In 2015 Google announced a new project ‘Sidewalk Labs’, to enter the urban domain and smart city market. The founders vision it as an “urban innovation company” that producing and investing technology that enhances city operation and improves the quality of urban life. Daniel Doctoroff, former deputy mayor of New York City for economic development and former chief executive of Bloomberg L.P., will be the CEO leading the office based in New York City with a team from Google, and they planned to build technology itself and also invest in partnerships.
Google’s ambitions and investments never limited to its core business and they have gradually extended beyond the Internet search engine and online advertising, and into new domain including autonomous vehicles, wearable technology, and biotech. Although Google is not the first mover entering the smart city market, regarding the fact that IBM and Cisco already have a significant scale of business and years of practice in this domain, they still believe this is good timing and it brings extraordinary business opportunities for Google.
The idea of Sidewalk Labs seems perfectly align with the main philosophy of Google, and there are multiple perspectives to interpret this move: Sidewalk Labs can be seen as a new project, a new initiative, or eventually a new platform for Google to enter the physical urban domain. In the most straightforward view, Sidewalk Labs acts as an investment vehicle, which diversifies the corporate’s portfolio. However, as Larry Page mentioned that Sidewalk Labs as ‘relatively modest investment yet with a decidedly long-term bet, which is very different from Google’s core business’, Google seems to expect more from this new project beyond an investment vehicle. Due to its nature as a private company, a corporate, and an organization, Google visions Sidewalk to create potential core competencies and become an innovation enabler. Therefore we consider Sidewalk Labs as a crucial strategic move for Google to increase its design dominance and market share in the long term.
The Nature of Google
A deep understanding of the core competency of an organization is essential for any further analysis of its business strategy and innovation management. C. K. Prahalad and Gary Hamel define core competency as “ a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace”. In this context, Google is a distinguished firm with not a rigid coherent core competency, but fluid core competencies. Google is a great example of the fluid core competencies among American enterprise and tech firms. Although it still remaining design dominance in advertisement and search engine services, its core competency is evolving and fluid. Forbes described that Google is “transforming into a device and telecoms infrastructure company” with a shift of core competencies. Google remains its software competency but has been actively developing a strong hardware outsourcing competency (Google Nexus), online marketing (Google Store), telecommunication infrastructure (Google Fiber), and hardware design (Google Glass). The company with a market cap of $365 billion has the cash to burn on “long-term, 10X bets” project as Sidewalk Labs and it’s done so before with projects like Google X (autonomous cars), Calico (aging and disease) and Food 2050 (agricultural tech). Although various new projects and end products from Google might be overwhelming, it is strategic for the organization to peruse a diversified portfolio of business around shared core competencies. To sustain fluid core competencies, Google ensures the radical adjacency between new projects and existing ones. Therefore keeping fluid yet adjacent core competencies is an important strategy for Google, and it will remain this strategy on Sidewalk Labs.
Google is also a learning organization. It frequently creates, acquires and transfers knowledge, and modifies its strategy to reflect new knowledge and insights. In order to successfully enter the urban domain, Google needs a platform that enables systematic searching and testing of new knowledge, an R&D lab to deliver demonstration projects, and an enabler to implement end products in the physical environment. Therefore an understanding of such high-level nature, strategy, and demand of Google as a learning organization is essential to analyze the future role of Sidewalk Labs.
The Role of Sidewalk Labs
Sidewalk Labs is officially defined by Google as “a new type of company that works with cities to build products addressing big urban problems. It is building an integrated platform with a set of urban applications to accelerate innovation in cities around the world.” Mr. Doctoroff, the CEO of Sidewalk Labs, claims that “the company plans to build products, platforms, and partnerships to tackle issues such as making transportation more efficient, lowering the cost of living and reducing energy usage.” Although this is a very general and vague statement, it is clear that Sidewalk Labs will focus on three levels regarding the scale of business: product, platform, and partnerships.
Sidewalk Labs acts as an R&D organization that studying, inventing, and testing a new end product. Especially it utilizes domain knowledge and expertise in cities to convert technology into sellable products. LinkNYC, the gigabit wireless network, is the most recognizable product to emerge from Sidewalk Labs since its formation. LinkNYC serves as a new type of communication infrastructure that offers free public Wi-Fi, phone calls, a tablet for web browsing, USB charging and way-finding tools. During an interview with a design and business website Co-Design, Sidewalk Labs shared their thoughts on this project, that LinkNYC will have a positive impact on cities, provide valuable public services for citizens, and offer a valid commercial model. Through this project, Google for the first time became involved in the development of a physical device in public space, and it is highly potential that Google will utilize such physical urban hardware as a vehicle for their related software and information technology, such as Google Maps and Google Fiber.
Sidewalk Labs will create platforms carrying end products for their implementation at a scale in cities. Mr. Doctoroff mentioned that self-driving cars as one area where Sidewalk Labs could help cities better prepare for the future, and they plan to enable products to be implemented in an urban scale globally. This message reveals that Google intends to use Sidewalk Labs as a platform for its end products. Although the media have been focusing on free Wi-Fi, public service and digital equality of LinkNYC, the ultimate goal of this project might be much more ambitious than media’s interpretation. The fact that LinkNYC as gigabit wireless network and ICT (information and telecommunication) infrastructure hints the potential for Google to use it as an operation support system for its physical product (autonomous car) and digital product in a physical urban environment.
Sidewalk Labs can also become a civic technology enabler based on the private-public partnership and Google’s strong knowledge and design dominance. Google considers there is a huge space between civic hackers and traditional big technology companies, as Mr. Doctoroff mentioned, “Sidewalk Labs is an urban innovation company devoted to improving city life for residents, businesses and city governments, in particular by developing and incubating civic technologies”. The private-public partnership is a vital component in this contest since a market share in smart city and civic technology does not only base on design dominance but also relies on successful implementation within urban policy and political scope. Lately, Sidewalk Labs initiated a second project ‘Flow’ that they partnered with U.S. Department of Transportation focusing on future transportation coordination system nationwide. As a learning organization, Google needs domain knowledge in urban policy and new expertise in cities from Sidewalk Labs to gain its future design dominance in cities. This reveals the further role of this organization that it builds physical infrastructure (project LinkNYC), creates the political environment (project Flow), and prepare urban domain expertise for Google’s ultimate products in transportation, housing, retail, etc.
The CEO of Sidewalk Labs emphasizes that they are different from projects by IBM or Cisco, that Google intended to create a broad tech platform, and to earn revenue, they could sell the platform or individual tech products on a subscription, fee or commission model to city government or interested private parties. But at the same time, he clarifies that they do not want to be a consultant. His comments reflect that they expect Sidewalk Labs to serve Google to gain core competence in digital-physical integration in the urban domain. The competition in smart city industry is fierce but there is no choice for Google if they want to maintain design dominance since an organization that has failed to invest in core competence building will find it very difficult to enter an emerging market.