How Google Works

by Eric Schmidt

there’s nothing a good ’80s cover band and a fine brew can’t fix. Everyone’s fun when they’re dancing to Billy Idol and swigging an Anchor Steam.

Here’s our idea for off-sites: Forget “team building” and have fun. Jonathan’s criteria for his excursions included doing outdoor group activities (weather permitting) in a new place far enough from the office to feel like a real trip, but still doable in a day, and providing an experience that people couldn’t or wouldn’t have on their own.

Retreat 1 day

A defining mark of a fun culture is identical to that of an innovative one: The fun comes from everywhere. The key is to set the boundaries of what is permissible as broadly as possible. Nothing can be sacred.

fun, and can only occur in a permissive environment that trusts its employees and doesn’t defer to the “what happens if this leaks?” worrywarts. It’s impossible to have too much of that kind of fun. The more you have, the more you get done.

While establishing a culture in a start-up is relatively easy, changing the culture of an ongoing enterprise is extraordinarily difficult, but even more critical to success: A stagnant, overly “corporate” culture is anathema to the average smart creative.

couple of important steps to take. First, recognize the problem. What is the culture that defines your company today (not the one described by the mission or value statements, the real one that people live in every day)? What problems has this culture caused with the business? It is important not to simply criticize the existing culture, which will just insult people, but rather to draw a connection between business failures and how the culture may have played a hand in those situations.

Then articulate the new culture you envision—to borrow Nike’s advertising phrase from the 2010 World Cup, “write the future”—and take specific, high-profile steps to start moving that way. Promote transparency and sharing of ideas across divisions. Open up everyone’s calendar so that employees can see what other employees are doing. Hold more company-wide meetings and encourage honest questions without reprisal. And when you get those tough questions, answer them honestly and authentically.

Sometimes, when looking to redefine a culture, it can be useful to look at the original one.

I simply returned to the wisdom of Mr. Watson and decided: Dress according to the circumstances of your day and recognize who you will be with.”56 (Eric was once asked at a company meeting what the Google dress code was. “You must wear something” was his answer.)

Practicing what we preach in this book in the effort to change a culture takes a lot more time than expected.

You will hire people who need to believe in you and your idea enough to be willing to make the same sacrifices. To do all this, you have to be crazy enough to think you will succeed, but sane enough to make it happen. This requires commitment, tenacity, and most of all, single-mindedness.

This is a common refrain you hear in Silicon Valley: the CEO who picks up the stack of newspapers outside the front door, the founder who wipes the counters. With these actions, the leaders demonstrate their egalitarian natures—we’re all in this together and none of us are above the menial tasks that need to get done. Mostly, though, they do it because they care so much about the company.

Leadership requires passion. If you don’t have it, get out now.

The famous Google mantra of “Don’t be evil” is not entirely what it seems. Yes, it genuinely expresses a company value and aspiration that is deeply felt by employees. But “Don’t be evil” is mainly another way to empower employees.

Googlers do regularly check their moral compass when making decisions.

one of its quality control rules was that any employee on the assembly line could pull the cord to stop production if he noticed a quality problem.57 That same philosophy lies behind our simple three-word slogan. When the engineer in Eric’s meeting called the proposed new feature “evil,” he was pulling the cord to stop production, forcing everyone to assess the proposed feature and determine if it was consistent with the company’s values. Every company n...

This is the ultimate value of having a well-established and well-understood company culture. It becomes the basis for everything you and the company do; it is the safeguard against something going off the rails, be...

There will be failures, but there will be more cases where people overdeliver, and when that happens the bar gets set even higher. That is the power of a great culture: It can make each member of the company better. And it can make the company ascendant.

MBA-style business plans, no matter how well conceived and thought out, are always flawed in some important way. Faithfully following that flawed plan will result in what entrepreneur Eric Ries calls “achieving failure.”58 This is why a venture capitalist will always follow the maxim of investing in the team, not the plan. Since the plan is wrong, the people have to be right. Successful teams spot the flaws in their plan and adjust.

it’s fine to have a plan, but understand that it will change as you progress and discover new things about the products and market. This rapid iteration is critical to success, but equally important is the foundation upon which the plan is built. The tectonic, technology-driven shifts that characterize the Internet Century have rendered some of the commonly accepted strategic fundamentals we learned in school and on the job incorrect.

So although your plan might change, it needs to be based on a foundational set of principles that are grounded in how things work today and that guide your plan as it shape-shifts its way to success. The plan is fluid, the foundation stable.

Some prospective team members may be turned off by this flexibility; most people don’t like uncertainty. Smart creatives, on the other hand, relish the “we’ll figure it out” approach—they have, as Jonathan wrote in one person’s review, the “pliancy to roll with the punches in this vertiginous environment.”60 In fact, they won’t trust a plan that claims to have all...

“Google Strategy: Past, Present, and Future.”

The principles that it

Bet on technical insights that help solve a big problem in a novel way, optimize for scale, not for revenue, and let great products grow the market for everyone.

Bet on technical insights, not market research

A technical insight is a new way of applying technology or design that either drives down the cost or increases the functions and usability of the product by a significant factor. The result is something that is better than the competition in a fundamental way. The improvement is often obvious;

Sometimes developing technical insights is simple—OXO built a business by ergonomically redesigning kitchen tools—but more often it’s hard, which is perhaps why most companies don’t make it a foundation of their strategy. Rather, they follow the conventional MBA approach of figuring out what they are best at (their competitive advantage, per Michael Porter),64 and then leveraging that to expand into adjacent markets. This approach can be very effective if you are an incumbent that measures success in percentage points, but not if you are trying a new venture. You will never disrupt an industry or transform your business, and you’ll never get the best smart creatives on board, if your strategy is narrowly based on leveraging your competitive advantage to attack related markets.

market research can’t tell you about solving problems that customers can’t conceive are solvable. Giving the customer what he wants is less important than giving him what he doesn’t yet know he wants.

“What is your technical insight?” turns out to be an easy question to ask and a hard one to answer.

If you are trying to do something big, it’s not enough to just grow, you need to scale.

Scaling needs to be a core part of your foundation. Competition is much more intense and competitive advantages don’t last long, so you have to have a “grow big fast” strategy.

a successful foundation must provide a good basis for revenue generation.

Initially they didn’t know exactly how, and they were biding their time while scaling their platform, but they were very clear about the general revenue model.

companies always think “platforms, not products.”

Nowadays firms should shrink until the cost of performing a transaction internally no longer exceeds the cost of performing it externally.”

They set up platforms for customers and partners to interact, and use those platforms to create highly differentiated products and services.

There are platform opportunities all around us. The successful leaders are the ones who discover them.

Platforms generally scale more quickly when they are open.

With open, you trade control for scale and innovation.83 And trust that your smart creatives will figure it out.

Open-sourcing something says, in effect, that we are committed to growing a platform, an industry, and an ecosystem as a whole. It lets everyone see that the playing field is level, with no unfair advantages conferred upon any particular player.

If you focus on your competition, you will never deliver anything truly innovative.

these pearls of (we hope) wisdom that we have collected from our own strategy sessions over the years,

The right strategy has a beauty to it, a sense of many people and ideas working in concert to succeed.

Start by asking what will be true in five years and work backward. Examine carefully the things you can assert will change quickly, especially factors of production where technology is exponentially driving down cost curves, or platforms that could emerge.

In a five-year timeline there are disrupters—and opportunities—in many markets. What will be t...

Spend the vast majority of your time thinking about product and platform.

When there is disruption in a market, there are two possible scenarios. If you are the incumbent, you can acquire, build, or ignore a disruptive challenger. Ignoring the challenger will work for only a short while. If you opt to acquire or build, you must viscerally understand the technical insights and options the challenger will use to attack.

If you are the challenger, you need to invent a new product and build a business around it, and understand the tools (business relationships, regulations, and lawsuits) ...

Consider the role of other players whose incentives can be aligned to help you. Your strategy should include a way you can have people outside the existing business framework (division, company, team) ...