Leading up to Google’s first-quarter earnings report on Apr. 17, investors couldn’t have been more bearish. They had knocked the stock down 35% since the start of the year, concerned that a weak economy would finally hurt the search giant’s advertising business.
But Google defied skeptics—and the economic downturn—with a surprisingly strong showing that sent the stock soaring 20% the next day. More than anything, Google’s continued prosperity is a testament to its ability to keep innovating, both in search and advertising operations and in new lines such as online office-productivity software.
In a recent interview, Chief Executive Eric Schmidt told BusinessWeek Bureau Chief Robert D. Hof how Google manages the tricky process of innovation.
Do companies have to manage innovation differently in a downturn?
Innovation has nothing to do with downturns. A hot product will sell just as well in a recession as it will in a nonrecession. Let’s imagine that we invented a better advertising product for television. What would our revenue growth be for that? Well, you’re into a $50 billion market, so it will be driven not by whether there’s a television ad recession but by what degree we can get people to substitute [our product] for the other. The strong companies understand this, and during a recession, they invest.
Can other companies emulate Google’s famous model of letting engineers spend about 20% of their time on projects outside their main job?
The story of innovation has not changed. It has always been a small team of people who have a new idea, typically not understood by people around them and their executives. [This is] a systematic way of making sure a middle manager does not eliminate that innovation. If you’re the employee and I’m the manager, and I sit down and say, “Our product’s late, and you screwed up, and you gotta work on this really hard,” you can legally say to me, “I will give you everything I’ve got, 80% of [my time].”
It means the managers can’t screw around with the employees beyond some limit. I believe that this innovation escape-valve model is applicable to essentially every business that has technology as a component.
Read more.
Photo by Ana Nance.
How Google Fuels Its Idea Factory
May 5, 2008 by Rich | 4 Comments
In Google, Innovation, Internet
Barry on May 5th, 2008 at 12:26 pm
Wow, your blog is worth a alot!
varun on May 6th, 2008 at 2:14 am
Google is smarter than any other web enterprise.The speed at which are evolving,they are quite capable of taking everyone with single hands…
Jeremy Nulik on May 6th, 2008 at 6:59 am
This continued spirit of innovation is what makes Google such a darling company. I love the way that innovation should occur regardless of whether or not there in a recession. Creating superior performance and changing the game works whether or not there is any economic downturn. It’s important to remember also that this is in their company’s DNA. They started in a recession-driven, post-dot-com, post-Yahoo world, and they have managed to perform.
Melanie D. on May 6th, 2008 at 7:48 am
Google doesn’t only dominate search, Schmidt has managed to expand his company and is now ruling web video and advertising.
So, is Google a technology company, an advertising company, a media company, or some new hybrid?