How Google Works

by Eric Schmidt

Over time I’ve learned, surprisingly, that 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. Because 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.

“over time 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 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.

Process is a great thing. It is the art and science of taking something that needs to be done and reducing it to a documented set of steps, often supported by information tools and systems. With process comes scale; you absolutely need process to grow a company profitably.

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.

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.

In How Google Works we preach that organizational design is challenging and that leaders should always organize around people whose impact is the highest.

Alphabet was created so we could attract the best CEOs, the ambitious visionaries who want to solve big problems with technology, and give them an environment where they can thrive at scale.

When it comes to evaluating where to create autonomous units, this is the primary thing we look for: not a business strategy or financial model (although those are necessary), but a strong set of technical insights.

Not-invented-here attitudes are a real danger in big companies; 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.

We have long felt that the start-up model, with small, autonomous teams located in one office led by passionate founders, is the most effective way to achieve remarkable new things (or fail quickly in the effort).

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

Perhaps the best known of Google’s innovation principles is our mantra to think big, to make things ten times (or “10X”) better and not just 10 percent better.

He called it his Roofshot Manifesto (“We choose to go to the roof not because it is glamorous, but because it is right there!”),

“Go out there and have huge dreams, then show up to work the next morning and relentlessly incrementally achieve them.”

What could be true in five years?

So what’s different today? The thing that has really astonished us recently is the rapid progress that has been made in machine learning.

Traffic jams are horrendous in megacities around the globe, wasting eons of time and tons of energy. Could we reduce them with smarter metering systems and better urban planning? Language barriers hamper trade, diplomacy, and commerce. Could we eliminate them with real-time, 99-percent accurate translation systems, the Star Trek universal translator two hundred years early? Lots of energy is wasted through inefficient power systems and a grid that can’t precisely match supply to demand. Could we save much of it through a smarter grid and systems that talk to each other? Hundreds of thousands of people die in car accidents every year. Could we reduce that tragic loss through cars that drive themselves and automatically communicate with each other? Doctors diagnose medical conditions every day. Could they get better and faster at it with the help of computer imaging systems and lots of data? Do you need a doctor to tell you that your child has an ear infection? Or could your smartphone do it?

Their plan for creating that great search engine, and all the other great services, was equally simple: Hire as many talented software engineers as possible, and give them freedom.

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. Many incumbents—aka pre-Internet companies—built their businesses based on assumptions of scarcity: scarce information, scarce distribution resources and market reach, or scarce choice and shelf space. Now, though, these factors are abundant, lowering or eliminating barriers to entry and making entire industries ripe for change.15 We saw this first in the media business, whose entire product can now be rendered digitally and sent around the world for free. But practically every industry is, at some level, information-driven. Media, marketing, retail, health care, government, education, financial services, transportation, defense, energy… We can’t think of an industry that will escape this era unchanged.

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

And who, exactly, is this smart creative? A smart creative has deep technical knowledge in how to use the tools of her trade,21 and plenty of hands-on experience.

She is an expert in doing. 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 the automotive designer who spends her weekends fixing up that ’69 GTO, the architect who can’t stop redesigning her house. 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 u...

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...

“it’s what you learn after you know it all that counts.”

So ask that team: What do we care about? What do we believe? Who do we want to be? How do we want our company to act and make decisions?

“long term focus,” “serving end users,” “don’t be evil,” and “making the world a better place” still describe how the company is run.

HiPPOs

Highest-Paid Person’s Opinion.

“If we have data, let’s look at data. If all we have are opinions, let’s go with mine.”40

The Bezos two-pizza rule

Organize the company around the people whose impact is the highest

“Your title makes you a manager. Your people make you a leader.”

Overworked in a good way

Establish a culture of Yes

fun, not 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.

Don’t be evil

Bet on technical insights, not market research

There’s nothing wrong with continuous improvement and smart business tactics, but the tail is wagging the dog when market research becomes more important than technical innovation.

Don’t look for faster horses

But they miss an important point. In the Internet Century, the objective of creating networks is not just to lower costs and make operations more efficient, but to create fundamentally better products. Lots of companies build networks to lower their costs, but fewer do so to transform their products or business model. This is a massive missed opportunity for incumbents in numerous industries, creating a giant opening for new competitors.

Default to open, not closed

Default to open, except when…

Don’t follow competition

Many large, successful companies started with the following: 1. They solved a problem in a novel way. 2. They used that solution to grow and spread quickly. 3. That success was based largely on their products.

And the coterie you gather to work on this strategy? Choose it wisely. It shouldn’t just comprise the people who have been around the longest or those with the biggest titles, rather it should include the best smart creatives and the ones who will have a good perspective on the changes to come.

Talent—Hiring Is the Most Important Thing You Do

Passionate people don’t use the word