Eric Schmidt and Jonathan Rosenberg: How Google Works- The Rules for Success in the Internet Century
Schmidt and Rosenberg describe how product excellence, the key to corporate success in the internet age, can be furthered through a company's culture, strategy, recruitment, decision-making, communication, and approach to innovation.
The Background: The costs of IT-related factors of production have declined significantly over the past decades. The internet has drastically lowered the costs of information; mobile devices have made connectivity affordable to many more people; and cloud computing allows for cheaply available computing power. As a result, consumers are nowadays better informed than ever before and the costs of experimenting to develop new products have drastically decreased for companies. This, in turn, means that business success is more dependent on product excellence than in the past.
Culture: The founders of Google invested significant time and effort to formulate their company's culture. Slogans like "don't be evil" have become widely known. Schmidt and Rosenberg introduce less known aspects of Google's corporate culture, too. Those include messy and crowded office spaces, decision-making based on data, treating being overworked as part of a life-style, and giving employees the chance to manage their time independently. Schmidt and Rosenberg also discuss organizational solutions appropriate for a company in the internet age. While there is no perfect organizational form, Google has found it useful to have a minimum of 7 employees reporting to a manager to keep hierarchies flat. Also, Google maintained a functional organization rather than organizing along product lines to prevent the emergence of organizational silos.
Strategy: Talking about strategy, Schmidt and Rosenberg emphasize three points: betting on technical insights; optimizing for scale, and defaulting to openly accessible solutions. Instead of being driven by market research, Google attempts to come up with new technical insights which significantly reduce the costs of a product and enhance functionality. Google also aimed for quick and global growth. The way to achieving this kind of growth in the internet age is to create and grow platforms (such as youtube or amazon), i.e. "a set of products and services that bring together groups of users and providers to form multi-sided markets." Drawing upon the work of economist Ronald Coase, the authors argue that in the internet age, with transaction costs having declined significantly, there is less need for large hierarchical companies. Companies instead work with a whole network of partners and customers via platforms which allow them to interact to their mutual benefit. Finally, Google has also been founded on the idea of defaulting to open when it comes to the platforms it offers, using open software and allowing users to easily enter and exit its platforms. Ultimately, being open makes a platform more competitive and offer customers more value.
Talent: Schmidt and Rosenberg also detail how google has managed to attract its immensely talented staff. They argue, based on work by psychologist Carol Dweck, that google aims to hire staff with a "growth mindset". People with a growth mindset do not accept the notion that their qualities are carved in stone, but rather believe that they can permanently adapt and change. Google's hiring decisions are also strongly data-driven: data on previous hiring decisions have for instance been used to determine the optimum number interviews (four) to identify suited candidates.
Decisions: In this chapter, Schmidt and Rosenberg argue in favor of a consensus-based decision-making model which is solution-oriented and promotes inclusion, cooperation and equality. Based on their conviction that virtually all business processes are quantifiable, especially in the internet age, the authors also make the case for data-based decision-making. Finally, Schmidt and Rosenberg promote the idea that CEOs should only have to make only few decisions and that daily meetings should be held in the run up to important decisions.
Communications: Drawing upon Google's experience, Schmidt and Rosenberg point to the need to have the flow of information maximized throughout a company. Google's philosophy to "default to open" also holds in the company's internal and external communications. Managers also need to access information about what is going on at the working level. To further open and honest communication throughout the hierarchy, google has introduced various fora, such as company-wide meetings, .
Innovation: Contrasting Apple and Google, Schmidt and Rosenberg note how different approaches to innovation can be: Apple's operating system for its i-phones (iOS) is closed, with Apple maintaining complete control over for instance the permissible applications. Google's android system, on the contrary, is an open platform, with anyone able to create and sell applications for it.
Google's approach to innovation asks for three criteria to be met for the company to pursue an innovative idea: it must address a big challenge or opportunity which affects a large share of the world's population; the proposed solution must be radically different from anything done in the past; and the breakthrough technology enabling the envisaged solution must be available soon. Schmidt and Rosenberg also recommend for innovation to be user-centric; to focus on big ideas, which means it is better to develop one innovative product rather than a series of mediocre ones, and, to not spend too much time on perfecting a product, but instead ship it and improve at a later stage. Google also found it useful to have about 70% of the company's efforts and ressources focused on its core business, 20% on emerging products which have already shown some success, and the remaining 10% on completely new products. In an attempt to enhance "innovativeness", google employees 20% of their time to any project of their own choosing.
Overall, an informative and readable book. Of course, it sometimes comes of as a bit of a google marketing ploy. At the same time, Google has been one, if not the company defining the internet age. Also, while some of the recommendations, such as the call for data-based decision-making, might seem trivial at first, many organizations, both in the private and public sectors, are quite far from implementing them.
Random pop cultural reference:
Product placement at its worst, but it is a kind of cool movie...
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