As a Venture Capitalist, I occasionally hear entrepreneurs lay out a Strategy of Everything, a plan to be all things to all people. (SOE rhymes with TOE, the Theory of Everything, the Holy Grail of mathematical physics, only less attainable than the sacred object…)

In practice, “all things to all people” invariably becomes too many different services in too many market segments. “We don’t know what will work or for whom, so we’ll spray and pray. We’ll shoot arrows in the dark and when the sun rises, we’ll paint a target around the one that lands in a good spot. We’ll declare victory and raise a second round while claiming that this had been our strategy all along.”

VCs hate SOE. It’s a grand way to waste large amounts of capital. We’re measured on capital efficiency and, as result, tend to tell entrepreneurs with SOE dreams to go pitch our competitors.

From this perspective, Google’s strategy doesn’t make sense: They, indeed, are trying to be all things to all people. They even brag about it on one of their sites where they arrange their products as a Periodic Table of Elements. The real thing (see for example) looks like this:

Google’s product line adopts a similar look:

Granted, Google’s table contains neat interactive features: If you hover over a category at the top – Mobile, Search, Data APIs — the related products light up. Well done. More proof of the breadth and depth of Google’s ambitions and skills.

So: Is this the type of SOE I just made fun of?

Yes and no. Yes, Google wants to be all things to all people, and, no, this is nothing to laugh at. Google continues to construct the largest computing infrastructure on the planet but still manages to generate large amounts of liquidities. At the end of March 2011, it had more than $36B in cash. Google is extremely capital efficient.

Let’s look at it from another angle.

Google’s one and only goal is to sell advertising. The path to this goal requires ‘‘radiation pressure’’: Google wants to make sure we don’t escape their ads. They want to insert themselves into all aspects of our lives, to find out much as they can about as many aspects, activities, and relationships as possible. In Eric Schmidt’s memorable Freudian slip at the D9 conference a few weeks ago: We know where you live… (The video is a bit long, not boring… and prescient.)

It’s that simple and complex — and breathtakingly audacious. And not without a downside.

The first general problem is quality. When you’re constantly pushing out new applications and services that compete on so many fronts, quality suffers. Bugs are inevitable, support is erratic, apps suffer from a “UI by — and for – Engineers” syndrome.

I have had several misadventures using Google Apps for Business, the paid-for variety. After waiting for days for the billing system to become “unstuck,” I finally contacted Customer Support — a needlessly complicated process. The suggested work-around was bizarre: Open an anonymous browsing window in Chrome. Things didn’t get much better. The billing system, which is clunky and displays inscrutable error messages, wouldn’t let me use Google’s own Checkout payment system — the same system I used when I purchased a domain name weeks ago. Ah well…

Regarding the UI, log onto Gmail and go the Settings page. What you see below is just the first of 13 settings tabs:

How does a normal human manage such complexity? Google’s engineering culture has made it the large-scale computing king, but these computer scientists don’t seem to have a feel for what lesser mortals experience.

Another problem is The Crack in the Wall. Google saw that smartphones were destined to be bigger than PCs. Android is a Google-scale success that shows what the company is capable of. But Google’s failure in social networking as Facebook and Twitter succeeded shows that you can’t man all the crenels in the fortress wall. Whatever the reason — management bandwidth, cultural deafness, lack of attention, arrogance as the toxic waste of success — Google either didn’t see Facebook or failed to develop the right service at the right time. And now Facebook has more than 750 million users worldwide. It’s become a kind of black hole sucking in Web traffic:

Facebook doesn’t have the kind of explosive revenue growth Google experienced at a comparable age, but they’re building an amazing ‘‘Overnet’’, a superstructure one level above the Internet.

Finally, Google is perceived as a threat. Following the lead of the European Union, the US FTC wants to take a close look at possible anti-competitive practices. On its official blog, Google responds with “Supporting choice, ensuring economic opportunity”. It reminds us of Steve Ballmer claiming that Microsoft is all about choice

Antitrust legislation is above my pay grade, but perceptions such as the one eloquently put forth by Bill Gurley have become pervasive. In The Freight Train That Is Android, Gurley argues that Google’s strategy is to flatten (kill or disintermediate) anything/anyone that stands between its advertising business and us, the eyeballs.

Does the FTC investigation confirm Google as Microsoft 2.0? Different times, different technology, but the same irrepressible need to dominate. Microsoft “ran” the PC industry, Google rules Internet advertising. Such dominion isn’t illegal per se, but many people and governments are unhappy about present and future consequences.

The Microsoft 2.0 moniker is a bit misleading. Microsoft built a franchise that’s easy to understand and manage: Windows + Office. With the possible exception of games, they haven’t fared well in other pursuits. The core business is likely to continue producing nice profits for a long time. PCs aren’t going to disappear overnight, and even if Web apps keep getting better, they aren’t yet as functional and pleasant as desktop apps.
Google, on the other hand, is much more complicated. They don’t make money from a simple Windows + Office combo. Indeed, they have to give away their products – smartphone OS, email, (excellent) maps, photo-editing, and many more — in order to sell ads.

This leaves Google with an interesting combination of threats. Actually, a chain of threats.

First, the need to be “all services to all people” exposes the company to sloppiness and to silos, to UI by and for engineers, to “featuritis”, to products that don’t interconnect.

Second, as if the threat of mediocrity wasn’t enough, the 360 degrees of products have only one role: sell the real thing, advertising. As a result, Google has to use its products/services to kill or disintermediate everything in the path of its advertising.

Third, for all Google’s “Don’t Be Evil” motto, the company has now reached a point where the more it excels, and it often does, the more it is perceived as a threat by individuals and governments around the world.

This is what a “successful” SOE yields.