How Google's Novel Management System Aids Growth

Carl Bialik from WSJ writes "Gary Hamel, visiting professor at London Business School, argues in a Wall Street Journal commentary that Google's 'novel management system seems to have been designed to guard against the risk factors that so often erode an organization's evolutionary potential.' Among Google's advantages: The 20% rule, an 'expansive sense of purpose' and the credo, 'keep the bozos out and reward people who make a difference.' Hamel also traces the company's evolution from Google 1.0, 'a search engine that crawled the Web but generated little revenue,' to Google 5.0, 'an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base. More than likely, 6.0 is around the corner.'"

Novell?

Was anybody else besides me wondering why Google was using a Novell system when they read the headline?

Wrong versioning scheme

...Google Beta 5.0, 'an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base. More than likely, Beta 6.0 is around the corner.

Fixed.

The Friendly Giant...

As the artical points out, Google is pretty much going right where all have gone wrong in the past with traditional business models before. This is what makes them so innovative. The tremendous openess in the company, along with their creedo to do no wrong has also given them a squeky clean public image. The world loves Google and wants to see the friendly Giant smash the mean people eating one.

All that said, how long can Google really maintain it's unorthadox business methods while allowing VERY orthadox investors to buy stocks in the company. I'd say it's only a matter of time, and the price for become a truly large corporation. I can only hope that I am wrong.

Re:The Friendly Giant...

Google is currently somewhat insulated because its Class A stock (the publicly traded one) has 1 vote per share, and its Class B stock (held only by a narrow group of insiders) has 10 votes per share, which give those insiders something like 2/3 of the voting power.

Re:The Friendly Giant...

Another example of a company that utilizes unorthadox business methods, but still manages to please share holders; look at Costco, because they were able to convince their orthodox share holders of the benefits of supporting Costco's unorthdox business methods.

If these companies continue to communicate to their share holders the sustained benefits of long term gain, we won't see a signifigant change in their unorthadox business methods.

Reminds me

of 'The Seven Day Weekend' from Ricardo Semmler. The CEO of SemCo with revolutionary ideas about business. A lot of his ideas are mentioned in TFA.
Really great book if you're interested in the ideas behind firms like Google.

Remember when Yahoo was the darling?

Now it's Google's turn in the box. With the way Google is getting involved in Politics, both in the US and China, I'm sure a lot of people are going to start having issues with them and I'm sure a lot of it will spill over into their workplace.

As a previous poster said, as it gets bigger, things will not go as well. Just as everyone turned on MicroSoft, I'm sure one say everyone will turn on Google as well. We're a fickle industry.

Whooops

I read that article title and did that "automatic brain" thing where you only read key words.

The article title came out "Google's management (has) AIDS"

Oops.

An innovation factory....

...I'd say that Amazon is starting to turn into one of these. Their new S3 storage service is a very nifty thing; I've seen folks using it all over the place.

We're using it for the indi [getindi.com] downloads and it's been working great - especially when paired with the Ruby API [blogs.com].

God I hope it lasts...

All it takes to cripple an innovative company is for people outside the tech world, usually managers from ivy league schools with big fancy MBA's, to come in and cement themselves into positions of power and shift the focus from innovation to profits. Happens all the time... people with MBA's don't really contribute much to society and they know it (honestly, slight contribution to efficiency, maybe, but absolutely nothing else), but they also know to look for the most up-and-coming sector and the companies in it to try and get positions high up.

Eh, at least that's what I've seen happen. Hope I don't get modded down too much by angry managers. :)

Re:God I hope it lasts...

Who, exactly, would you like to manage large projects (or large companies)? People who don't know anything about management or business, because they are educated in tech? Yes, occasionally companies run from the top down by techies work, but that's not the reason why they work. Believe it or not, the ability to lead, to allocate resources, to plan ahead, to determine whether something is marketable, to deal with supply chains and distribution, and to keep people happy are skills. Good MBA programs teach those skills. The second /. heresy in this post is the following: the best piece of software doesn't always make the best product! Look, I've been programming since I was 5 years old and so I have the same feelings as the most of you about great software. At the same time, I realize the business world isn't a perfect world. Sometimes your clients don't want it perfect-- they need it now. Sometimes you _could_ spend a few more weeks adding really great functionality to your project-- but marketing research says that it won't change sales numbers a bit.

Re:God I hope it lasts...

I don't know if it means anything, but one of my former coworkers left a (very good) NASA engineering position to get his MBA from Columbia. He'd been with NASA for about 10 years, and was looking to shift out of engineering for a change. He certainly came from a background that was a lot different and much more technically oriented than almost all of his classmates.

Google just hired him to do business development. Unlike the stories I hear about how difficult it is to get hired there, he did very little work to get the position except submit a resume - in fact, it was more like they were actively looking for someone like him.

Anyways, perhaps that's some sort of indicator of the MBA types Google is recruiting.

Re:God I hope it lasts...

Its not MBAs that are the problem. Its MBAs that don't know anything about the industry that their company is in. Even worse if they think they know a lot more than they do (ie. PHB). An MBA that is also very technically proficient is worth his/her weight in gold.

And in 2016, Google becomes self aware.....

"It is driven by an open-ended mission to organize the world's knowledge..."
and:
"Google seems to have grasped the new century's most important business lesson: The capacity to evolve is the most important advantage of all."

My bet is on Google to solce the problems of a working A.I., maybe by accident, maybe by design.

I would take issue with one point from the article

From the article:

Elitism may be out of fashion, but Google is famously elitist when it comes to hiring. It understands that companies begin to slide into mediocrity when they start to hire mediocre people. A-level people want to work with A-level people.

The only problem is that a company cannot thrive longterm with only A-level people. As a software company grows and matures so the average age of the company code base increases, and there's a gradually increasing requirement for maintenance of the older products. A-level people rarely consider their primary task in life is settling in as a maintenance coder on products that are no longer considered to have a substantial "wow" factor.

Having said that, code maintenance can be some of the most demanding work around, as programmers are asked to come up to speed on outdated code they didn't write and make it do things it was never designed to do. But, speaking generally, this isn't considered something that will make you stand out in your company and it's not where A-level people want to be.

Equally well, having everyone take a turn at maintenance doesn't work either. I would imagine that there's few programming tasks worse than taking over code that's been maintained by half a dozen people who only wanted to move on to other things. You probably aren't going to get any of the awards mentioned in the article by burying yourself in old code, regardless how valuable that might be.

Re:I would take issue with one point from the arti

A-level people want to do what is best for everybody (for themselves and the company). If Google keeps rewarding people who make the most contributions, then code maintainers will be rewarded. Maintenance is considered a low-tier job at hierarchical companies where only people working on the 'wow' products are rewarded.

The whole point of googles flat structure makes it possible to have maintenance be a sexy task within the organization by allowing rewards to go where they should go too. I would say that 'most companies' create the hierarchy because they don't have the guts to manage the way that google does.
I've worked at far too many companies where the disconnect between espoused values and actual values create the kind of situation you describe (ie maintenance coding is a loser job, best avoided or gotten promoted out of).

WSJ is submitting articles now?

Seriously, look at the submitter...

Novel?

Looks strikingly similar to the models that 3M, IBM and possibly a number of other companies used during their rapid growth periods, particularly in their research/development departments. An emphasis on employee driven product development has high overhead to the number crunchers (lots of work is thrown out) but it really only takes 1 unique application of an idea (all ideas are old) in 100 to more than make that back.

i disagree with the evolutionary steps

Google 1.0 was a search engine that crawled the Web but generated little revenue; which led to Google 2.0, a company that sold its search capacity to AOL/Netscape, Yahoo and other major portals; which gave way to Google 3.0, an Internet contrarian that rejected banner ads and instead sold simple text ads linked to search results; which spawned Google 4.0, an increasingly global entity that found a way to insert relevant ads into any and all Web content, dramatically enlarging the online ad business; which mutated into Google 5.0, an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base. More than likely, 6.0 is around the corner.

It should be:
Google 1.0: A nobody search engine
Google 2.0: Outsourcing search engine
Google 3.0: Contextual ads in searches
Google 4.0: Adsense network
Google 4.1: Information hoarding of users

My version 4.1 highlights Google's recent overt interest in aggregating data on its users through services like the personalized homepage, Gmail, Gcal, Gchat, and the Google Desktop. Why is it not 5.0? Because these enhance the previously established revenue streams without changing the way they make money. It is not an evolution in Google's financial model, just new ways to better target their contextual ads (3.0 and 4.0).

In order for a 5.0 to happen, Google has to redefine its primary revenue stream or add a new one that pulls in revenue from a seperate audience. My point is made most clear by highlighting the benefiting party of each evolutionary step:

Google 1.0: A nobody search engine - You and me
Google 2.0: Outsourcing search engine - Yahoo/AOL/portals
Google 3.0: Contextual ads in searches - Web advertisers
Google 4.0: Adsense network - Web masters
Google 4.1: Information hoarding of users

Likely candidates for a 5.0 would be:
Television or radio advertisement domination
Online music store, or other type of goods for cash type of business
Online payment system (clone paypal)
A novel online service as a subscription service (seems least likely with Google's history)

Those would be Google 5.0.

Usenet Death Penalty for Google Groups

Google's apparent indifference to the use of Google Groups [google.com] by anonymous posters to wreck Usenet with SPAM, off-topic posts, and overall abuse has led some to call for a Usenet Death Penalty (configuring news servers to drop all articles originating from a given site). See:

Call for UDP against Google Groups [google.com]

Bozos, etc.

keep the bozos out and reward people who make a difference

Well, everybody does that, don't they? Even the Bush administration does that. The key is in your perception of who the bozos are, and who makes a difference...

torrent of new Web-based services

"an innovation factory that produces a torrent of new Web-based services"

Anyone got a link to this torrent?

Novel Management...

Leave it to Google to come up with a better design than "alphabetically, by author, then title"

(Sorry, I couldn't resist.)

Keep the Bozos out

Arguing for the "Keep the Bozos out" mantra, the very smart Peter Norvig posted a stupid post [blogspot.com] at Google Research Official Blog. He describes Google hiring strategy as "hiring above the mean" and plot some graphics showing how great it is.

The premisse is that you can reduce all the richness of human beings to an unidimensional measure. The best teams I worked with have a diversity of talents, each one contributing for the success.

Re:Keep the Bozos out

I assume the point of the poster you replied to is that you shouldn't always hire the best people. Many jobs require little skill, and hiring top skilled people and assigning them gruntwork achieves two things: You pay more than you have to, and those people are likely to leave.

Hiring above the mean makes sense for jobs where a better employee means a potentially higher return for the company - it does not make sense for positions where a better employee means higher costs and no higher return and higher turnover.

In fact, for a large number of positions, it makes sense to look for the weakest candidate that can do the job satisfactorily within reasonable margins, assuming you get a chance to hire them at a matching salary, because such candidates are more likely to have a possible career ladder (and so be more likely to stay) and/or are more likely to stay because it's harder for them to move elsewhere, and are likely to be cheaper than the alternatives.

Even if you're looking purely at developer jobs, if you keep hiring above the mean, it means eventually you'll have people with PhD's and umpteen years experience doing routine maintenance programming for trivial, non-critical systems that you could have safely handed to some intern.

I Would Never Work For Google.....

I Would Never Work For Google..... Not because I don't want to, but because Google would never let me in the door. Despite 12 years of Software Development experience, they still require a high GPA which I can never modify/rectify no matter how many life corners I may turn. Let that be a lesson to the new CS students. It's too bad too. I am your typical Make Magazine fanatic who brings "outside the box" thinking to his job. Always looking to do more than the initial requirments when appropriate, always looking to add that little extra bit of "wow", always looking to make life easier for the end user. My current boss loves it, and at least he'll feel safe knowing that Google will never steal me away. -CF

Shocking News! Guru likes Google

Yet another example of a management guru hitching his/her star to a hot company.

Most innovation theorists in b-schools would desperately like to believe that managing a whole company like an R&D lab is the way to go. It may be true, but Google hasn't shown it yet. Their money-making business models (AdWords/AdSense) were mostly developed (or stumbled upon) before Google grew into this "innovation factory".

Less glamourous but effective models for the long term, like the Toyota Production System, demand that management have an absolute grip on how their business operates, and always compare their performance vs. some measurable reality. The rest is tools and techniques.

In Search of Excellence?

Whenever a company is doing well at the moment, somebody writes an "In Search of Excellence" type of book or article explaining why. Then a few years later (sometimes a few months later) the company falters despite the fact that their "great/innovative/creative/yada-yada-yada" practices haven't changed a bit.

Now if a writer looked at 100 start-up companies and predicted which ones would succeed and which ones would fail in the next 5 years based on their management practices and he got most of them right, I'd be impressed. Picking today's winners is all too easy.

Add 'enormous hubris' to the Google motto

Huh? Lets keep a perspective here.

Let's wait 5 years to see if Google is indeed so wonderful, ground-breaking, innovative blah blah blah.

The rapid growth trajectory they are on at the moment has been traced by many tech and other companies in the past, and along the way things get more complicated and organisations and their environment can change dramatically, often for the worse. G. are not unique in this or any respect, and don't live outside of history.

I'd also like to dispute statements that Google is "an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base "? There is nothing innovative about the items in that list at all - Google didn't invent (nor even significantly improve) web-based email, nor web-based database front-ends, nor good search algorithms nor desktop search nor photo-sharing on the web nor web-based satellite mapping nor the delivery of contextual web-based advertising etc etc etc. And to call the 'Google Desktop' an innovation when it is just a round up of basic software tools (many of which aren't even Google's) is especially dumb.

There is, in fact, very little that Google has done in terms of products or its business model that is 'innovative' by any stretch of the imagination. Let's face it, they haven't really invented much at all.

They are indeed very good at buying up other small innovative companies, they do web search well, they run a good ad banner network in AdSense, and offer good software like GDS, Picasa, SketchUp and other titles for free. I thank them for that, and their business has indeed successfully delivered those things to me and millions of other people, but I'm not going to lose my sense of judgement about the company because of these nice but hardly innovative achievements.

Enron

Another company that hired only A-level talent, robustly avoided B-level talent, ran strong internal competitions to try and attract other employees onto your star project, and talked a lot about "darwinian" processes running between internal projects was: Enron

Like Google now, Enron back in the day had management consultants writing magazine articles about the wonders of their "fluid" structure, the way petty beaurocrats were kept out of people's way, and their hiring practices. It was The Way Of The Future. Enron was the best, was going to take over and Rule Supreme. Like Google, Enron was proud that it didn't just keep to one boring idea of what they did, the company could perpetually reinvented itself.

Those standard management structures exist for a reason. If google finds a way to work without them long-term, then good for them. But it's harder than it might seem.

So "Dr. Enron" Hamel Likes Google too!

Lets not forget that Gary Hamel had Enron "leading the future", his now revised book, with its decentralized management structure. As many of us know, in the current thinking decentralized structures promote innovation at the expense of control. Hamel's one sided view of structure didn't work out so well.

Googles 20% +10% rule is jsut best practice from the 3M post-it case taught to every HBS MBA with the 10% twist. It works. Its not new. Google does some things exceptionally well. But I don't need a revisionist telling me about that.

This isn't new

These ideas aren't new. Have any of you read Built to Last? Google walks and talks like a textbook example of a visionary company.

Re:Googles problem will be their increasing size

The funny thing is, that's exactly what the article was all about. Kudos.

Re:Googles problem will be their increasing size

The problem is that with success comes size. Companies like Microsoft get crushed under their own weight. If history is any lesson, Google will follow suit unless they truly are that smart.

I completely agree with you. Those big companies are in trouble. IBM after all showed only a 25% growth in profit for Q1 2006. And, just a few minutes before I posted this, Microsoft announced a small jump of 16% growth in profit AND a 13% growth in revenue. Leaving the tech industry, Exxon Mobile had a horrible quarter with only $89 Billion in Revenue.

Yeah, those large companies, they are just falling apart....Oh, wait...

Re:Googles problem will be their increasing size

I have often contemplated if the public interest would not be better served by the government requiring a specific mission statement for the purposes of incorporation and then preventing the entity from going outside of that stated purpose. It seems that would limit corporate size, increases competition allow for greater free enterprise and a more even distribution of wealth while still managing to keep the rewards of success substantially high enough to encourage innovation. Also , it seems to me smaller companies tend to have better customer service because they are more focused on their core business. Larger companies become unresponsive to customers because they no longer have a 'core' business but instead many course and so the button line provided by pleasing 70% of people is good enough vs the 90% you want to please if you do only 1 thing.

Problems will increase when they don't deliver

Nobody minds you being different while you're performing. If the performance drops off then you better straighten up! Wall Street and boards of directors etc allow companies a pretty free reign until..... the returns flatten off or dip. Then things will tighten up/ become more conservative to make Wall St happy.

This all stinks of geese and golden eggs, but Wall Street's memory of positive indicators only extends to the last quarterly result.

Re:Profit?

Can someone please care to explain how Google Desktop and Google Base (and *all* other services except Gmail) make mokey for Google?

They make money by developing goodwill and customer affinity and keeping users attached to the Google brand, and by integrating with and therefore encouraging use of the main search engine, Gmail and the other advertising-supported services.