How Google spurs innovation

Yes, I know Google has little to do with homebuilding (other than advertising options), but there's an interesting interview with its CEO, Eric Schmidt in the latest issue of Business Week magazine. If you ever want to insult builders, call them "lemmings," but there is a certain truth that many homebuilders copy each other's designs, marketing plans and merchandising strategies when something works -- and why not? If strategies like model homes, full-color brochures and interactive websites help to sell homes, why not copy the leaders who institute them first?

So how can a company with a more staid culture hope to innovate? At Google, the fact that they allow employees to dedicate 20% of their time to new ideas is the commitment they need to keep ahead of their rivals. As a big fan of many Google products -- including this blog, their advertising programs, the new GrandCentral phone service and their famous search technology (Google is in fact my home page) -- they're clearly doing something that works:

Many companies, says Chief Executive Eric Schmidt, can skirt downturns entirely by coming up with innovations that change the game in their industries—or create new ones. (When asked if Google's strategy would change as the economy heads into a likely recession, he replied: "What recession?")...

The story of innovation has not changed. It has always been a small team of people who have a new idea, typically not understood by people around them and their executives. [This is] a systematic way of making sure a middle manager does not eliminate that innovation. If you're the employee and I'm the manager, and I sit down and say, "Our product's late, and you screwed up, and you gotta work on this really hard," you can legally say to me, "I will give you everything I've got, 80% of [my time]."

It means the managers can't screw around with the employees beyond some limit. I believe that this innovation escape-valve model is applicable to essentially every business that has technology as a component...

We make an explicit decision to favor the end-user. [We] do not say, "Newspapers should be happy. Advertisers should be happy. Telcos should be happy. Competitors should be happy." Those are fine if we can do it. But it's all about end-users...

The No. 1 thing we do require is: You can do whatever you want as long as you track it. We have very sophisticated measurement systems at every stage of launch. We have what is called trusted testers. Then beta test, which is forever. We do these 1% launches where we float something out and measure that. We can dice and slice in any way you can possibly fathom.

What's more important than the absolute number is the relative growth rate. High growth solves virtually all problems. If the growth rate is low, or negative, you've got a serious problem...

You have to have a set of necessary conditions for innovation to occur. To start with, you have to listen to people...

Innovation comes from places that you don't expect.