Microsoft vs Google : Strategy wars

With the launch of ChatGPT and open declaration of war on Google from Microsoft CEO Satya Nadella, we are living in one of the most exciting duels in most recent tech history. Lets analyze relative positioning and odds of who will come out on top in this epic Satya vs Sundar. Behind this lies a fascinating tale of the careers of these 2 Indian American executives who rose up the ranks to head these behemoths in Mountainview and Redmond.

Declaration of war

Microsoft has been making steady progress in the Deep Learning space through its investment in Open AI and the release of Dalle-2 and ChatGPT. While that is regular part of innovation and other companies like META has also been making steady progress in this field, Microsoft went a step ahead with product integration with Bing and open declaration of war. Here is what Satya said : 

Google is the 800 pound Gorilla in the room. This new Bing will make Google come out and want to show they can dance, and I want people to know that we made them dance

With that let us revisit how things go to here.

Google and its search monopoly

While Google is often credited for its technology, Google is able to retain its market share and monopoly in search due to its product strategy. The average user doesn't have much incentive to go and change the default search engine from settings. Google has successfully gated the entry points to search via Android OS for mobile, Chrome browser on desktops and by paying $20B to Apple for staying as the default search option on MacOS. No wonder Sundar Pichai (and not some engineer) became the CEO of Google because he was the Product Lead(read gatekeeper) of two of this products(read gates) : Chrome and Android. This virtually sealed Google's monopoly status on search. 

Monopoly and culture

What happened after Google became the monopoly it is today is exactly what a monopoly would need to do to stay a monopoly : lower profits so that they are not perceived as a monopoly. What better way to do it while stiffling competition by raising costs for competition by hiring developers at premium prices thus increasing cost and reducing supply of engineers. While the strategy was sound and paid off in the last decade, the recent ad recession of 2022-23 has exposed the flaws. Overhiring engineers, paying exhorbitant RSUs, lack of any need to deliver anything at all, delusions of exceptionalism, leads to a level of entitlement and lack of self awareness in engineers unseen in a while in Silicon valley. There are 2 high level problems with this

• [Financial Mismanagement]As pointed out by investors/hedge funds TCI and Altimeter
• Rapid headcount growth has led to reckless empire building. Managers reporting to Managers reporting to Managers..... Bloated org structures, title inflation, redundant levels - basically investors in Wall Street paying for the Sushi bar in Mountainview
• The median compensation at Alphabet was 67% higher than Microsoft and 153% higher than the 20 largest technology companies and there is no justification behind this enormous disparity
• [Cultural Trainwreck] Google engineers lost the ability to ship because for the last 10 years they didnt really need to. As pointed out in Mice in a Maze Google has 4 cultural problems : 

The way I see it, Google has four core cultural problems. They are all the natural consequences of having a money-printing machine called “Ads” that has kept growing relentlessly every year, hiding all other sins.

(1) no mission, (2) no urgency, (3) delusions of exceptionalism, (4) mismanagement.

Challenge from Microsoft - surprise ?  

In the meantime Satya Nadella has been playing 4D chess. Nadella was the boss of Bing before he got elevated to CEO in Redmond. So Bing vs Google is close to his heart. While Sundar has been enjoying his Sushi in Mountainview financed by monopoly taxes, Nadella has been plotting Bing revival one step at a time. Key milestones being investing in Open AI, Integrating it to Azure and then Launching Bing+Edge+ChatGPT in a bid to reinvest search. 

Microsoft CEO not only did the product announcements in Redmond, but also openly launched war on Google Search with its ChatGPT + Bing integration : 

“There is such margin in search, which for us is incremental. For Google it’s not, they have to defend it all,” he added, referring to the competition against Google as “asymmetric”.

Microsoft says for every point of share gain in the search advertising market, it’s a $2 billion revenue opportunity. 

There are several upsides of this strategic play from Microsoft. 

Microsoft Strategic Upsides

• Asymmetric battle : This is all for Google to defend and any incremental market share win for Microsoft has a huge revenue upside as Amy Hood (Microsoft CFO pointed out)
• Microsoft doesn't need to gain any market share at all to make Google lose. If it can change customer behavior to expect Search results from 10 link clicks(legacy search) to some mix of legacy search and some mix of conversational AI through ChatGPT(10-20% of the queries), it will be a big win. Conversational AI queries wont be monetized and the change in the mix of the search queries means, Google would also have to serve the unmonetized queries through Bard in order to stay competitive. Even if Google maintains its market share, it will put further margin pressure on Google and thus exacerbate the financial mismanagement and the cultural trainwreck issues highlighted above. This point is very important. It is not a matter of which AI is better, what matters is how will the user behavior and expectation change with the new form of search. Any deviation will hurt Google.
• Here is rough math to prove the point
• Google search queries : 300k queries per second
• Revenue : 160B in 2022, 1.6cents per query
• Cost : Apple 20B, 24% services margin, roughly 1.06cents per query
• So Google has 50 cents margin per query which can go to inference costs of an LLM

• Deploying current ChatGPT into every search done by Google would require 512,820.51 A100 HGX servers with a total of 4,102,568 A100 GPUs. The total cost of these servers and networking exceeds $100 billion of Capex alone

• Essentially 30B $GOOGL profit could evaporate overnight

• Looks like Microsoft knows how to flip a monopoly if not beat it
• Flipping Search monopoly is beneficial for Microsoft because it reduces competition for Azure as Google cannot funnel its monopoly riches to money losing Google Cloud investments any more. 
• What Google is facing is classic innovators dilemna

how large incumbent companies lose market share by listening to their customers and providing what appears to be the highest-value products, but new companies that serve low-value customers with poorly developed technology can improve that technology incrementally until it is good enough to quickly take market share from established business.

• ChatGPT is doing free marketing for Azure AI Services which hosts ChatGPT thus increasing cloud adoption
• Satya Nadella looks like a mastermind wartime CEO who looks like a peacetime CEO

Google Strategic Upside

• Yes you read that right, Google has an upside here too. While Google bungled its latest Bard announcement and the picture looks bleak right now, the biggest upside is that it could get support that it is not a monopoly in its latest department of justice lawsuit due to this competition from Microsoft. 
• Google has investments in Cloud hardware and TPUs could get more investments in the future to compete with Nvidia GPUs. So essentially the battle of search could be won or lost on the hardware front which could lead to significant value capture and also change the winners and losers of search

The next 1 year will be an interesting battleground for these two companies in Tech and how the personal lives, successes, failures and tales of two Indian American CEOs influence how they carve out the tech future for their companies. 

Pitfalls of Poorly Designed PM Roles

In my decade-long journey navigating the realms of FAAMG giants and pre-IPO startups, I've encountered a multitude of Product Managers (PMs) ensnared in a web of stress, dissatisfaction, and an overwhelming urge to seek new horizons due to challenges with their current roles.

But what exactly delineates a great PM job? Let's delve into the intricacies of what constitutes an exemplary PM role and how companies can endeavor to retain their prized PM talent.

1. Dedicated eng team with frontend (app + web engineers)

Being a PM without an eng team is a farce. These roles are highly ambiguous, without no line of direct impact/delivery in sight and no way of attributing success back. Often times there are competing PMs with engineering teams who are actually delivering value. These roles tend to feel more like Program or initiative management. These roles can be high visibility, high accountability roles without much power in the organization to move the needle. Often times, these roles tend to be on the chopping block first and lead to the greatest frustrations.

Yet, these positions are everywhere. These positions tend to have the highest attrition.

PMs need to build and deliver features that impact users. This is impossible without engineers (or “ops” or “tech design” - people who release features). A magical ratio is 7:1 engineers to a PM.

2. Dedicated design analytics, & user research team members

Although lack of design works for certain backend teams, most those PMs end up in the position of needing to ask other teams for support to make impact. They end up in the same position as PMs without dedicated eng.

Similarly, analytics are critical for good prioritization and experiment analysis. PMs who are shipping lots of features don’t have time to write SQL queries and build dashboards.

Finally, working to do user research (UXR) on your own as a PM is time traded off with other activities. Discovery and usability testing are sciences best performed by experts. Also easy to lose credibility even after going the extra mile the experimental feature fails, its easy to say that the hypothesis was incorrectly built because of lack of thorough user research. 

Most PMs need at least half a resource of design, analytics, & user research. PMs doing these jobs trades off with driving execution, developing strategy, and bringing along the company. This causes PMs to either underperform or work long hours - driving attrition.

3. PMing a backend team or ML/AI team

While PMs can be successful in backend and AI teams, but these roles can be very hard to deliver on. Backend and AI teams generally have a lot of technical complexity and have Staff/Senior engineers for technical direction and strategy. Most of big tech companies hire/promote high agency engineers with direction/strategy sense to Staff roles. It becomes very hard for PMs to demonstrate value in those scenarios that engineers cannot bring to the table making the role less essential compared to user facing frontend teams. Backend teams can be user facing too and the users can be other developers. These kind of PM roles are platform PM roles. Generally engineer to PM converts in the team are happier in these roles compared to external PM hires for whom the rampup curve can be steep. 

4. Lack of clear charter and ownership

Often times teams have overlapping charter. For eg : retention can be part of growth and also engagement. Lack of proper org structure is far too common leading to lack of clarity of goals, collaboration nightmares, resourcing prioritization, unpredictability of roadmap, leading to lots of frustration. 

5. PM can be a lonely role

A PM role is all about bringing everyone together : engineering, design, user research, partner teams, etc. Yet the PM role can be lonely as no one role has this full view and at the same time shares all the frustrations described above. 

6. Working for a great line of product leadership

There is no formal training for product management. (The few that exist are not to standard.) Most PMs have to learn on the job.

As a result, leadership matters. Great product leaders teach specifically via feedback, 1:1s, and career sessions. They also teach by example. Decisions aren’t made by gut, but by discovery. Features aren’t graduated just because, but due to metrics.

Bad product leadership, on the other hand, is ubiquitous. It’s not uncommon to find product leaders who haven’t even been individual contributor PMs. They can rarely coach how to execute and influence. They don’t have the context.

7. Empowered to determine your own roadmap and strategy

Product managers who are glorified project managers rarely stay. Yet, this is all too common. PMs are handed roadmap and strategy by execs.

On the other hand, there are few thrills quite like leading an empowered product team. These PMs feel empowered to make an impact and change the world.

8. Collaborate with supportive cross-functional colleagues

Often, it’s an influential sales team blaming the product team. Other times, it’s marketing, partnerships, finance, analytics, design, or legal. Whomever the culprit, once other functions point the finger, PMs leave.

If you are a PM struggling with some of these issues, feel free to drop me a note with your story. Happy to advice. 

Meta Messaging and Commerce Strategy

• Recently $FB / $META organized a Conference called Conversations 2022 which show cased their progress and strategy on messaging including Kustomer acquisition. 

  
  

  Seems like most of Fintweet and US investors are oblivious to it. Heres a thread with the highlights 
  

   

• 1/ Zuck : "Businesses want to be where people are. We saw that with Feed, Stories, now Reels and Messaging. Already more than 1Bn users connect with a business account across $META 's messaging services every week. Users use messaging for discovery, checkout, etc"

• 2/ $META launching whatsapp cloud API. Key features - Any business can customize their experience on whatsapp, speed up response times - Customer to biz conversations grew 50% over last year - $META will provide hosting service, network, compute for free - results from partner

• 3/ Customer experience and improving touch points - 1800 numbers are 1960s technology - teenagers dont read email - 1-2 hours wait time connecting on phone - 7/10 people prefer to connect businesses via msg - 65% ppl feel more connected to businesses that respond over messaging

• 4/ Momentum behind this trend of customer business messaging - By 2025, 80% of customer service orgs will abandon native mobile apps in favor of 3rd party msging platforms - Gartner - 50% of US online adults use chat for commerce - Forrester

• 5/ Takeaway for brands : Brands that have made the switch by embracing messaging as a customer service strategy and are meeting where the customers are have experienced more agent efficiency, customer satisfaction and improvement in marketing and sales.

• 6/ Example 1 : KLM Royal Dutch airlines : call volumes increased by 500% during COVID-19 peak. KLM reduced wait times for most urgent calls to almost 0 by introducing Messaging based automated responses to simpler queries.

• 7/ Example 2 : C&A global fashion brand invested in whatsapp integration in brazil : 50% of their digital revenue in Brazil, which last year was 900M Reals came through Whatsapp

• 8/ Example 3 : Aldi reduced response times for what items are in stock from 3 mins to 3 secs by deploying an AI backed assistant on messenger

• 
  9/ Example 5 : Indosat inspired by customer service on whatsapp, introduced prepaid services, refills growing revenue 5x

• 10/ The sooner you are able to turn down your call centres (cost centres) to profit centres through messaging by enabling you to upsell and cross sell. Messaging is the best way to generate and qualify leads.

• 11a/ $META portfolio of products to help businesses - WA business app - small business and entrepreneurs. Lightweight business inboxes in messenger / insta - Meta business suite - for larger businesses - omnichannel capabilities to interact cross app wa/msngr/insta

• 11b/ $META portfolio of products to help businesses - Kustomer - omnichannel - messaging first CRM platform comes with many enterprise integrations. - META is working with 100+ partners that help build customizations on top of the APIs META recently closed this acquisition.

• 12/ $META launching a startup accelerator with PlugnPlay - a VC firm

• 13/ "For many businesses whatsapp is their business, its their website, store counter, their livelihood" - Ami Vora, WA VP. Example 6: of an ad on facebook that clicks over to a whatsapp chat. These first party conversions will also be ATT resilient and be first party data

  
  

• 14/ Example 7 : Test feature on whatsapp in Sao Paolo : Businesses can get listed in a directory, right inside whatsapp

• 15/ Example 8 : catalog feature enabling checkout on whatsapp in India. This is how mom and pop retailers are selling in India now, something which US investors have no idea about. "For many people WA is their first e-commerce experience, it is making commerce more accessible"

  
  

• 16/ Example 9 : $GM found a new way to sell cars through whatsapp when COVID-19 forced them to close stores and sales went from 15k to almost 0 across the country. If $GM closes Whatsapp today, they have to open 25 stores to mitigate the volume. The entire CAC can move to WA.

• 17/ $META launching Recurring Messenger Notifications to re-engage customers on Messenger. Throughout testing Recurring Notifications vastly outperformed other channels like email and sms driving sales. Most examples from emerging and developing markets.

• 18/ $META also batted for SMBs : 90% of all businesses and 50% of employment.

• 19/ $UBER CEO Dara also showed up in the conf. $UBER is now thinking as a messaging first company because the real world is messy, there are lot of stakehodlers : eater, courierer, restaurant, rider, driver and messaging works better fundamentally to give a delightful experience

  

• 20/ In India you can call $UBER on WA, its a product WA to Ride. 33% of the riders coming on WA are new riders (for such a well known app like Uber). Huge incrementality working with Whatsapp. Significant younger customer base. Expansion coming to delhi and brazil.

• Thank you for reading, here is the tweet thread
  

Execution vs Strategy

Impact = (Execution ^ Strategy) × Market

Obviously, this is not a formal mathematical formula. Its goal is to help us understand & explain to others the *relative* roles of the factors that determine long-term impact. To understand it, it’s useful to assign a value of 0 to each factor (while keeping the others non-zero). 

Let’s start with:

Strategy = 0 (others non-zero)

You get:

Impact ≈ Market

What it tells us:

A very bad strategy won’t kill you. But if you don’t fix it, it will severely limit the impact of your execution over the long term.

Now let’s set:

Execution = 0 (others non-zero)

You get:

Impact ≈ 0

What it tells us:

Abysmal execution almost always assures zero long-term impact, regardless of our strategy or market.

That is why I’d rather have some execution with no strategy, and not the other way around.

Finally:

Market = 0 (others non-zero)

You get:

Impact ≈ 0

What it tells us:

Lack of a market (or at times, a rapidly shrinking market) also kills our future impact over the long term.

As I said above, I’d rather have some execution and no strategy. But also note that strategy has an exponential effect on your execution. So I’d rather have excellent strategy & just OK execution vs. excellent execution & just OK strategy. This is counterintuitive for many people

In practice, if you make superb strategy choices i.e. how you differentiate your product and/or distribute it to create lasting competitive advantage, you can afford to have OK execution and still end up in a very good place over the long term.

Of course, the very best teams nail both strategy and execution. And that is what you should aim to do too, as a leader of a product team. When your business and your team’s future is at stake, why become dogmatic about an extreme position just for some Twitter likes & retweets?

As a leader, you need to obsess over both your strategy and your execution. How much you obsess over each of them depends on your product’s context. That also changes over time as you assess current reality and decide what it will take to reach where you want your product to be.

Last thing: 

(for leaders who are very good at strategy)

When you’re just starting to build a team, it is usually a better idea to hire people such that your team will be excellent at execution, even if that comes at the expense of your team being somewhat weak on strategy.

Because it is easier to add strategic discipline to a team that's excellent at executing than to add execution discipline later on.

How a new team executes sets its early culture a lot more than how (or if) it strategizes. 

And that early culture is very hard to undo later.