How Google Works

by Eric Schmidt

‘Schmidt and Rosenberg put much of their emphasis on people – how to hire, train, motivate, organise, reward the talent needed to run a company like Google’

As Eric and Jonathan explain in How Google Works, we’ve tried to apply this autonomy of thought to almost everything we do at Google. It’s been the driving force behind our greatest successes and some impressive failures.

It’s also true that 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. So you need to force yourself to place big bets on the future.

Hopefully you can take these ideas and do some impossible things of your own!

“What’s different now?” This is one of Eric’s favorite ways to start a conversation (he’s a real hoot at dinner parties!). It usually generates an interesting response, because we are fortunate enough to live and work in a time when technology is advancing at an amazing pace, changing many lives and businesses along the way. The question is always relevant. Something is always different.

We wrote How Google Works because we believe that 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 result? Lots of nodding heads and engaged conversation, but very few results. They listened but rarely acted. Although they never told us this directly, our visitors let us know that our lessons and insights were very interesting, and were perhaps what they needed, but were practically impossible to implement.

This change was driven home for us in a typical Google way: A software engineer told us about it.

It became apparent to us that as Google had grown, it had naturally become slower and more process-driven.

In his 2013 Founders’ Letter1 Larry Page noted that “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.” Larry was concerned that as we were slowing down, becoming more process-driven, and acting like a big company, we ran the risk of realizing our worst possible fate: becoming irrelevant.

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.

The best products are still the ones that are based on technical insights, those unique ideas that apply one or more technologies in a new way to solve big problems.

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.

What could be true in five years? We ask ourselves and those around us this question quite a bit, mainly because the answer can change so quickly. It forces us to look at what’s different today and then imagine what could happen if that trend continues or accelerates into the future.

We hope that by making this amazing platform generally available, we can accelerate research on machine learning technology and spread its benefits to many new types of uses.

If you look around, though, you can easily see lots of situations where we have dumb systems working on complex problems.

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?

In our conclusion to How Google Works, we speculate about the next smart creative, toiling away in a garage, lab, or conference room somewhere on a new venture, intent on making Google irrelevant.

Yes, she’s toiling away on something potentially great, but she’s not trying to make Google irrelevant; she’s trying to create the next Google, a company that uses machine learning and other evolving technologies to solve very large, complex, painful human problems. Transportation, health care, genomics, climate science, cybersecurity, or even something as confounding as scheduling meetings: The opportunities abound. You haven’t heard of her yet, but in another decade or so, her company will be a household name with a product so ubiquitous and powerful that we won’t imagine how we lived without it. Sound familiar?

Amit Patel, who explained to Eric that his office had five inhabitants, with another on the way, and that his solution of sawing one of the desks in half to make more space hadn’t worked.

And when Microsoft took a real interest in things start-ups were doing, things had a way of getting really interesting.

Moritz was right: To take on the biggest gorilla in the jungle, we needed a plan. But he was also wrong, and to understand why he was wrong, and why he was inadvertently putting the two of us in a rock-and-hard-place sort of situation, it helps to first understand just what kind of company Google was.

the founders ran it on a few simple principles, first and foremost of which was to focus on the user.

If all they did was create the world’s best search engine, they would be very successful.

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.

But 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.

The management tactics the founders used to run the company were equally simplistic. Like the professors in their Stanford computer science lab, who did not dictate what their thesis projects should be but rather provided direction and suggestions, Larry and Sergey offered their employees plenty of freedom and used communication as a tool to keep everyone moving in the same general direction. They

few months later, Jonathan presented Larry with a product plan that was a manifestation of the gate-based approach at its finest. There were milestones and approvals, priorities, and a two-year plan of what products Google would release and when. It was a masterpiece of textbook thinking. All that remained was for him to receive a rousing round of applause and a pat on the back. Sadly, this was not to be: Larry hated it. “Have you ever seen a scheduled plan that the team beat?” he asked. Um, no. “Have your teams ever delivered better products than what was in the plan?” No again. “Then what’s the point of the plan? It’s holding us back. There must be a better way. Just go talk to the engineers.”

As Larry spoke, it dawned on Jonathan that the engineers he was talking about weren’t engineers in the traditional definition of the role. Yes, they were brilliant coders and system designers, but along with their deep technical expertise many of them were also quite business savvy and possessed a healthy streak of creativity. Coming from an academic background, Larry and Sergey had given these employees unusual freedom and power. Managing them by traditional planning structures wouldn’t work; it might guide them but it would also hem them in. “Why would you want to do that?” Larry asked Jonathan. “That would be stupid.”

They were great leaders of computer scientists, but we needed more than computer scientists to create a great company.

And maybe fire the two of us while they were at it.

Microsoft did aggressively challenge us, reportedly spending nearly $11 billion11 in an attempt to knock Google off its perch as a key player in the Internet search and advertising business.

We left that out for the simple reason that we didn’t know how we were going to do it. When it came to management tactics, the only thing we could say for sure back then was that much of what the two of us had learned in the twentieth century was wrong, and that it was time to start over.

Three powerful technology trends have converged to fundamentally shift the playing field in most industries.

First, the Internet has made information free, copious, and ubiquitous—practically

Second, mobile devices and networks have made global reach and continuous connec...

And third, cloud computing13 has put practically infinite computing power and storage and a host of sophisticated tools and applications at everyone’s dispos...

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.”19

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

most management processes in place at companies today are designed with something else in mind. They were devised over a century ago, at a time when mistakes were expensive and only the top executives had comprehensive information, and their primary objectives are lowering risk and ensuring that decisions are made only by the few executives with lots of information. In this traditional command-and-control structure, data flows up to the executives from all over the organization, and decisions subsequently flow down. This approach is designed to slow things down, and it accomplishes the task very well. Meaning that at the very moment when businesses must permanently accelerate, their architecture is working against them.

Put these factors together, and you suddenly have an environment where employees, from individual contributors to managers to executives, can have an inordinately big impact.

As a result, most knowledge workers in traditional environments develop deep technical expertise but little breadth, or broad management expertise but no technical depth.

When we contrast the traditional knowledge worker with the engineers and other talented people who have surrounded us at Google over the past decade-plus, we see that our Google peers represent a quite different type of employee. They are not confined to specific tasks. They are not limited in their access to the company’s information and computing power. They are not averse to taking risks, nor are they punished or held back in any way when those risky initiatives fail. They are not hemmed in by role definitions or organizational structures; in fact, they are encouraged to exercise their own ideas. They don’t keep quiet when they disagree with something. They get bored easily and shift jobs a lot. They are multidimensional, usually combining technical depth with business savvy and creative flair. In other words, they are not knowledge workers, at least not in the traditional sense. They are a new kind of animal, a type we call a “smart creative,” and they are the key to achieving success in the Internet Century.

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

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. In our industry, that means she is most likely a computer scientist, or at least understands the tenets and structure of the systems behind the magic you see on your screens every day. But in other industries she may be a doctor, designer, scientist, filmmaker, engineer, chef, or mathematician. 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 cr...

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.

By the time we delivered that business plan to the board back in 2003, we knew that we had to do what so many business leaders are faced with today: reinvent our rules for management and create and maintain a new kind of work environment where our amazing smart-creative employees could thrive, in our case in a company growing by leaps and bounds. While we were brought into Google to provide “adult supervision,” to succeed we ended up having to relearn everything we thought we knew about management, and our best teachers were the people who surrounded us every day at the Googleplex.