Co.Design

Google's Business Strategy: Have No Business Strategy

Serial innovators like Google give employees time to explore ideas — even though some of those ideas turn into massive failures, writes Tim Harford in Adapt: Why Success Always Starts with Failure.

[This is the second in a three-part series of excerpts from Tim Harford's new book. The first excerpt was "Why Do We Hold Fast To Losing Strategies?"]

Google’s CEO Eric Schmidt had a surprise when he walked into Larry Page’s office in 2002. Page is the co-creator of Google and the man who gave his name to the idea at the company’s foundation: its PageRank search algorithm. But Page had something rather different to show Schmidt: a machine he’d built himself which cut off the bindings of books and then scanned their pages into a digital format. Page had been trying to figure out whether it might be possible for Google to scan the world’s books into searchable form. Rather than instructing an intern to rig something up, or commissioning analysis from a consulting firm, he teamed up with Marissa Mayer, a Google vice president, to see how fast two people could produce an image of a 300-page book. Armed with a plywood frame, a pair of clamps, a metronome, and a digital camera, two of Google’s most senior staff tried out the project themselves. (The book went from paper to pixels in forty minutes.)

Managers stay out of the way. Other engineers determine which projects gain momentum.

Larry Page regarded the time he devoted to the project not as something he could do because he was Google’s founder and could do whatever he wanted, but as something to which he was entitled because every engineer at Google had the same deal. Famously, Google has a “20 percent time” policy: any engineer (and some other employees) is allowed to spend one-fifth of his or her time on any project that seems worthwhile. Google News, Google Suggest, Adsense, and the social networking site Orkut are all projects that emerged from these personal projects, along with half of all Google’s successful products—and an astonishing portfolio of failures.

Whole Foods Market would have little to gain from letting its employees noodle around on whatever project took their fancy, but Google’s 20 percent time is a practice made successful by the same basic mechanism that Whole Foods relies on: peer approval. Managers stay out of the way of personal staff projects. It is other engineers who determine which projects gain momentum and which languish: If you can’t persuade your peers to help you with your idea, it will go nowhere. Managers can provide the space for innovation, but it is peers who provide most of the time and energy. More recently, Google has grown so big that Eric Schmidt, Larry Page, and Sergey Brin have formalized a process of supporting promising innovations. Even so, the aim is not to stifle more projects but to give extra funding and resources to projects that might otherwise be lost in the noise of 20,000 employees.

It’s hard to imagine two more different companies than the shoe-repair chain Timpson and the Internet search giant Google, but look at the similarities in the language: Google wants to maintain a “bozo-free zone,” Timpson is insistent about keeping “drongos” out of the business. Bozos are less-than-brilliant engineers; drongos are shop assistants who don’t care about the business and don’t pull their weight. The basic idea is the same: In a company where the selection mechanism is your teammates rather than top-down rules, there is no room for people who don’t play their part.

The 20 percent time policy isn’t unique to Google: Not only is it being widely emulated across Silicon Valley, but it long predates the creation of the Googleplex. A similar deal has been standard practice for half a century at W.L. Gore, where all employees get a half-day each week of “dabble time.” Again, we see that while the experimental approach may be perfectly exemplified by the denizens of Silicon Valley, and even more by the online communities they make possible, the basic ideas have been around and successful much longer than the World Wide Web.

A serial innovator such as Google or W.L. Gore knows that if you give smart people some space, you may get a Spitfire, the solution to the longitude problem, the technique for knocking out genes in mice—or Gmail. A few such successes justify a lot of slack time. One example is W.L. Gore’s ‘Elixir’ range of acoustic guitar strings, which now dominate the market. They emerged via a long period of experimentation when a W.L. Gore engineer, Dave Myers, applied the Gore-Tex polymer first to cables on his mountain bike and then to guitar strings. Gore had no experience in the music industry and Myers had no management approval for what he was doing. He didn’t need it.

Google is quite simply an evolutionary organization.

The management guru Gary Hamel argues that Google in particular is actively pursuing a Darwinian strategy of pushing out the largest possible range of products—not a single guppy but a greenhouse full of different guppy strategies. Google is quite simply an evolutionary organization: It began with a search engine, then turned site hits into revenue when it teamed up with AOL and Yahoo, then developed a system of displaying adverts alongside search results. Google then stumbled upon the idea of Adsense, the ability to make adverts relevant to any web page. This discovery was made serendipitously while developing Gmail, and trying to deliver context-sensitive adverts alongside the Gmail inbox, and then expanded into Google apps and other projects. Hamel comments that “like an organism favored by genetic good fortune, Google’s success owes much to serendipity.” That is true of many successful companies – John Mackey, the CEO of Whole Foods, calls himself “the accidental grocer” — but Google have elevated it to a guiding principle.

If any company can be said to embrace trying new things in the expectation that many will fail, it is Google. Marissa Mayer, the vice president who helped Larry Page bodge together the first book scanner, says that 80 percent of Google’s products will fail — but that doesn’t matter, because people will remember the ones that stick. Fair enough: Google’s image seems to be untarnished by the indifferent performances of Knol, a Google service vaguely similar to Wikipedia, which didn’t seem to catch on; or SearchMash, a testbed for alternative Google search products which was labeled “Google’s Worst Ever Product” by one search expert and has now been discontinued. According to the influential TechRepublic website, two of the five worst technology products of 2009 came from Google — and they were major Google products at that, Google Wave and the Android 1.0 operating system for mobile phones. Yet most Internet users know and rely on Google’s search, Google Maps, and Image search, while many others swear by Gmail, Google Reader, and Blogger. As long as the company doesn’t pour too much money into failing products, the few big successes seem to justify the many experiments.

This is fundamental to the way Google does business. Google has established its own equivalent of John Endler’s guppy ponds and is seeing what emerges. The company’s corporate strategy is to have no corporate strategy.

Excerpted from Adapt: Why Success Always Starts with Failure by Tim Harford, published by Farrar, Straus and Giroux, LLC. Copyright © 2011 by Tim Harford. All rights reserved.

Click here to purchase the book at Amazon, for $15.

[Top image, of spent shotgun shells, by U.S. Fish and Wildlife Service Northeast Region]

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5 Comments

  • @andreweccles

    I'm a fan of Tim's work, although I haven't read Adapt yet- but this excerpt goes to reinforce why I should.

    I agree with Jesus, it may not be a 'classical' strategy, but it is still a strategy. Sure Google benefits from freedoms other businesses perhaps don't, but I'm guessing it doesn't 'fly by the seat of its pants' either.

    Eagerly awaiting part 3, & my copy of Adapt! Keep up the good work.

  • Trend Guardian

    Now that I think about it, Google's 20% time policy comes from the Pareto principle, or the 80/20 rule. 80% of idea failures again confirm this principle.

  • David Rapp

    If Eric Schmidt is so smart - why can't I sort gmail by sender, size, etc when THOUSANDS of users have requested it over and over. Just goest to show you - smart people make dumb (and often dogmatic) decisions.

  • Narayana Rao K.V.S.S.

    Regarding Google's Knol: Knol is now estimated to have more than 5 million unique visitors per month coming from all the countries in the world. Such a performance could give around Top 1000 rank to Knol as a website. I think Google did not spend much effort in articulating its strategy regarding Knol but implemented it by taking all the criticism of social media with patience. Today, it is now evident, that Knol user community has the ability to survive and grow in the competitive online article platform area. Once, social media changes its assessment of Knol, the growth will further accelerate. Knol need not be compared with Wikipedia every day. The utility of Knol, its cost and benefit can be assessed independently.

  • jesus arguelles

    Strategy 2.0 which is based on a learning and consequently an evolutionary organization is  driven by less structure and disruptive technologies. Nevertheless,  it is still a strategy but not in the classical sense. In fact, I would say that 80% of all firms have been using non-classical or structured business strategy approach to growth. Therefore, stating that Google does not use business strategy because it enjoys the freedom to initiate and execute or manage innovation is not quite correct.