I recently wrote a piece titled, “Google: Following in the Footsteps of WorldCom and Enron,” discussing Google's forays into the telecom and energy trading industries. Now the company says that in addition to these initiatives they want to become your ultra-high-speed ISP (see Excite@Home). Carl Howe made a good point yesterday that this can be viewed as an extension of the company's mission statement. I also love the idea of Jim Collins' BHAG (Big, Hairy Audacious Goal) and consider myself a fan of his work. However, these forays are clearly outside of the company's core competencies of search and advertising. I'm also a big fan of another business guru, Warren Buffett, who has famously discussed the idea of “circle of competence,” the concepts, industries and business plans which an investor can easily understand and evaluate. Those that lay outside an investor's circle are obviously beyond her ability to effectively analyze and hence dangerous to her financial well-being.
BHAGs are fantastic motivators and integral to the evolution of the most successful businesses in the world BUT, just like the most successful investors in the world, they must be focused within the “circle of competence.” I am confident that Jim Collins would absolutely agree. His Hedgehog concept is clearly in the same spirit as Buffett's circle concept.
I would argue that Google's new ventures are outside the company's circle and amount to it abandoning its hedgehog concept. Shareholders would do well to keep a close eye on these developments and the company's clear shift in focus.