Strategic Innovation for Organizational Success

1. How Googly Is Your Company? Tom Davenport Sogeti October 11, 2009

2. Lessons from Google • Practice strategic patience • Exploit an infrastructure “built to build” • Rule your own ecosystem • Exercise architectural control [source: “Reverse Engineering Google’s Innovation Machine,” BalaIyer and Tom Davenport, Harvard Business Review, April 2008)]

3. Lessons from Google (cont.) • Build Innovation into Organizational Design • Innovate Incrementally and Constantly • Support Inspiration with Data and Analytics • Make Your Knowledge Workers Productive

4. Practice Strategic Patience • Google's mission is “to organize the world's information and make it universally accessible and useful.” • The company’s senior executives suggest that it may take 300 years to achieve the mission • “Ubiquity first, revenues later….If you can build a sustainable eyeball business, you can always find clever ways to monetize them.”—Eric Schmidt, 2007.

5. Question: Where is Your Company? ? • Where is your company on the strategic patience scale? • Big, ambitious mission over very long time horizon • Somewhat inspiring non-financial goals to be achieved over 5-10 years • A few pedestrian non-financial goals along with financial—one year horizon • Individual managers set largely financial goals—annual or quarterly horizon • No planning process—we live day-to-day with only financial goals

6. An Infrastructure “Built to Build” • Scalability • Over a million servers • Unique access to power • Proprietary operating system and database • High performance • Better than 92% of all websites despite being #1 in traffic • An accelerated product development life cycle • Support for third-party development and mashups

7. Google’s Innovation Ecosystem (161 million unique visitors August 2009) Ad servers

8. How’s Your Infrastructure? ? • Where is your company on the “built to build” infrastructure scale? • Flexible, scalable infrastructure—IT or otherwise—extends into suppliers and customers and acts as platform • Strong, flexible infrastructure, but internal only • Infrastructure is adequate but not well understood internally • Infrastructure is just a collection of technologies and is a barrier to growth • What is infrastructure?

9. Architectural Control • Can track activity through alliances • Each API call has a unique key • Calls can be tracked by user/application/domain • Differential pricing by user or call rates • Alliance relationships can be dynamic • Ownership of data and applications allows for different business models

10. Got Control Over Architecture? ? • How much control do you have over partner relationships and business models? • We run the show, even when we partner—interactions dynamically metered • We have a good handle on what partners do with us • Emerging links with partners, periodic reports • We have controls, but they are internally focused • We’re lucky to control ourselves

11. Build Innovation into Organizational Design • Budget innovation into job descriptions • 70/20/10 for technical people, plus Director of “Other” • Eliminate friction at every turn • Let the market choose • Cultivate a taste for failure and chaos • “Please fail very quickly – so that you can try again”—Eric Schmidt • “We kind of like the chaos. Creativity comes out of people bumping into each other and not knowing where to go.”—Laszlo Bock, head of Personnel

12. How Innovation-Oriented Is Your Organizational Design? ? • Everyone’s an innovator, and it’s built into the structure and roles • Lots of innovation from all over the organization, whether defined or not • Innovation is a defined function (R&D), but not pervasive • Some innovation, but only in narrow functions and roles • Even the R&D function isn’t innovative

13. Innovate Incrementally and Constantly • Roughly 130 products—CEO doesn’t know them all • New feature or function incorporated almost every day • Many products in semi-permanent “beta” • Build and buy • Everybody encouraged to innovate • “In my first month at Google, I complained to a friend on the Gmail team about a couple of small things that I disliked about Gmail. I expected him to point me to the bug database. But he told me to fix it myself, pointing me to a document on how to bring up the Gmail development environment on my workstation. The next day my code was reviewed by Gmail engineers, and then I submitted it. A week later, my change was live.”—Google software engineer in blog New!

14. How Innovative Are Your Product and Service Offerings? ? • So many new offerings it’s hard to keep up with them all; offerings offered early for customer feedback • Small and large product innovations tumble out frequently • New offerings appear at regular intervals and are tested internally • Products are getting long in the tooth and are incrementally innovative at best • Can’t remember the last time we had a new product or service

15. Support Inspiration with Data and Analytics • Page rank analytics are the core of Google • Google has some of the world’s best statisticians and algorithms for serving ads • Google makes Google Analytics available for free to users • Anyone proposing a new offering is first asked, “Have you tested it with data?” • Extensive use of analytics on people • Googlyness index for hiring • Prediction of attrition

16. How Analytical Is Your Company? ? • Every decision is made in scientific context based on data, analysis, and formal experiments • A solid fact-based culture, with analytics when needed • Generally fact-based decisions, with some intuition too • Poor-quality data, or many versions of the truth • We have little data about our business, and don’t much care

17. Make Your Knowledge Workers Productive • Ten Golden Rules—Schmidt and Varian • Hire by committee • Cater to their every need • Pack them in • Make coordination easy • Eat your own dog food… • Mario Batali, Tom Friedman, and Robin Williams drop by in one day • Widespread use of prediction markets

18. How Productive Are Your Knowledge Workers? ? • We have our own principles for managing knowledge workers, and they work well • Knowledge workers are happy, productive, and engaged • We don’t have any major obstacles to productivity • Knowledge workers face lots of bureaucracy and rules • What are knowledge workers?

19. Add Your Score • 32 to 40—you’re a Google clone • 24 to 31—you’re innovative, but not exotic • 17 to 30—you like the Old Economy just fine! • 8 to 16—you’re probably hoping Google fails!

20. Cautionary Messages on Google • It’s still too early to know whether Google will achieve its ambitious mission, and it may not continue to grow and perform • Most of its products have not been very successful • The incredibly successful search and advertising businesses pay for virtually everything else • Some talented executives have left • But can you afford to ignore Google’s example? Probably not.