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El modelo Google Por: Bernard Girard. Google’s management model. Bernard Girard. Google is a very special company. Because of its economic and financial performances Because of its market share Because of its very fast growth no employees in 1998 5000 in 2005 20 000 today
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Google’s management model Bernard Girard
Google is a very special company • Because of its economic and financial performances • Because of its market share • Because of its very fast growth • no employees in 1998 • 5000 in 2005 • 20 000 today • Because of its prospects and chances to keep on growing • Markets left to penetrate • Search on mobile phones… • Because of its resilience • But also because of its very original methods
A company as a model • The management theory uses innovative companies as models, examples to copy, imitate • Ford, 1910 : the mass production • General Motors, 1930 : The M organization • Toyota, 1970 : quality and mass production • Citibank, 1970, the « one bank holding company » • The theory is just the conceptualisation of methods and solutions discovered by innovative managers • Google is the last of these models • Not because of its successes that come from • The context • The situation • But because of the methods it uses in the management of its people, its products, its markets
The context, the situation • The situation : the Silicon Valley • Its universities • Its financial tools • Its financial competences (they know how to select the best projects) • Its legal rules • It’s very difficult to impose non-compete clauses • Engineers and ideas flow freely from one company to the other • The context of the late nineties • The internet bubble • Engineers are cheap • The rapid growth of internet
What makes Google so different? • Its technologies • The algorithm • The « factory » • Its economic model • Advertising • Selling • Its governance • Its management methods • In HR • In product development • In marketing • In managing innovation
An algorithm for the search • Search on computers used two methods • Indexation : people read the documents, abstract and index them • Efficient but expensive : a lot of handwork, delays… • Automatic search : the computer selects the documents with the words selected by the searcher • Fast, inexpensive but inefficient when too many documents • If the machine brings back 1 million documents, what do I do? • Page & Brin find a way to rank pages that makes automatic search efficient • Imitated from the scientific method of ranking papers • The most cited ones should be the best • The documents with most links should be the more relevant • If you want your site to be on the first page, one solution : make it the best, so that others create links to it
Innovations in the « factory » • A powerful « factory » : 1 million computers in 60 « farms » • When they started, Brin & Page were not rich • They had to build their computer farm with PCs and cheap used computers • They chooed Open Source softwares that are free and give a better control on home-made applications • Everyone knows PCs don’t last very long, are not very reliable • They has to build an ad hoc system • Very redundant • That duplicates data several times • With a software that copies automatically the data from one PC to the other • They have built a reliable system that grows incrementally
An economic model • When Page & Brin started Google, the search engines where financed by advertising • Free search for everyone, money comes from advertisers • But too much advertising is a « pain in the neck », that slows search and harms the reputation of the engines • They tried to find other ways of financing before finding their own way with • Advertisements that are useful and almost invisible • The way these ads are priced • A price per click • A price defined by a double envelope auction • An automatic customer relationship • No need to sell the ads • No need to negociate the prices • The long tail : a lot of small advertisers that make a lot of revenues for the company
Price : a price per click The advertiser pays only when users click on their ad • He pays only useful impressions of his ads whereas in the press (and on the other search engines) he pays all impressions • Which could help Google grow in a recession : advertisers just want ads that bring sales • If ads don’t bring sales, it’s not Google’s fault, it’s because the advertiser does not transform clicks into sales • In a way, Googe brings customers in the shop
An automatic sales system • When they started Brin & Page had not ressources to hire a salesforce, they invented a system where sales are made without salesmen • The buyer does everything • Chooses the keywords of his ads • Writes the text of the ad • Decides the price per click on a keyword • Chooses his daily budget • Google gives advertisers tools to improve their ads • Statistic tools (Analytics) to convert ads in clicks • The best ads bring the more sale to the advertiser and the more revenues to Google • This automatic sales system brings Google new customers : small shops… that didn’t do advertising
Price : the double envelope system • But how Google chooses the ads it prints ont its pages? • What happens when several advertisers want the same keyword? • Their solution : an auction system • The sealed-bid second price auction • All bidders give their best price in sealed envelopes • The winner is the highest bidder • He pays the second highest price (and not his own price) • The bidder is encouraged to give his best price vs the english ou dutch auctions) • The price is fair (it’s the market’s price) • The buyer can trust the transaction • Pricing is automatic thanks to the auction system • Everything can be automatized • No need for negociations, transactions costs are reduced to almost nothing
Innovations in management • Google innovated in • Governance • Human Resources • The hiring process • The 20% rule • Reputation as a motivation driver • A very special working environment • Customer relationship • Product management • Innovation
Governance • Usually, there is one head, the boss who knows better and decides for everyone (or tries to) • At Google, they have a tripod : Schmidt, Page, Brin… three leaders who work together • Which opens up the cognitive capacities of the leaders • Instead of one brain, three brains… • Which improves the quality of the information they use to take decisions • Which gives them the opportunity to look at the business from different points of view and not only from the financial one • Which gives them more freedom • Vis-à-vis the shareholders • Vis-à-vis the high management • This governance mode helps create a company with less layers of management and bureaucracy • It’s not totally new (many start-ups have the same structure) but they choosed to keep it active
Human Resources • The hiring process • Reputation as a motivation driver • The 20% rule • A very special working environment
Hiring the best • All companies say they want to to hire the best • Most don’t really do that, Google really tries • It affects a lot of resources to the recruitment process • It’s hiring methods are non conventional • They don’t wait for the best people to come to them, they look for them • They reverse the usual way of hiring • Diplomas are not a proof of your technical abilities but a proof or your personal abilities • You prefer future to present (you invested in education and stayed long years in school) • You are able to solve difficult problems • Tests and meetings are used to discover your technical capabilities
Reputation as a motivational driver • How to motivate workers is a question all managers have to deal with • Two classical answers • The external drivers : salary (commercial companies), prestige (army…) • The internal drivers : pleasure to do, to achieve an objective… • In the US, the usual answer is money, index salaries to performance • Google taught there is another driver : reputation • What motivates people is the desire to acquire and keep a good reputation among co-workers • It’s a bit like in the academic world : scientists don’t run for the money but for the reputation their work can bring them • This motivation friver is embedded in Google in two ways • The selection of the brightest • Working with the brightest gives the impetus to work a lot : one wants to be considered bright and capable by those one considers so well • The peer reviews : rather than being judged by hierarchy, projects are judged by colleagues
The 20% rule • Each engineer can spend 20% of his working time on personal projects • An unconventional but efficient way of managing people • When one has an idea, he has time to work on it, even if it’s not in the company’s priorities • In traditional companies, these ideas are abandoned or their inventors go elsewhere to develop them • To find these 20% time you mus rush on your official job : it’s good for productivity • Procrastination is no longer a loss of time which is also good for productivity • Several Google products come from this 20% rule • Googlenews, cloud computing…
A very special working environment • The popular press emphasized the massages, the free food, the swimming pool… • It’s important • To build the good image of Google : it’s a place where it’s nice to work • But, it is also a place where you can find the best conditions to work • The techshops : any problem with your network? Your computer? Specialists solve them quickly • Engineers don’t have, like in other companies, to work on these trivia! • They can concentrate on satisfying users
A new personage, the user • In all companies, the « customer is the king »… but is he really? • On the web, the user is the main personage of the play • He is the one who creates the contents search engine supply • Without users and their contents, no… interesting results • And Google understood that better than others • « Take care of the users all else will follow » (L. Page) • « First make sure our users are satisfied, we’ll always find ways to monetize our invention » (LP) • The user helps the company in a kind of renewed potlatch
A modern gift economy • The user benefits from Google’s free products, but, in exchange… • He brings contents on his websites, on his blogs… • He gives Google informations • On his behaviors, his preferences that statistical analysis can analyze • Metrology is a marketing tool • He tests the products delivered in early phases of development (beta phase) • He promotes them through blogs and forums… • He develops them when he participates in a mashup…
Product management : how to solve the complexity problem • High-tech companies meet the complexity problem • At Microsoft : several years between two major releases of a product • Which slows innovation • Google solved that problem with the swiss knife approach
The Swiss Knife • With the swiss knife every innovation, every tool is independent vs the « bloatware » à la Microsoft • Google can easily add new products, new tools : it’s not limited by the obligation to respect the past applications • Any of these products can change quickly without any impact on the other tools • It’s of course possible to mix these tools to build new ones • In these cases innovation comes from integration of different applications
Release early, release often… • This approach allows to launch innovations as they come • Once a product is « usable », it is released • Very high rate if innovation : almost not a week without something new • The method gives a very quick feed-back from the users, it forces to listen to the users • But the products are « work in progress », they are not perfect, they are… perfectible • Users are often disappointed but they keep quiet : these products if mediocre are… free and they know they will improve • This solution is possible only because the applications are free and there are no distribution costs
Products with an original life cycle • They improve incrementally and stay for long periods in beta phase • Which gives the users the opportunity to give the company feedback on their uses • They have a long life. There is no obsolescence strategy as at Microsoft (Vista vs XP) or Apple • They slowly diverge from the competition : • At first Googledocs was a terrible « me too » Office • It is, today, a suite of office automation applications for the web and collaborative work • With special functions that you can only find on the web • And appear to be, in the end, competitive • Today Microsoft imitates Googledocs :)
Innovator, but not like the others • Microsoft, Apple, Sun, HP… are also innovators, but the flavor at Google is different • At Microsoft, innovating is the best way to build monopolies • Which is the classical strategy : patents give their owners a monopoly on their invention • Apple applies Hollywood’s theory of creating blockbusters to industrial innovation : • A star (Steve Jobs), • Excellent products (although usually not disruptive) • Formidable advertising campaigns • Google is an explorer that applies the scientific experimental method to industrial innovation (hence the word « trying » in Schmidt’s sentence)
The experimental method • In the experimental method, researchers propose hypotheses and design ways and means to validate them • Eric Schmidt : « We try this, we try that, we see what works » • This logic of « trying and trying » is embedded in the company • In its management, • In an organisation that was designed to make plain use of this method • In the management of its products • Two examples • The peer review and the management of innovations • The swiss knife and innovation
The peer review, innovation, productivity and quality • Thanks to the peer reviews… • Ideas flow between teams • The colleagues that judge your projects work on other topics • OCR : the fight against spam and Google Book search • If you want your colleagues to judge your work you’d better make it short and readable • Everyone speaks the same programming language • Source code documentation is a must • Projects are short • Small projects = small teams = less layers of management
Mobilize all creative ressources • But the experimental is not the only novel way of doing things at Google, the company is also a master at mobilizing creative ressources wherever they are • Its engineers and their ideas (the 20% rule), its users • Universities • The Open Source Community and its developers • Google code and project hosting • The archives of IT • The Tesseract story and how it became OCRopus • Competitors : rather than reinventing their applications, Google buys young companies • Users as creators of contents and as developers • Google gives them tools (API, Sketchup…) • Which help fight the « Not Ivented Here Syndrom » : Google does not reinvent the wheel every morning as others do
Thanks to this method… • Google regularly discovers new domains that could become very lucrative new businesses • Maps • Collaborative office automation • Cloud computing • But also new frontiers that could limit its markets and slow its growth • Technical : translation • Good translations could open the web, but where are the engines that produce them? • Legal : Copyright laws • Everyone would like freely available rich contents, but copyright laws are an obstacle in video, music and books • Economic : innovations must be monetized • And it’s not always easy to find a way to do it (Youtube)
How users helped overcome the copyright obstacle • Because of copyright laws, big search engines cannot offer movies or music • The solution : give the users the means to create and publish their own content • Create our own contents? we can all do that with our cameras • Publish? We can do that with Youtube and we do it!
Innovation as a strategic tool • I am often asked : what is Google’s strategy? • The answer : innovation • Fast innovation stifles, asphyxiates the competition and make sure all roads lead to… Google • Search, gmail, picasa, blogger, chrome, google books, docs, notes… Google gives almost all the tools you need on the web • Thanks to the beta model and the continuous improvement of products, the competitors are uncertain as what will be their next move, • They run after Google • This same model make allies of users and customers • They help develop new products, they are the best « salesmen », they give the best informations on what the products should look like… • And they are, most importantly, loyal!
Questions on this model • Is it sustainable? • Is it for everyone?
Is it sustainable? • Is what is good for a small and young company appropriate for a mature and bigger company? • How long can Google deliver solutions it cannot monetize? • Can this model be applied to products that are sold rather than given? • Is the ad market big enough to finance all th web? • Is reputation so good a motivaton driver when stock-options dive • …
A model for every one? • This powerful model helped Google become what it is today • Following all Google’s rules is not a recipe to become a new Google • But most of these new ways of managing will in the years to come enter the catalogue of business’s best practices • Somes companies already started emulating them • In the hight tech sector • Most start-up imitate Google’s ways • But also in the old industry • Chrysler and the tripod as a mode of governance • Even in very different businesses • The Restaurant and the 20% rule • The consulting company in Bucaramanga, Colombia
A model for you? You tell me…
