Please leave Google alone – bad advice from Harvard and Mr. Anthony
Is Google a company who's growth and innovation worry you? Not me. Which is why I was disturbed by a recent blog at Harvard Business School Publishing's web site "Google Grows Up." In this article Scott Anthony, a consultant and writer for HBS, says that he thinks Google has been immature about its innovation management, and he thinks the company needs to change it's approach to innovation. Unfortunately, his comments replay the core of outdated management approaches which lead companies into lower returns.
No doubt Google's revenues are highly skewed toward on-line ad placement. But with the market growing at more than 2x/year, and Google maintaining (or growing) share it's not surprising that such high revenues would dwarf other projects. Google created, and has remained, in the Rapids of growth by leading the market. From its Disruptive innovation, offering advertising through products like Google AdWords to people who previously couldn't afford it or manage it, allowed Google to lead a market shift for advertising. And ever since Google has implemented sustaining innovations to maintain its leadership position. That's great management. No reason to worry about a lot of revenue in ad placement today, with the market growing. Not as long as Google keeps breeding lots of new, big ideas to help grow in the future.
But Mr. Anthony flogs Google for its "unrestrained" approach to innovation. He recommends the company push hard to implement a process for innovation management – and he uses Proctor & Gamble as his role model – in order to curtail so many innovations and funnel resources to "the right" innovations. Even though he's obviously flogging his consulting, and pushing that all "good management" requires some significant stage gate management of innovation – he couldn't be more wrong.
Firstly, P&G is far from a role model for innovation. As recently discussed in this blog, the company recently said one of its major innovations was cutting prices on Tide while introducing less a less-good formulation. As commenters said loudly, this is not innovation. It's merely price cutting – taking another step on the demand/supply curve of price vs. performance. It doesn't change the shape of the curve – it doesn't help people get a far superior return – nor does it bring in new customers who's needs were not previously met.
In a Wall Street Journal article "P&G Plots Course To Turn Lackluster Tide," the CEO freely admits the company has had insufficient organic growth. Additionally, his big future opportunities are to "reposition Tide," to cut the price of Cheer by another 13% and to use Defend & Extend practices to try pushing the P&G Success Formula into other countries. Like people in China, India and elsewhere are in need of 1.5 gallon containers of laundry detergent sold through enormous stores which have big parking lots for all those cars to lug stuff home. None of these ideas have helped P&G grow, nor helped the company achieve above-average returns, nor demonstrate the company is going to be a leader for the next 10 years in new products, new distribution systems or new business models for the developed or developing world.
This urge to "grow up" is a huge downfall of business thinking. It smacks of arrogance and superiority by those who say it – like they somehow are "in the know" while everyone else is incapable of making smart resource allocation decisions. In "Create Marketplace Disruption" I provide a long discussion about how introducing "professional management' causes companies to enter growth stalls. The very act of saying "gee, we could be more efficient about how we manage innovation" immediately applies braking power well beyond what was imagined. If Mr. Anthony were worried about Google managers leaving to start new companies in the past (like Twitter) he should be apoplectic at the rate they'll now leave – when it's harder to get management attention and funding for new potentially disruptive innovations.
Google is doing a great job of innovating. Largely because it doesn't try to manage innovation. It maintains robust pipelines of both disruptive, and sustaining, innovations. Google allows everybody in the company to work at innovation – providing wide permission to try new things and ample resources to test ideas. Then Google lets the market determine what goes forward. It lets the innovators use supply chain partners, customers, emerging customers, lost customers and anybody who can provide market input guide where the innovation processes go. As a result, the company has developed several new products — such as new network applications that replace over-sized desktop apps, and a new, slimmer mobile operating system that expands the capabilities of mobile devices —- and we can well imagine that it may be coming close to additional revenue breakthroughs.
Unfortunately, Mr. Anthony would like readers, and his clients, to believe they are better at managing innovation than the marketplace. However, all research points in the opposite direction. When managers start guessing at the future their Lock-ins to historical processes, products and market views consistently causes them to guess wrong. They over-invest in things that don't work out well, and investing for really good ideas dries up. All resource allocation approaches use things like technology risk, market risk, cost risk and revenue risk to downplay breakthrough ideas. Management cannot help but "extend the past" and in doing so over-invest in what's known, rather than let ideas get to market so real customers can say what is valuable.
Google is doing great. In a recession that has put several companies out of business (Silicon Graphics and Sun Microsystems are two neighbors) and challenged the returns of several stalwarts (Microsoft and Dell just 2 examples) Google has grown and seen its value rise dramatically. To think that hierarchy and managers can apply better decision-making about innovation is – well – absurd. It's always best to get the idea surfaced, push for permission to do things that might appear crazy at first, and get them to market as fast as possible so the real decision-makers can react, and give input, to innovation.