Eric Schmidt on innovation, reflection

McKinsey Quarterly interviews Google’s CEO

The Quarterly: Could you tell us about how Google innovates?

Eric Schmidt: Innovation always has been driven by a person or a small team that has the luxury of thinking of a new idea and pursuing it. There are no counter examples. It was true 100 years ago and it’ll be true for the next 100 years. Innovation is something that comes when you’re not under the gun. So it’s important that, even if you don’t have balance in your life, you have some time for reflection. So that you could say, “Well, maybe I’m not working on the right thing.” Or, “maybe I should have this new idea.” The creative parts of one’s mind are not on schedule.

So, in our case, we try to encourage [innovation] with things like 20 percent time, and the small technology teams, which are undirected. We try to encourage real thinking out of the box. We also try to look for small companies that we can acquire. Because, often, it’s small companies which have the great new ideas. They have gotten started with them but can’t really complete them.

Google’s objective is to be a systematic innovator at scale. Scale means more than one. And innovator means things which really cause you to go, “Wow.” And systematic means that we can systemize the approach—we can actually get our groups to innovate. We don’t necessarily know this month which one [will succeed]. But we know it’s portfolio theory. We have enough groups that a few [innovations] will pop up. And, of course, we also cull the ones that are not very successful. We push them to try to do something different, or retarget—or, in fact, get canceled. Although that’s relatively rare.

The Quarterly: Is there a type of organization that has an edge when it comes to fostering innovation?

Eric Schmidt: Executives always want to simplify their lives. So they have three divisions, and four products, and all the marketing and so on. That may work in some businesses. But, for most businesses, due to the nature of technology, they’re going to become more complex. They will have more products and more variance. And it’s part of [maintaining a] competitive barrier to have resilient, scalable, differentiated, and global products.

Which means they can’t be built by two people anymore. So, in our case, while we recognize that innovation comes from small teams and we organize that way, we also encourage them to talk to each other.

One of the things that we’ve tried very hard to avoid at Google is the sort of divisional structure and the business unit structure that prevents collaboration across units. It’s difficult. So, I understand why people want to build business units, and have their presidents. But by doing that you cut down the informal ties that, in an open culture, drive so much collaboration. If people in the organization understand the values of the company, they should be able to self organize to work on the most interesting problems. And if they haven’t, or are not able to do that, you haven’t talked to them about what’s important. You haven’t built a shared value culture.

Shorthand:

1. Reflect

2. Instill values

3. Let ‘em go.