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Google's Management Style Grows Up

Posted on Innovation Insights: June 22, 2009 11:48 AM Over the past decade, Google has inspired envy in trench-dwelling managers around the world. It's not just the unparalleled benefits. It's the way Google approaches innovation. Engineers are encouraged to dream up pet projects in their spare time. Teams self form around the best ideas. Market-based principles ensure that the best ideas receive funding. It sounds chaotic, democratic...and intoxicating. "Why can't we do that?" countless managers wonder. "Instead, we have to deal with crushing bureaucracy that favors our leaders' personal whims over the most game-changing ideas." Management guru Gary Hamel praised Google in his book The Future of Management, positing that more and more companies would adopt the company's market-based system. There is indeed much to admire about Google's approach, and much to learn from it. The system ensures that interesting ideas—even those that aren't obvious fits for Google's capabilities or core business model—receive some degree of attention. However, Google's approach hasn't demonstrated that it can actually, you know, create successful businesses. Despite the hype, more than 95 percent of Google's revenues trace back to Web-based search advertising. Further, as the company's explosive growth has slowed, innovative employees have left to form new ventures. For example, Twitter was formed by former Google employees. In a blog post last year, I said this recession would be Google's "moment of truth." Either it figured out how to bring appropriate discipline to innovation process to realize its latent potential, or it ended up looking like every other company. The company has at long last recognized that discipline is not a dirty work. An article in the Wall Street Journal last week described how Google plans to build a process to make sure that high priority ideas received the right resourcing. Specifically, it is creating "innovation reviews" where department heads share promising ideas with Google's top leadership, helping executives focus attention and resources on promising ideas early. As CEO Eric Schmidt said, "We were concerned that some of the biggest ideas were getting squashed." It doesn't seem like Google is walking away from its ideals. Rather, it's trying to couple its world-class approach to the "front end" of the innovation process with the world-class discipline exhibited by companies like Procter & Gamble. It might yet struggle to bring these two approaches together. But success could allow the company to create an innovation capability that actually lives up to the hype. I have three unsolicited pieces of advice for Google's management. First, set and communicate clear criteria for how you make funding decisions. Make sure those criteria include quantitative elements (how big could the market be) and qualitative elements (how passionate are we about this). Second, create an "ideal" innovation portfolio that blends core improvements and new growth businesses. Finally, consciously seek ideas that provide "unique" diversification by using a new channel, reaching a new customer, or creating a new revenue stream. There's a general lesson in Google's shift. People think that constraints are innovation inhibitors. They aren't. Unconstrained efforts are often undisciplined efforts that lead to immaterial results. The right constraints in the right places can be innovation accelerators. Constraints can focus creativity where it is most needed. Constraints can help ensure investment flows to where it provides the highest returns. Growing up isn't always a bad thing. We'll see how well Google handles it.
Anthony is the managing partner of the innovation strategy firm Innosight and the author of The First Mile: A Launch Manual for Getting Great Ideas into the Market.

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