How Google Works

by Eric Schmidt

starting from first principles was what got Google going.

it’s tremendously hard to get teams to be super ambitious. It turns out most people haven’t been educated in this kind of moonshot thinking. They tend to assume that things are impossible, rather than starting from real-world physics and figuring out what’s actually possible. It’s why we’ve put so much energy into hiring independent thinkers at Google, and setting big goals.

if you hire the right people and have big enough dreams, you’ll usually get there. And even if you fail, you’ll probably learn something important.

many companies get comfortable doing what they have always done, with a few incremental changes. This kind of incrementalism leads to irrelevance over time, especially in technology, because change tends to be revolutionary not evolutionary...

the art and science of management has changed in the twenty-first century. Empowered by information and technology, individuals and small teams can have enormous impact, far greater than ever before.

The only way to succeed in business in the twenty-first century is to continually create great products, and the only way to do that is to attract smart creatives and put them in an environment where they can succeed at scale.

With process comes scale;

As process gets better, judgment can weaken.

It’s like there is a big pendulum in companies, swinging from centralized control and consistency on one side to decentralized chaos on the other.

Start-ups don’t run on process, they run on ideas, passion, and a common set of goals. They don’t wait for the meeting to make decisions.

Dependence on process, no matter how well intentioned, squelches start-ups and the start-up spirit.

It’s not just people processes that can hurt innovation; budget processes can do it too.

The typical CEO knows that the budget shouldn’t be set by how much revenue the business will generate in that fiscal year, but rather the potential ultimate market value of the venture some years down the road.

leaders should always organize around people whose impact is the highest.

As a company gets big and complex, you can’t just organize around people who create innovation; you need to organize around people who can create and lead entire new ventures and businesses. This is a special class of smart creative: the CEO.

leaders with the audacity and talent to start new businesses are a special breed and are often averse to working within the structure of a big company. They need the freedom to build things their way, without being forced to adhere to cumbersome processes or politic across various teams. When you are a big company, it can be hard to hire people like this, and when you do hire them, it’s h...

None of this stuff about giving people air cover and organizing around CEOs works if you don’t get the product right.

you need to have leaders who are OK with acknowledging the limitations (or outright failure) of internal efforts in light of the success of outside ones. It was this attitude that let us buy YouTube and shut down our own Google Video. And that led us to see the tremendous value in Waze as a complement to our own hugely successful Google Maps. It takes humility to make deals like this, which is exactly what our M&A process is designed to engender.

Google’s entire culture, values, and operating practices were all created with innovation in mind,

they can focus on making sure the product works and is consistent with their vision, and that the business model is commercially viable. De-risk the product and de-risk the business; everything else is secondary. Only after those two things have been proven to work do we look to scale the business.

Each step along the way is an effort to make the project fail, to prove that it is flawed. We look at granular technical, business, and financial milestones, and pace investments to those milestones. When the team fails to fail, we move the project on to the next step. (X sometimes gives bonuses to teams that fail well, reasoning that by calling it quits on a project that was bound to fail, the team saved the company money.)

The ethos is always to build the prototype as cheaply as possible, and to worry about scaling only after the prototype fails to fail.

Larry and Sergey at Google, where they frequently engage the engineers in deep design discussions. The point of these discussions is to ensure that project leads and engineers are deeply focused on the product, understand their technical insights, and can defend their decisions. It also helps bring a different, bigger perspective to these decisions.

we suggest that business leaders should be constantly asking themselves the question, What could be true in five years?

while most companies say that their employees are everything, Larry and Sergey actually ran the company that way.

They felt that attracting and leading the very best engineers was the only way for Google to thrive and achieve its lofty ambitions.

In economic terms, when the cost curves shift downward on a primary factor of production in an industry, big-time change is in store for that industry.14 Today, three factors of production have become cheaper—information, connectivity, and computing power—affecting any cost curves in which those factors are involved. This can’t help but have disruptive effects.

product excellence is now paramount to business success—not control of information, not a stranglehold on distribution, not overwhelming marketing power (although these are still important).

As Jeff Bezos, founder and CEO of Amazon, says: “In the old world, you devoted 30 percent of your time to building a great service and 70 percent of your time to shouting about it. In the new world, that inverts.”

The second reason product excellence is so critical is that the cost of experimentation and failure has dropped significantly.

Product development has become a faster, more flexible process, where radically better products don’t stand on the shoulders of giants, but on the shoulders of lots of iterations.

The basis for success then, and for continual product excellence, is speed.

The primary objective of any business today must be to increase the speed of the product development process and the quality of its output.

Since the industrial revolution, operating processes have been biased toward lowering risk and avoiding mistakes. These processes, and the overall management approach from which they were derived, result in environments that stifle smart creatives.

the defining characteristic of today’s successful companies is the ability to continually deliver great products. And the only way to do that is to attract smart creatives and creat...

who, exactly, is this smar...

A smart creative has deep technical knowledge in how to use the tools of her trade,21 and ple...

or at least understands the tenets and structure of the systems behind the magic you see ...

She doesn’t just design concepts, she builds prototypes. She is analytically smart. She is comfortable with data and can use it to make decisions. She also understands its fallacies and is wary of endless analysis. Let data decide, she believes, but don’t let it take over. She is business smart. She sees a direct line from technical expertise to product excellence to business success, and understands the value of all three.

She is competitive smart. Her stock-in-trade starts with innovation, but it also includes a lot of work. She is driven to be great, and that doesn’t happen 9-to-5. She is user smart. No matter the industry, she understands her product from the user or consumer’s perspective better than almost anyone. We call her a “power user,” not just casual but almost obsessive in her interest.

She is her own focus group, alpha tester, and guinea pig. A smart creative is a firehose of new ideas that are genuinely new. Her perspective is different from yours or ours. It’s even occasionally different from her own perspective, for a smart creative can play the perspective chameleon when she needs to. She is curious creative. She is always questioning, never satisfied with the status quo, seeing problems to solve everywhere and thinking that she is just the person to solve them. She can be overbearing.

She is risky creative. She is not afraid to fail, because she believes that in failure there is usually something valuable she can salvage. Either that, or she is just so damn confident she knows that even in the event that she does fail, she can pick herself up and get it right the next time around. She is self-directed creative. She doesn’t wait to be told what to do and sometimes ignores direction if she doesn’t agree with it. She takes action based on her own initiative, which is considerable.

She is open creative. She freely collaborates, and judges ideas and analyses on their merit...

She is thorough creative. She is always on and can recite the details, not because she studies and memorizes, but because she knows them. They are her details. She is communicative creative. She is funny and expresses herself with flair and even charisma, either one-to-one or one-to-many.

Not every smart creative has all of these characteristics, in fact very few of them do. But they all must possess business savvy, technical knowledge, creative energy, and a hands-on approach to getting things done. Those are the fundamentals.

the ambitious ones of all ages who are eager (and able) to use the tools of technology to do a lot more. Their common characteristic is that they work hard and are willing to question the status quo and attack things differently. This is why they can have such an impact.

It is also why they are uniquely difficult to manage, especially under old models, because no matter how hard you try, you can’t tell people like that how to think. If you can’t tell someone how to think, then you have to learn to manage the environment where they think. And make it a place where they want to come every day.

the wisdom in John Wooden’s observation that “it’s what you learn after you know it all that counts.”

We open by discussing how to attract the best smart creatives, which starts with culture,

culture and success go hand in hand, and if you don’t believe your own slogans you won’t get very far.