The impact of Google’s bold move

Today many people in China are sad. Who’s sad? The people in China who most strongly support Google. These people were excited about Google’s services- search, docs, wave, android, chrome, and all the other services that were yet to come. Google could do no wrong in their eyes, and they were ready to be the early adopters of any service, be it alpha, beta, or product, that Google would deploy. They would use Google Wave even though the first version barely limped along and still think it was the coolest thing on earth. They would install a Chrome browser and every update the minute it became available. Why are they sad? They’re sad because they believe Google’s bold move towards the Chinese government means the end of Google in China.

With its bold statement towards the Chinese government, Google basically closed their doors in China. Business tactics that may work in countries like the US do not work in China. In China there is a strong feeling about building relationships. There is a strong feeling about “saving face”. There is a strong culture and history that the people are very proud of.

Sure there are problems. And yes there are problems that need to be fixed. But the question that arises is what is the best way to go about it.

I wrote a blog post about how to do business in Asia. In this post I summarized the lessons that could be learned from President Bill Clinton’s visit to North Korea to release the US reporters. Bill did not prove that he was right and North Korea was wrong. Instead, he approached the government with respect and he approached them in a way that was aligned with their culture. Bill gave them a path to change their position without losing face. By doing this, Bill achieved a result that many thought was impossible. North Korea released the US reporters to the US.

Unfortunately, Google did just the opposite today. They brought US tactics to the Chinese government. Not any US tactics, but US tactics that are against the grain of Chinese culture. They did not show respect. They did not allow a path for “saving face”. They did not build the relationship.

I am a big fan of Google. I use their services. I use their browser. I’m excited about their experimentation with web-based operating systems. I’m also proud of them for taking a position with their principles. I just don’t understand the strategy behind this move. Are they expecting to be successful in China? Are they okay with losing the Chinese market? Will they get enough benefit from other parts of the world to make up for the loss in China? Will they catalyze a larger movement?

I agree with some points that Sarah Lacy made in her post on this topic. Robert Scoble wrote a post in response on the push and pull of China. He discusses the tensions that businesses face when working in China. He takes a negative view of the way business is done in China. However, I would argue that there are positive sides too. My main point is that any government has good points and bad points, so we must take a balanced view. I have worked with and managed people in China and I have colleagues and close friends there. They are not sitting around feeling repressed. They are innovating, they are creating, they are working hard, and they are hopeful about their future.

In any case, let me speculate a bit about the potential business impacts.

1. Companies will be hesitant about advertising on Google China, which will hurt Google’s current business in China. Until now, companies inside and outside of China have used Google advertising as an onramp into the China market.
2. Google will not be able to re-enter the China market easily because it will be difficult to rebuild relationships.
3. Google will have trouble recruiting top talent in China because they have lost some credibility and people don’t want to join a company whose future in China is uncertain.
4. There will be opportunities for others to enter the market in China: Not only Baidu, but also incumbents like QQ and Microsoft Bing.

This also raises some interesting questions: Can Google succeed without a presence in China? Will this make Google less of a powerhouse worldwide? Will this allow Microsoft to regain ground from Google?

One of my colleagues told me about some advice he had gotten early in his career. His mentor asked him “Do you want to be right or do you want to be effective?” I commend Google for standing up for its principles. Google is a powerhouse. I would like to see them take the approach of being effective.

I’d love to hear your thoughts!