Google Inc (GOOG), Apple Inc. (AAPL): Managing Growth and Innovation

Remember 2012? Apple Inc. (NASDAQ:AAPL) investors were basking in the glory of their company’s epic rise to more than $700 a share. Apple rivaled Exxon Mobil Corporation (NYSE:XOM) as the world’s most valuable company in terms of market capitalization. Many believed the stock would reach $1,000 a share.

Just seven months later, Apple Inc. (NASDAQ:AAPL) is hovering at around $400, losing about 40% of its value. Experts are pointing the finger at Apple’s lack of innovation. Since the passing of Steve Jobs, Apple hasn’t really released any new products, and instead has continued to improve and update its existing products.

In the highly competitive tech industry, it is absolutely crucial for tech companies to continue innovating to stay relevant.  Apple Inc. (NASDAQ:AAPL)’s recent struggles have been a direct result of its lack of innovation and the company will continue to struggle unless it can find some way to create innovative products.

Since its inception in 1998, Google Inc (NASDAQ:GOOG) has been a dominant force in the tech industry, holding more than 60% market share in both search engines and smartphone operating systems. A leading company in Internet advertising, Google’s revenue is derived from advertisements placed on its search engine, YouTube videos, etc. In 2012, approximately 95% of its $50 billion in revenue came from advertisements.

The company’s focus is to develop products that drive more traffic and more searches to Google Inc (NASDAQ:GOOG). With recent up-and-coming competitors like Yahoo! Inc. (NASDAQ:YHOO) Search and Microsoft Corporation (NASDAQ:MSFT)’s Bing, Google continues to make efforts to maintain market share. Products such as Google Docs, Android Smartphone Operating System, and others drive more users to Google Inc (NASDAQ:GOOG).

Google’s organizational culture

The development of these products is a direct result of Google Inc (NASDAQ:GOOG)’s organizational culture. A flat organizational structure along with a very relaxed, loose environment allows Google’s employees to develop their own ideas into the next best Google product.

Google Inc (NASDAQ:GOOG) actually has a policy that empowers its employees to work on their own projects, called the “20% Project.” It states that employees are entitled to 20% of their work week, one-out-of-five days, to work on their own projects and ideas. These ideas can be taken directly to upper level management, or even to one of the two founders themselves, Sergey Brin or Larry Page. This structure has worked for Google for years and has led them to the dominance in the search- engine market. It has also attracted the best, brightest, and most innovative talent in the tech industry.

Source: Yahoo! Finance

Hovering around $800 a share, Google’s investors have enjoyed a 30% return over the past 12 months. Will Google Inc (NASDAQ:GOOG) investors experience the same or greater returns in 2013? Doubtful. As the company grows, it will face challenges with innovation that in the past has been the company’s bread and butter.