Strategy – your plan is wrong. Chapter 2 of "How Google Works"

MBA style business plans are always flawed. This is why venture capitalists always invest in the team and the people - not the plan itself. It is ok to have plans as long as it is understood that things will change and we will figure it out down the path. Iterations are more important than plans.

Even though the plan is fluid, it is important to make the foundation of the plan stable. Give smart people the foundation and let them figure out the rest.

Products should be defined by how much value they provide the user, not how much value they provide Google. Revenue streams can be figured out later. Rely on creating technical insight that drives cost of existing product down or increases usability or functions. Don’t use MBA or Porter logic of figuring out what you are good at and leverage that to expand into adjacent markets.

Google resisted placing ads on their search site and focused on the user experience itself. When noticing accelerated advertising by customers trying to meet their forecast numbers, Google warned them that it would negatively affect their user experience. Google’s focus is growth over revenue.

Competitors are important but you should not follow them too closely. You cannot innovate though imitation. Competitors can however be powerful motivators like Bing was for Google.

Market research is ok but not more important that technical insights. The best things about market research consultants. They are easy to blame and fire when they are wrong.  Google products have always been based on technical insights. This has been proven in a 2009 review of all products. All great products had technical distinction.  A number of perceived popular products that eventually flat lined, were also found to lack technical distinction. Focusing on number of users can trick you into believing you have created a good product.

We have entered an age of combinatorial innovations – the building blocks of new technology. You need to find out who the geeks are in your company.  The areas they are working on is where you find your technical distinction

Most new innovations enter the world in a primitive state focused on a narrow problem and needs to be refined.  The first effective porn filters that Google invented where based on behaviour of people searching for porn. These users effectively defined porn so Google where able to filter it for others. This later developed into technology that was able to define the content of all images on the internet based on the search people used to find them.

Defining products based on technical insights instead of market research prevent me too products. Henry ford: “If I had listened to customers I would have been looking for faster horses.”

In order to achieve something big it is not enough to grow - you need to be able to scale. This is what Google calls a “grow big fast strategy”. It is based on creating platforms that bring together users and providers (much like YouTube) in multisided markets. The power is in creating the network.

Open platforms are more capable of disruption because it attracts other companies and talent to help co develop to drive down cost and increase functionality. All of this disrupts the owners of closed platforms business.

Rather than locking in the customer, Google has a team that is working towards making it easy for user to leave Google.  Google believes that user freedom is in the best interest of the company.

Culture - Believe your own slogans. Chapter 1 "How Google works"

Culture needs to be in place early. It stems from the founders but is best reflected in the trusted team the founders form to launch their venture.  It is not only about making people do great things but also about attracting people that can do great things.  Attraction, selection and attrition is part of culture.

Google has a “no blame” culture meaning a yellow post-it sticker with “These ads suck” from the founder is taken as a challenge not blame. The challenge can be taken by anybody.  The sticker also points out those results were not in line with the mission of “organising the world’s information and make it universally accessible and useful. It is not culture if it is designed to look good on a wall. It is important that it reflects what you do – that you believe your own slogans.

The IPO letter was contested by Wall Street for including words like “Long term focus”, “serving end users”,” don’t be evil” and “making the world a better place”. Despite warnings the document was not changed.

Google offices are designed like a dorm to invite to university style work ethics and creativity. Plenty of perks but crowed with no individual offices.  Closeness and lack of title is important. A petri-dish for creativity.

Google fight against the culture of the Highest Paid Persons Opinion (Hippo) matters the most.

Google encourage a culture of Meritocracy – where the quality of the idea matters more than who it came from. They are inspired by the McKinsey & Company’s culture where employees are obliged to dissent if it is in the best interest of the company or customer.

Equal opportunities employee although groups often proudly display their associations (Like Gayglers – LGBT in Google). “It doesn't matter who you are, just what you do.”

The organisational structure is aimed to be flat, informal and without perks. Dis-Org has been tried but did not work. Now organisation is built around rule of 7 meaning leaders have a minimum of 7 reports. The high number of reports makes it impossible to micromanage and direct. Organisations or reorganisations are not seen as solution to problems, more a fight of interests. If they indeed has to happen they will be implement fast, preferably a day – even if the details have not been worked out.  Google want to organise around people with performance and passion, not people with functions and title.

The company try and use the Bezos (Amazon) two pizza rule – keep teams small enough that you can feed them with two pizzas. Team effectiveness drops with number of members.

Don’t believe in work life balance but individual’s responsibility for both work and home life. Don’t believe in people being indispensable and workload should be shared. Focus is on making sure that both work and family life contributes positively. There is a culture of fun and a belief in saying yes as the default.

The culture is egalitarian and leadership is be example embodied in “Israeli Tank Commanders” that don’t lead with “Charge” but with “Follow me”.

The Google dress code:  You must wear something

Don’t be evil is not just a corporate policy, it is seen as an empowerment of employees, a way of letting them check their moral compass.

Introduction. "How Google works" review

Eric Schmidt and Jonathan Rosenberg’s introduction describes how it was to join Google in the early days. It describes a company that has rejected most of the existing management philosophy and centred activity on talent, skills technology, learning and culture.

Even though they were hired to lead, S&R had to take the approach of students to learn from the people that had been part of the founding team. This is embodied in the quote from coach John Wooden: It is what you learn after you know it all that counts.

The aversion against planning and allocation of resource that is the foundation of most large corporations is seen as an asset for Google.  Focus was on creating products that would beat any conceivable plan or schedule. The only real management tool used was a spread sheet with the top 100 project ranked from 1 to 5 in importance.

The philosophy in the company was to hire the very best engineers and get out of their way. Their products and product development had an intense focus on the user. Income streams would follow if the product was good enough.

Microsoft was the gorilla in Google’s jungle. Not only were they seen as a dangerous competitor but also as a potential acquirer of Google and as a  powerful motivator. “When we gets noticed they will come after us – wave after wave” and they did.

Schmidt and Rosenberg outlines why they believe the old industrial thinking needs to be replaced with thinking more appropriate for the internet century. They see the internet century being defined by 3 major developments:

-          Information through the internet: It is free, copious and ubiquitous

-          Global reach though mobile devices and networks: Low cost and widespread

-          Infinite computing, storage and applications through Cloud computing : No investment need

They believe that this has lowered the cost of production through 3 factors: Information, Connectivity and computing power. As a result of lower production cost power that has been with the manufacturer and has moved to the distributor is now moving to the customer as predicted by Drucker. It is not possible to fake customers though marketing – the product has to be excellent to compete. As Jeff Bezoz (Amazon) puts it: : In the old world you spent 30% of your time on creating a product or a service and 70% of your time shouting about it – In the new world, that inverts.

The product development is also changing from the old stage gated system with strict resource control and minimisation of risk as the controlling paradigm to a system of experimentation. With new 3D print technology and access to cloud computing experimentation has become low cost and low risk. The Google Glass prototype was made in 90 minutes.

Google want to attract and develop “smart creative” people with engineering skills.  You cannot tell people like that how to think. You have to learn to manage the environment where they think and make that place where they want to come every day.