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CASE EXAMPLE Google: who drives the strategy? Phyl Johnson, Strategy Explorers Google From an idea to a verb in less than 15 years: no Google to search the Internet If you are in need of the answer to a question and close to a computer what do you do: Google it. With the excep- tion of "Hoover it is hard to think of another example of an organisation whose product's name has become so synonymous with the activity of the product that it becomes a commonly used verb. Google has achieved this in just a few years, growing at an eye-watering pace to its current internationally dominant position in internet search. It has to be one of the most successful strategies ever; so how did they do it? Unsurprisingly. Google has attracted the attention of analysts, researchers and other organisations trying From the beginning Google has been different. Page to uncover their formula for success. Moreover, their and Brin insisted that their IPO follow a very unusual business model has taken over from GE and IBM before routes instead of using investment banks as dictators it as the model to learn and replicate. At the heart of this of their initial share price, they launched a kind of open hugely successful enterprise is a famously unstructured IPO. In this auction, buyers decided on the fair price for style of operating and a CEO who claims their strategy a share and not the investment banks. A quirky route is based on trial and error: can this really be the case? to market that some sowas arrogant and established a "Google is unusual because it's really organized from theme for Google: breaking the mould. This continued as the gottom up... It often feels at Google people are Google set up its governance structure with a two-tier pretty much doing what they think best and they board of directors, common in some European countries tolerate having us around... We don't really have le... Germanyl but extremely rare in the USA. The advan- a five-year plan.... We really focus on what's new. tage of the two-tier system for founders Page and Brin what's exciting and how can you win quickly with your was the additional distance it places between them and new idea.' Eric Schmidt, Google CEO their shareholders and the increased managerial freedom it offered to them to run their company their way. Page About Google confirmed this by penning an open letter to shareholders Google started life as the brainchild of Larry Page and and that they did not intend to become one. claiming that Google was not a conventional company Sergey Brin when they were students at the IT power- house Stanford University in the USA, Google was born another curious and unlikely twist in 2001. Page and Running the company the Google way involved from coursework the pair undertook in 1998 to improve Brin recruited successful CEO Eric Schmidt from internet search engine results. After University and Novell Inc and between the three of them, they shared when Page and Brin launched their own search engine power at the top. Schmidt dealt with administration product, it gained followers and users very quickly and the company's investors and had the most tradi- attracted financial backing and enabled them to launch tional CEO role. Page was centrally concerned with the their IP in the USA stock market in 2004, se making social structure of Google whilst erin took a leadin Google a publicly owned corporation the area of ethics. There have been very few successful * IPO: Public Offering of shares in a company to the triumvirates in history and many epic failures. Either public to be often referred to as the fation of a company stock market politics and confusion create rits in which three become GOODLE WHO DRIVES THE STRATESY 427 two and two become one or the three power holders its size and breadth of operation Control of workflow. become overly consensual. But against the odds it went quality and to a large extent the nature of projects that well for Google are under way is down to employees and not manage- With 132 million customers and a network of 1 million ment. Google is a famously light-managed organisation computers worldwide. Google is without a doubt the They have a 1:20 ratio of employees to managers. This dominant player in internet search with 67.5% market is half the number of managers that would be the case share, way ahead of Yahoo 18.4%. But they are also in the average US organisation (1:10 and considerably widely diversified thanks to their highly acquisitive less than some European countries (France 1.7.5) approach to business. Their other areas of operation Engineers work in small autonomous teams and the include Blogging, Radio & TV Advertising, Online Payment work they produce is quality assured using peer review Services, Social Networks and Mobile Phone Operating and not classical supervision. So there is the potential Systems. Their guiding principle in acquisition seems to for these small work teams, with their freedom for self- be: if they can't innovate something in-house, buy it, initiated project work, to create a situation of project In this way Google were buying a product technical proliferation in which a large percentage of activity expertise and usually a fan base of early adopters. may not be contributing to the strategie direction the This is in contrast to Apple, for example, who seek to leadership wish the firm to take. Moreover, engineers innovate in-house. In the period between 2001 and 2009 at Google are allowed to allocate 20% of the work time they acquired some 50 companies. Many of these were to personal projects that interest them as a means to small starts-ups but others were already established stimulate innovation and create new knowledge as well with a significant enough band of internet followers to as potential products. However, some commentales be attractive, the most famous of which was YouTube suggest that reports from inside Google estimate many in 2001 for $1.651-1.15 billion. engineers spend more like 30% of their time anabo In 2010, Google was still expanding at a startling of their own choice - a lot of opportunity for new ideas rate, and following twin tracks in its operation, those but also for chaos. of search tools and productivity tools. Their aim to This form of highly organic organisation (sometimes retain their position as the King of Search but always referred to as an ecosystem is more familiar in much follow the same mantra was delivered on multiple smaller organisations, under the 300 employee level and YouTube broadcasts by the senior Google executives: in creative industries such as advertising agencies. But To organize the world's information for an organisation the size of Google Imore than 16,000 employees the disorganisation and anti-bureaucratic The disorganisation organisation approach is something that they pride themselves on "Google is run by its culture and not by me In many ways, life inside the Googleplex [Google's Hal much easier to have an employee base in which tase is the image of a disorganised organisation where it can be difficult to work out who is responsible for what. everybody is doing exactly what they want every day An example of this was Google's failure to renew its They're much easier to manage because they never own domain name in the German market in 2007 as well have any problems. They're always excited, they're as an instance when no legal representative for the always working on whatever they care about But it's a very different model than the traditional, company appeared at a Belgian lawsuit hierarchical model where there's the CEO statement Google famously launch halt-finished products into the market and don't control information flow about their and this is the strategy and this is what you will do, and it's very very measured. We put up with a certain products by advertising: in fact they don't advertise at all. With regard to product development their approach amount of chaos from that.Eric Schmidt: CED is to launch a part-finished betal product, let Google fanatics find it, tay with it, essentially error-check and The rigid organisation de-bug it. This may be a good use of end users but also Irrespective of the image that Google has as an organ- a significant release of control Isation that sees the benefits in releasing managerial The legacy of Google's rapid growth is an organisa-control and rigid hold over strategic direction, there are tion with less structuring than would be expected for some significant areas of rigidity built into the system One key area is that of recruitment. With an * An example of the pace in growth being employee tubers, from extremely highly rated employment brand, Google can 1.628 amployees in 2003 to 10.464 in 2001 afford to be choosy. Close to 100 talented applicants 428 CHAPTER 12 STRATEGY DEVELOPMENT PROCESSES chase each job at the Googleplex. The pay is competitive Google's internal technical platform is a major part of but not way ahead of the competition. However, perks, its success. They have the capacity to record and analyse including free meals, a swimming pool and massages vast aspects of data from their user and customer all help attract employees. So too does the 20% of free groups. In addition, there is an in-house intranet called time engineers can spend on their own interests. In "Moma that tracks huge amounts of data in real time. return Google have rigid recruitment criteria and pro- Google is all about information, capturing it, tracking it cesses and are unashamedly elitist. and applying it all in a systematic and organised manner. Engineers must have either a Masters or Doctorate The technology itself is the strategy and the strategy is from a leading University and they must pass through a the technology series of assessment tests and interviews. The criteria As Google continues to travel at a high velocity into for these are derived in a highly scientific manner, after the future, on some level major decisions have been and all Google measure everything. The end product of this remain to be made. Who decided to buy YouTube and is that Google actually recruit against a psychometric make the other acquisitions? Who do the shareholders profile of googleness and can therefore hire and retain hold responsible for strategic success and failure? In a fairly predictable employee population much easier early 2010. Google back-tracked on deal they had to manage. made with China to allow some content to be censored Their laissez-faire attitude toward the management by the Chinese authorities. However, after a security of employees can be read as control as well as freedom. breach into its gmail system, Google reversed course Peer review is a famously stringent form of performance who made these decisions? Moreover, as information management. Amongst professionals, reputation is key capture about users and the personalisation of search and if someone is being reviewed by peers the pattern engines to those users becomes more advanced, so is toward harder and higher quality work. The way peer does the hunger of organisations and perhaps even reviews are carried out and indeed the way many pro- governments for that information. The triumvirate who cesses within Google are followed is formulaic and rigid.run Google find themselves with some big strategic For example, work teams are kept small and limited to thinking to do around decisions that will have huge a maximum of six Projects to be worked on must be ramifications around the Google world Limited, deadlines are short no longer than six weeks! Pinay source. Grunt 2007 The Way How are company and as ever in Google there is measurement. songs. Ne Starch Press, Sem Francisco, CA "Everyone who meets Sergy Brin notices his aptitude as a mathematician. Math is everywhere at Google terview by Nicholas Cartoon w Google CEO Ene Schmidt in pricing policy, in discussions among engineers, in Down Posters 20 May 2009 decisions about whether to develop a new product. 2. Cred in Web utrat China in the development of those products in recruiting, foundations The Times, 14 2010 and in evaluating employee performance. Google As above Quoted on 17 ora 2007 measures and analyzes everything. Girard 12009 Pp. 97-981 We're very analytical. We measure everything, and we systematized every aspect of what's happening in Questions the company. For example, we introduced a spread 1 What influences strategy development in sheet product this week. I've already received hourly Google? updates on the number of people who came in to 2 What are the strengths and weaknesses of their apply to use the spreadsheet, the number of people approach? using it, the size of the spreadsheet." Eric Schmidt 3 Is the Google approach transferable to other organisations? Personality type