Arnold, Google, and Innovation: The Google Labs Event
July 31, 2011
Imagine my surprise when a reader sent me a link to “The End of an Era for Google Labs—Innovation Now Via Acquisition and Pontification.” I submitted an analytic write up which ran as a news item. I don’t do news, but Information Today did me the honor of handling my commentary as “real” news. A happy honk to the editor for this decision.
The point of my write up was that Google asserts that innovation will come from product teams. Maybe? I think product teams add features. Some features require innovation, but in my research, the big ideas such as Google becoming the Internet come from the pre-2007 era at Google. Since that wonderful year, Google has been implementing and buying companies to get innovation. In some cases, Google acquires people who developed a company and then join Google to follow their research path. I document a couple of these individuals with companies in their past cases in my monograph Google Version 2.0, which is still relevant and available from this link.
In my Information Today “news” break, I asserted:
… consider that less than 3 weeks after the Google+ tsunami rolled over the lucky invited beta testers, Google purchased Fridge, a start up with technology that allows a Google+ user to create private groups. A few days later, Google bought PittPatt, a start up with facial recognition software. Keep in mind that Google has its own facial recognition technology and Schmidt cautioned governments about the use of such technology. The phrase I jotted down was “facial recognition is too creepy even for Google.” The quote appears in a May 18, 2011 article in The Telegraph, a U.K. newspaper. Creepy or not, Google is buying technology, presumably to add functionality to its lineup of products. I will have to check out Google+ to see if PittPatt features turn up in Picasa, the photo sharing program now integrated into Google+. (Google Labs generated some interesting patent applications such as US2010 0008547, “Method and System for Automated Annotation of Persons in Video Content.”)
I think the shift at Google is understandable and, in fact, almost inevitable.
Let me go back in time to the mid 1970s. I worked on a project which is long since forgotten. The companies which were the focus of the study have morphed in dramatic ways (GE) and some have just disappeared (RCA). My memory is not to sharp, but let me summarize what I recall from a research project conducted almost 40 years ago.
A Historical Note about Innovation
In the late 1970s, I worked at a major consulting firm. In 1974, only McKinsey & Co., Bain, and Boston Consulting Group challenged my employer for the top spot of the experts-for-hire totem pole. One of my most challenging projects was working on a global study of innovation. The research, commissioned by a Fortune 50 company, was to answer what looks like a simple question, “How do technology leaders innovate?”
I remember the three key findings of that work completed almost 40 years ago. Our sample was skewed to what the client called “big innovation spenders”, so the investments in innovation were hefty when fully loaded with:
- Staff
- Acquisitions of other companies
- Legal fees for patents and other matters such as employment disputes
- Overhead for the “labs”
- Capital investments in computers, measurement devices, etc.
- Administration, which today would be called “adults in charge of the sleepover”.
Finding One
First, none of the companies in the sample had much of a clue. Innovation happens, which is strikingly similar to the phrase “stuff happens”, “Así es la vida” or “C’est la view.” The 12 firms in our sample were making oodles of money rolling out interesting, clever products in electronics, pharmaceuticals, and manufacturing. In order to keep the cash coming in, innovation in general and new products in particular were needed. But in interview after interview, we heard the same message: The innovations for which the firms were known arrived almost by happenstance. Someone got an idea to run a tube from a paint can to a cheap paint roller. Bang. A new product idea was born which eliminated the messy process of dunking a paint roller in a pan. (Google enshrined this type of invention serendipity in its patent application for “Transportation Routing” (US2006/014941), a figure from which is shown below:
Finding Two
The second finding was that the most successful innovators in the sample of innovators in 1974 relied on what I call “the shotgun approach to squirrel hunting.” Slap in cartridges and blast in the general direction of the squirrel. Our research revealed that the companies which we poked, prodded, and probed used a wide range of methods to make the Petri dish effloresce with innovation. Competitors’ products were reverse engineered. SWAT teams were formed. Start ups were bought and tossed into a sea of engineering cubicles in the hope that a genetic mutation would produce an Incredible Hulk of an invention. There were secret “skunk works” which worked on science fiction projects for government agencies. There were examples of experimentation like my mother’s approach to making chocolate chip cookies. Experimentation is entertaining, but my mother never produced an edible cookie despite decades of effort. Variations included a “sandbox” or “playroom” where anyone with an idea could leave the normal routine and experiment. There were examples of forced disruptions from reorganizations, hiring and firing, and strategic shifts. We encountered an early version of a “death march”. The idea is that an deadline is set and the professionals were enticed to reach the goal and win the innovation Super Bowl. As crazy as it sounds, this method produced some startling consumer product successes such as the familiar filling station pump with the single hose and nozzle and a garden hose that rolled into a plastic container about half the size of a flat pizza box. Management genius or luck? No one knew. Stuff happens.
Finding Three
Our third finding was that innovation could be purchased like a Chilean sea bass at the local Costco. Once an innovative company was owned, the new purchase would apply its innovations for the benefit of the acquiring company. For some in our sample, the approach was also a hit-and-miss proposition. The practitioners of the just-buy-it approach to invention rationalized the approach in terms of time to market and cost savings. One ancillary finding: Buying companies was described as “fun.”
The net net of the study was that innovation was a dark art. None of the companies in our sample of 12 had a repeatable formula for producing inventions. Curiosity, persistence, intelligence, instinct, time, a tolerance for failure, and luck seemed to be the common ingredients. Like I said, “A slippery fish is innovation.”
One of the surprises for me was that innovation was perceived by the managers we interviewed as essential to the success of the firm. The firms in our sample had hammered the mantra of innovation into the nerve fibers of the organization. Talking about innovation and delivering were in 1974 two quite different functions.
Cost of Innovation
How expensive are the methods for coming up with good ideas and making money with those ideas?
Across the 1974 sample, the data we were able to review revealed that anywhere between six to 10 percent of revenues was pumped into the work of innovation. For a company with $20 billion in revenue that worked out to big numbers in 1974 dollars. I assume that the costs today are going to be in this ballpark. I am happy with our work 37 years ago because our study was one of the first to slap a number on the cost of an innovation fishing trip in rough financial seas. (Business Week also tallied R&D costs at one time, but the sample was more diluted whereas we focused on the companies who believed in innovation and were willing to invest to get innovation.)
Our client was happy, which surprised me. The results were not definitive, and I remember wrapping the basic message “stuff happens” in MBA speak. But our client, the top dog in this multi-billion dollar firm, smiled and said as I recall:
“These guys don’t know any more than we do. ”
Now drag your finger over your iPad’s screen to the present, July 2011.
For companies of a certain size, buying innovation seems to be what works. Only this week, Oracle, a company with various search technologies, bought InQuira, a natural language search vendor focused on customer support. Oracle is a technology company but it is no secret that in order to move its search technology along, acquisition was the shortest path between A and B. When was the last time you got excited about SES11g?
Bottom line: Google is a grown up, yet mostly misunderstood company. My suggestion? Check out Google Version 2.0 because those innovations which I reported in 2006 and 2007 are happening now. Today’s acquisitions will have an impact in a year or two. Understanding Google’s now is probably a useful exercise whilst at the sea shore.
Stephen E Arnold, July 31, 2011
Sponsored by Pandia.com, an outfit which published my new study of enterprise search and a chapter that provides some of my analysis of the Google Search Appliance.
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[…] “Innovation happens, which is strikingly similar to the phrase ‘stuff happens’, ‘Así es la vida‘ or ‘C’est la view.’… in interview after interview, we heard the same message: The innovations for which the firms were known arrived almost by happenstance… the most successful innovators in the sample of innovators in 1974 relied on what I call ‘the shotgun approach to squirrel hunting.’ Slap in cartridges and blast in the general direction of the squirrel… The net net of the study was that innovation was a dark art. None of the companies in our sample of 12 had a repeatable formula for producing inventions. Curiosity, persistence, intelligence, instinct, time, a tolerance for failure, and luck seemed to be the common ingredients.”–Stephen Arnold, 2011 […]
I was almost done with my placid cerebral comments about how Google innovation is all about an intentional and conscious balance of potential and kinetic energy and how that must make for stake and shareholder friction and arguments for why Googler should buy themselves back and what Thorstein Veblen would say and then I did what I have done numerous times and inadvertently and unintentionally deleted this webpage and the comment forever with Google Chrome. Don’t they have enough browser user info to fix this, some idiosyncracy with the find function with one of those keys around the key and take care of it – even without my knowing – like my own personal update?
So as Larry Page trained us with Google Labs to be proactive and “help” Google innovate, I propose we – let’s say potentially hundreds of millions of users – actually make demands for change (read “innovation”). We can be nice with prior knowledge of Google Version 2.0 or other Google Trilogy monograph describing and explaining inventions or patents already existent – or we can be really challenging and, who knows,.more fun? No no no – fun was in the garage not on the bottom line.
It would seem Facebook is a better platform for this than Google+ which really should have been ready and in place and tried and trued before the protests and revolutions in countries in the Middle East and North Africa.
It could already be as Porky Pig says “Th-th-th-that’s all folks!”
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