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2 Important Investing Lessons from a Technology Giant’s Incredible Success

A little over two weeks ago on 19 August 2014, Google Inc celebrated the 10th anniversary of its Initial Public Offering (IPO), which happened on 19 August 2004.

Last week, I wrote about how the company clocked-in an incredible return of 1,081% since its listing. Google’s success has been built upon its popular search engine, and it has gradually branched out to other products such as Chrome (a web operating system), Youtube (yes, the online video and streaming site), Android (the smartphone and tablet software) and a whole lot more.

It is often said that we can learn a lot from past successes, so I believe that that we can learn even more from success stories of our generation. Without further ado, here are two important business and investing lessons we can take from Google:

1. Relentless improvements and innovations

According to comScore, Google holds a dominant 67.3% market share in US online search. However, this strong position has not stopped the technology giant from continuing to improve its bread-and-butter product – Google Search.

In fact, in 2012, it ran an astonishing 20,000 experiments to improve its search algorithm. For competitors, this means an ever higher wall to scale. Put another way, Google’s challengers would first have to match Google’s current search quality, and subsequently, exceed the company’s relentless pace of innovation. This tall order is something that its competitors, such as Microsoft’s Bing and Yahoo! Inc., have yet to be able to do.

A parallel may be found in Singapore’s scene. Diamond manufacturing technology maker, Sarine Technologies Ltd (SGX: U77) introduced the first of its Galaxy equipment range (Galaxy 1000/2000) in 2009. In 2011 and 2012, it introduced another three systems in Galaxy HD, XL and Ultra. These new products have gone a long way in helping the company to almost quadruple its revenue since 2009 from US$21 million to US$83 million in the last 12 months.

Despite achieving such success, Sarine has not been resting on its laurels. The company went on to recently introduce two new products, Sarine Light and Sarine Loupe to cater for the more lucrative downstream diamond retail markets. According to a report from the Edge, Sarine Technologies’ Chief Executive Officer, Daniel Glibert, estimates the new market to be worth around US$50 billion.

Sarine Technologies’ innovative efforts has helped its shares rise by 934% in price alone over the last five years.

2. “It’s very hard to completely fail in ambitious goals”

Google’s CEO Larry Page is a big believer in tolerating multiple failures in order to achieve big goals. This is best seen in the company’s experimental Google X lab which has been responsible for projects such as self-driving cars and contacts lens which monitor glucose levels in a human body. The head of Google X, Astro Teller, explains more about the idea of embracing failure in this BBC report:

“You must reward people for failing, he says. If not, they won’t take risks and make breakthroughs. If you don’t reward failure, people will hang on to a doomed idea for fear of the consequences. That wastes time and saps an organisation’s spirit.”

Arguably, the same culture might just exist within Singapore-based OSIM International Ltd. (SGX: O23). In a CNN interview in 2008, OSIM’s CEO Ron Sim explained his thoughts on failures:

“I always tell the young entrepreneurs that are coming up, if you want to win, be prepared to lose. And every loss is an opportunity, you learn something from your loss. We lose many times.”

For a company that has grown its earnings-per-share by 250% since 2009, it seems like OSIM has found success through learning from its many failures.

Foolish takeaway

Learning from historical successes would be one way we can be one step closer in recognizing patterns of success. And, the lessons can become more relevant especially when the learning points come from the movers and shakers of our generation.

That said, Google Inc’s total annualized share price return of 26.8% over ten years is going to be one hard act to follow. So, even if we can take the best lessons from the internet giant and study its success patterns, we may still never be able to find investments which achieve the kind of returns Google has.

The good news is that we may not need to.

Even half the annualized rate of Google’s 26.8% return would easily beat the long term compounded annual gains of of 8.65% of the SPDR STI ETF (SGX:ES3), a proxy for Singapore’s market barometer, the Straits Times Index (SGX:^STI). Besting the index by a few percentage points per year in annualised returns would still be quite a satisfying achievement on its own.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong is an avid fan of Google and owns shares in Google (GOOGL and GOOG).