IBM CEO from outside the company. His first steps as CEO of IBM were dramatic, but ultimately proved to be the right call. Gerstner laid off 60,000 people, cut through Corporate bureaucracy, froze long-term projects, and refocused the company's efforts back towards business-to-business transactions. Gerstner's biggest asset to IBM was his removal from the decades of corporate culture that had enabled the incrementalism which had blinded leadership and hit the company with the $4 billion loss it suffered the year before Gerstner was hired. It was the biggest loss by a business in American history.

Gerstner's dramatic shifts of the culture at IBM away helped revitalize the company. IBM came late to the PC business, but still made a great deal of its revenue through mainframes. In fact, IBM still has a pretty strong grasp over the mainframe market today. It was the change in this corporate culture that eventually caused IBM to sell their personal computer arm, which birthed the ubiquitous ThinkPad, to Lenovo in 2005. (Today's fun fact: ThinkPads were exclusively used on the International Space Station until recently, and still make up a majority of the computers aboard the ISS today.)

At the time when IBM was continuing to rebound from its dark age, a small company named Google – which just celebrated its 25^th anniversary six months ago – had its own humble beginnings as a search engine for this thing that was getting really popular called the internet.

Searching For A Revolution

Google's success is one of the internet's hero stories. This was a small company built on striking gold with the next innovation of the budding internet and grew large enough to tussle with the giant corporations of yesteryear. The way their search engine worked was responsible for this explosive expansion. Google's great innovation wasn't finding websites; search engines had existed for years before the company's founding. Rather, Google's innovation was ranking the results of a query based on the websites' qualities: how many pages a website had, and how many pages linked back to the main page. Instead of seeing the websites that mentioned the search terms the most, Google was showing users the most relevant websites of the highest quality.

Put another way, the internet today acts more like a city. The large social media sites serve as the downtown area, where people gather and communicate and give recommendations for where to go. Twitter, Facebook, TikTok, Reddit, Instagram, etc. all serve as the town center; a gathering place to build community and share information. Based on those conversations, some people may head to other parts of the metropolitan area for something more specialized via a robust public transit system. In other words, today's internet has a few key services which provide links to more specific websites for news or commerce or entertainment. Furthermore, with the dawn of smartphones and the internet being more accessible than ever, the internet was no longer some place that must be sought out, it was a place which traveled with everyone.

Flash back to 1998, when Google was founded, and the internet was very decentralized. It was a requirement for users to know how to navigate to specific spaces on their own. If the internet of today is a city, the internet of the late 90s was a rural county: a large number of scattered small towns which were hard to navigate between without knowing exactly how. This is also the era before GPS, so MapQuest was the best bet for directions. It would be inexact and require strict adherence to the directions, but a user could still reach their destination. Google devised a service to fill a need: not only would they come up with a car service that knew exactly what small town you needed to travel to in order to best fulfill your needs, they would take you right to that town as well. Over the years, Google identified the most common destinations, and ran rail lines to those places. To make money, they put advertisements on every train car, at every station, and on billboards all the way up and down every line. Eventually, companies began seeing where those rail lines intersected and started building what became the bustling downtown we know as the internet today.

What Fells a Giant?

Incrementalism without a long term plan is the mother of most business disasters. Business Insider breaks down why Google may be going the way of IBM, and the overwhelming reason is losing the trust of employees. In essence, Google used to be a fun place to work, and now it's mired in bureaucracy and stagnation. All of that would have been acceptable without the recent tech layoffs. Those shake the feeling of employee security and the longstanding belief that Google would be a place for the best and brightest to work on a variety of projects, any one of which could be the next big thing. In essence: Google used to be a place where innovation happened all over the place, and employees were happy to ride out a rough patch because of that fact.

Google is worth over a trillion dollars today. Most of that comes from the ad revenue on their search system. Seems like a surefire system, right?

Slower, stable growth is always the best for a company in the long term. A company's yearly growth should fall between 85% and 115%. Anything less and there are serious problems at play; anything more and the company runs the risk of growing too fast and being unable to support itself.

Google, it would seem, grew too fast. The ad revenue for the biggest search engine in the world allowed Google an insane level of explosive growth, and put the company on equal footing with older, more established corporations in a very quick fashion. It also allowed Google to build their castle on sand: the ad revenue was so great that they had an excess of money and could throw their cash at any project they dreamt up, even if it wouldn't necessarily be an overnight success. That strategy works until it doesn't.

Going from zero to hero grants a company an air of invincibility. IBM faced it until the late 1980s when their castle also began collapsing. They only survived through a restructuring of corporate culture to find the right balance and reining in the more ambitious ideas in the name of financial rationality. Overhauling a corporate culture to move away from innovation towards hitting the financial goals for just the next quarter doesn't always bring the most success either. Targeted, measured, and consistent growth are better than violent spurts, ensuring the company doesn't start living beyond its means. However, leadership should still have a long term goal in mind for the company's efforts. Allowing some projects that may go nowhere is good, as creative innovation is always a gamble. That being said, the business consultants with their spreadsheets have a valid place even within the giants to ensure that one revenue source isn't being eaten up by a million investments which will never pay out.

IBM was forced into its worst situation because of external factors: the PC marketplace, Don Estridge's untimely death, etc., and their inability to adjust. It is important for a company with diversified interests to have a diversified income stream in the interest of long term sustainability. If one revenue stream is suddenly and violently lost, it will be unpleasant for the company, and there will have to be some sacrifices, but the lion's share of the company will be able to weather the storm. A company which can no longer react to external factors and one of them happens to take a hammer to the company's primary source of income is a recipe for total disaster.

The biggest difference between IBM and Google is that Google is a child of the internet revolution. There is no hardware division to fall back on if an innovation fails. Google has survived and grown as a company based on the power of their search engine and the advertising revenue generated from said search engine. Relying on one source of income for too long is dangerous, as external factors could easily jeopardize that whole endeavor. Google pays a great deal of money in lobbying the federal government and fighting back against antitrust lawsuits brought by the Department of Justice targeting their advertising strategies. If that revenue stream dries up or changes, then Google's entire business model is endangered. While Google is trying to diversify what brings money in, they haven't quite reached a stable position yet.

On top of all that, just because Google is flush with cash doesn't mean that it's being spent in the most efficient fashion. Google may have been an early investor in AI technology, but it seems that it's falling behind smaller companies like OpenAI in terms of the product available. Bernard Marr on Forbes lays out a pretty thorough comparison of Google's Gemini AI offering, and Open AI's ChatGPT. Marr's conclusion is in favor of ChatGPT being more worth the money. It would seem that OpenAI's Rocky Balboa can go the distance in the ring against Google's Apollo Creed, and that should be troubling for Google. OpenAI is worth about $86 billion, and while heavily backed by Microsoft, the resources which OpenAI has at its disposal are still dwarfed by those of Google.

So long as smaller competitors can keep up with Google's offerings, and push innovation when and where Google won't, the company edges closer to a dangerous cliff akin to the one which gave IBM a nasty tumble.

No King Reigns Forever

Google seems to be facing a level of aimlessness and bureaucracy, the same issues which plagued IBM. However, like IBM's miraculous leap back from the brink, Google stands a chance to pivot and remain on its throne. Apple managed to do so after its ouster of Steve Jobs by bringing him and his visionary mind back into control. Microsoft navigated the uncertainty of the post-Bill-Gates era under Steve Ballmer with a level of inconsistency but ultimately backed a few winning horses which allowed the company to retain its place in the tech world. Amazon's portfolio is diversified enough to be able to shift with the market, and Meta (formerly Facebook) seems to have done the same. While issues may plague these companies, and it's quite possible that both Amazon and Meta have yet to face their greatest challenges – the kind which can kill a giant – it is equally possible that they have both found ways to avoid dark ages of their own.

When IBM spread itself too thin, it had to trim the branches. By doing so, the company was able to turn around and focus on the AI development, data analytics, cloud computing, and other areas that make it a powerful force in the industry today. IBM is still ambitious, and still innovative, but not beyond their means.

Google's problems now stem from trying to pull endless growth out of a limited environment and is coming up on the inevitable crash from doing so. Google has a responsibility to its investors, its employees, and the industry at large to remain stable while pursuing innovation. Striking the right balance is crucial. IBM struggled for close to a decade to find that balance but got there eventually. Only time will tell if Google's current internal struggles, mass layoffs, and corporate culture changeover are warning signs of an imminent fall, or the first steps in a painful but necessary process to keep the company alive. Whether that means Google keeps its place as one of the five giants, or just survives to rebuild as a smaller but still powerful force in the technology market is still up in the air.

No king reigns forever, though it is still too soon to tell if Google's time on the throne is at its end.