The innovation challenge
Most companies face significant challenges in terms of innovation. The products and services that generate current income must be continually replaced by new and improved offerings to customers. The advantage that many companies have in terms of skilled labor and a strong market position is about to disappear as other nations, after radically increased investments in education and research, are emerging not only as efficient goods producers but also as new centers of knowledge and innovation.
We know with a high degree of certainty that the primary reason why large and previously enviable companies lose steam and finally cease to exist is that they are not able to keep pace with the rapid development that is now largely exponential rather than linear. To significantly strengthen the capacity for innovation, it is necessary to take into account the increased reliance on employees’ creative abilities and be prepared to challenge conventional management and organisational models.
How Google manages innovation
Google has challenged conventional management thinking and may well be the present day counterpart to GM in the 1920s and Toyota in the 1980s with regard to management innovation. In 2012, only fourteen years after its establishment, Google had already been distinguished as one of the world’s most valuable brands for five years running, according to BrandFinance Global 500. The same year, Google reported sales of 50 billion dollars and almost 11 billion dollars in gross profits. Today, Google is considered one of the world’s most innovative companies.
Google: An inside view
In 2010 I got a unique chance to observe from the inside how Google works and how its management model in various ways supports innovative energy at the company. From an external perspective, the company seemed to have successfully combined two arguably rather different competencies: engineering skill in computer science and scientifically based expertise regarding human capital. The conclusion was that Google has built an unorthodox management model that is based on six management principles.
- Dynamic capabilities. The company’s ability to integrate, develop, and reconfigure internal and external competencies in order to meet rapidly changing surroundings.
- A continuously changing organization. If you delay taking action until problems arise, you will act too late. The organization should be permeated with a proactive approach to change.
- A people-centric approach. The company is people-centric, focusing on the individual and liberating his or her innovative power. This principle is based on a belief that people want to be creative and that a company must provide them with a setting in which they can express their creativity.
- An ambidextrous organization. Continuous innovation must combine two different forms of organizational logic within the same organization. These are daily production, which works best with a conventional planning-and-control approach, and innovation, which requires greater freedom, flexibility, and a more open attitude toward experimentation.
- An open organization that networks with its surroundings. A company can be more or less open to integration with its surroundings. Continuously innovative companies have permeable limits and have a constant and conscious exchange of information with their surroundings.
- A systems approach to work differs from the conventional linear way of working. A systems approach requires a holistic view and understanding of the whole corporate system (that is, the organization) and how the different components in the system influence each other.
Google’s leadership style
The Google model, with its ‘googley’ leadership, innovation culture, emphasis on people, and semi-structure is based on the six management principles. What follows are three examples that demonstrate this:
- At Google, there are many signs of dynamic capabilities. The management has frequently demonstrated skill and insight with regard to determining what the next important area for Google will be. In addition, when new projects threaten existing products, Google is not afraid to develop them. The management decision to assign several hundred engineers to develop Google+ is a third example. The company’s culture facilitates dynamic capabilities through the constant expectation of external change present in the minds of management and other employees.
- Google apply the principle of a people-centric approach. The culture emphasizes transparency and openness, and therefore also trust in employees. In its recruitment process, Google places a great deal of emphasis on hiring the right people—people who can manage in an environment of rapid change and where there is a high level of empowerment. Many of the company’s offerings to its employees in the form of education are voluntary, and employees can decide whether to opt in. Each year, Google removes unnecessary bureaucratic features in order to give each employee more freedom and to facilitate communication and collaboration between colleagues.
- A third example is the company’s application of the principle- an ambidextrous organization. At Google, both these orientations coexist in symbiosis and are elements in a strong culture. Google applies the 70–20–10 percent rule, which means that 70 percent of employee’s time should be spent on core business, 20 percent on projects related to core and 10 percent on projects on projects not related to core business., Engineers are entitled and expected to use time for their own projects according to the 20% rule. When employees in other units have ideas that they wish to develop they are most often given the freedom to realize their ideas or the ideas of others—again, according to the 20% rule. This project-oriented activity is carried out in parallel to daily operations in an ambidextrous organization. Google’s semi-structured organization facilitates the balance between those two orientations. At Google, each employee’s performance is valued according to both the aspects of production and innovation.
To summarize, the ability to be continuously innovative is critical for most companies today, regardless of their industry. A management model that has shown to be both unorthodox and successful in driving innovation is the Google model. The Google model is based on six critical management principles, which have been applied to among other things Google’s leadership, culture, HR/processes, and structure. These six principles, together with Google’s practical applications of them could potentially be used as a platform for a totally new management concept- not a Lean concept this time, but a concept for Management for continuous innovation in a rapidly changing world.
I thank Google for accommodating my research. The above is only a summary of all the insights we obtained, for more information we refer you to the book, which you can get here.
If you would like to learn how to apply the six management principles in your organization, please feel free to contact us.