How Google Works: Creating an Innovation Machine

Posted On August 21, 2015
Categories Thought Leadership

Ken Bernhardt

An Op-Ed from the Atlanta Business Chronicle

Last week Google announced the creation of Alphabet Inc., its new holding company, and the separation of its highly successful and profitable search and advertising business from, what the Wall Street Journal called, “its array of so-called moonshots.”

On Alphabet’s new website, abc.xyz.com, CEO Larry Page explained the thinking behind the move. He cited the original founders letter that he and co-founder Sergey Brin wrote 11 years ago: “Google is not a conventional company. We do not intend to become one.” They also stated that people could expect Google to make smaller bets in areas that might seem “speculative or even strange when compared to our current businesses.”

Page states that he and Brin have long believed that over time companies tend to get comfortable doing the same thing and just making incremental changes, and you need to be a bit uncomfortable to stay relevant. By separating Google’s core business, including the search business, YouTube, the Android and Chrome operating systems, maps, and Gmail, from the riskier new technology businesses such as driverless cars, glucose-sensing contact lenses and Internet balloons, each of the businesses will get more focus. Wall Street responded to the announcement by sending the stock price up 6 percent to $704 per share.

As a result of doing lots of things that “seemed crazy at the time” Google has grown its sales to $66 billion last year, and the company is currently worth $445 billion. These are big numbers. How Google has grown so dramatically over the years is documented in a book published last year, How Google Works. The book was written by two people who were an important part of the Google story – – Eric Schmidt, Google’s CEO from 2001 to 2011 and current executive chairman, and Jonathan Rosenberg, who joined Google in 2002 and managed the design and development of the company’s consumer, advertiser, and partner products including most of Google’s current core products.

They state that the key to Google’s rapid growth and success is due to a few simple principles. First and foremost is an intense focus on the user. The philosophy has been that if the company can create great products for users, they would be able to figure out the “money stuff” later. To achieve that, it is important to understand the product from the user or consumer’s perspective and to do this better than anyone else.

Understanding how consumers use products enables the engineers to find the technical insights that make products better. For something to be innovative it must be new, surprising, and “radically useful.”

Another principle at Google has been to hire as many talented engineers as possible and give them freedom. The engineers are allowed to spend 20 percent of their time on projects of their own choosing. The most valuable result isn’t the products and features that get created; it’s the things people learn when they try something new.

Today the rule of thumb is that half of the employees should be engineers. The company uses communication as a way to keep everybody moving in the same direction. They have TGIF meetings every Friday where any employee can ask any question – – any topic is fair game.

For years the company had a list of the top 100 projects that was available for anyone to see. The list was debated semi-quarterly. The list was prioritized on a one-to-five scale with room on the list for projects categorized as “new/far out” and “skunkworks.” The goal today is to have 70 percent of the top projects focused on the core business, 20 percent on emerging products that have achieved some early success, and 10 percent on completely new things that have a high risk of failure. This ensures the core will get the bulk of the resources and that promising up-and-coming areas will also get investment, along with the “crazy ideas” getting some support as well.

The company has had many failures, including Google Notebook, Knol, iGoogle, Wave, Buzz, and Pigeon Rank (which was closed down 24 hours after its launch). The Google culture encourages people to take risks and they are not penalized or held back for failure. The rule is to “fail well,” that is, to learn from your mistakes.

Other parts of the Google philosophy leading to its success include:

  • “Don’t Be Evil” is a serious part of the culture. Googlers regularly check their “moral compass” when making decisions.
  • Don’t grow so fast that it negatively impacts user experience. The priority is to grow, not make more money.
  • Make it easy for consumers to leave; you want to win consumers’ loyalty based on merit. When consumers have low barriers to exit you have to work hard to keep them.
  • Don’t follow the competition. That fixation leads to a never-ending spiral into mediocrity and to the development of only incremental, low-impact changes.
  • Hiring is the most important thing you do. At Google, hiring is done in committees, with interviewers highly trained in the process. They believe that this creates better hiring decisions.
  • The Google interview feedback form has ratings on a) general cognitive ability (how a candidate thinks), b) role-related knowledge, c) leadership experience, and d) “Googleyness,” which includes ambition and drive, team orientation, bias to action, creativity, integrity, and listening and communication skills. The last criterion includes the LAX Test – – the degree to which you would like to spend 6 hours with the person at the LA Airport during a plane delay.
  • Give disproportionate rewards. Pay outrageously good people outrageously well regardless of their title or tenure.
  • Read. One of the easiest ways to get ahead in a field is to know more about it and the best way to do that is to read. People always say they don’t have time but what they are really saying is that it isn’t a priority.
  • The world’s best athletes need a coach and you don’t?
  • At Google, users are people who use the products and customers are the companies that buy their advertising and license their technology. When there are conflicts, the bias is toward the user. Users are more empowered than ever and won’t tolerate “crummy products.”
  • Set (almost) unattainable goals. If you reach all of your goals, they aren’t set high enough. A score of 70 percent progress on a well-structured goal is often better that a 100 percent score on a lesser one.

Seeing how Google works, it is no wonder that the company has been as successful as it has been. How many of these principles does your company follow?

Ken Bernhardt is Regents Professor of Marketing Emeritus at Georgia State University’s Robinson College of Business and a marketing consultant. He can be reached at ken@kenbernhardt.com.