When: 2001
Where: USA
Why: 20% innovation time has facilitated some of Google’s most ground-breaking innovations
How: Google realised the smart ideas would come from the bottom, not the top
Who: Eric E. Schmidt, Larry Page and Sergey Brin
Fact: In the five years following Schmidt’s appointment as CEO, Google grew from 5,000 to 9,400 employees and from $3.2bn turnover to $23.7bn
In the early 1990s, despite all the advances made by management gurus such as Ken Blanchard, Spencer Johnson and Percy Barnevik, none of the world’s major organisations had really cracked the problem of how to retain top talent. Some companies had begun to harness the concept of ‘empowerment’, whereby employees are encouraged to buy into goals. But for many employees, this concept wasn’t enough; hundreds of companies were suffering because they simply couldn’t hang on to top talent.
The Pareto principle, which had been coined by management guru Joseph M. Juran in the 1940s, suggested that 80% of a company’s most productive ideas come from just 20% of its employees. Recognising this, other organisations, among them The Timken Company, allowed development groups to set up autonomous arm’s-length entities that were financed, but not directed, by the company as a way of keeping products and intellectual property in-house. However, Google has taken the concept of employee autonomy onto a new plane – and the process began with the appointment of Eric Schmidt as CEO in 2001.
Before he arrived at Google in 2001 to serve as a mentor for the youthful Larry Page and Sergey Brin, Eric Schmidt was not well known beyond Silicon Valley. But his unconventional ideas suited Brin and Page.
Schmidt argued that chaos was crucial to Google’s corporate culture – indeed he once said that ‘the essence of the company is a little bit of disorganisation, because it allows it to see what’s next’. From this premise he devised Google’s own 70-20-10 rule, at the centre of which lies the 20% innovation time principle – everyone at Google, from Page and Brin to the rawest Noogler (newly hired Google employee), should spend 70% of their time at work on core tasks, 20% on ‘projects related to the core business’ and 10% on new projects that aren’t necessarily dedicated to day-to-day business processes.
Shannon Deegan, director of people operations at Google, explains: ‘You can take 20% out to work on anything you think is cool. If you think you have a great idea you can gather support from other people and maybe do some more work on it together.’ There’s a place on the Google intranet where these ideas can be posted to attract the critical attention and cooperation of colleagues with supplementary skills. However, there are some boundaries; Megan Smith, vice president for new business development and general manager of the philanthropic Google.org, has said: ‘The 20% is not there so that people can entirely do their own thing; it’s designed to make the company and the world a better place.’
Since Google works from the bottom up, great technical ideas are not devised in a separate department, with resources directed by management to develop them. The first task is to take the idea to fellow engineers and convince them that it has legs. This approach ensures against technical mistakes but also means that the burden falls upon the individual Googler to spread the idea.
Ideas that look as if they are going to have an impact on the way the company is run or perceived by potential employees are then developed within a ‘grouplet’. These have neither budget nor decision-making authority, but bring together individuals committed to an idea and willing to work in order to convince the rest of the company to adopt it. Rather than resulting in a new product, many of these ideas have affected the way the company works from day to day. The shuttle buses that take staff to and from the company’s headquarters in Mountain View, California are an example of this, as are ‘Fixit Days’ devoted to concentrated work on an engineering, customer relations management or documentation problem, and ‘Testing’. This last one proposed that engineers should devise automated tests along with the products they devised – and disseminate them by posting them in the toilets.
‘The 20% is not there so that people can entirely do their own thing; it’s designed to make the company and the world a better place.’
Many of Google’s most effective customer-facing technologies have their origins in 20% time, including Gmail, Google News, Google Sky, Google Art Project, AdSense and Orkut. Since 99% of Google’s revenues come from advertising, every application that increases the number of views on a Google platform has contributed to its market dominance, and 20% time has ensured that the ‘cool’ ideas that no boardroom would ever countenance get to the market fast.
Orkut, the social networking site developed in 20% time by Turkish engineer Orkut Büyükökten, grew to a user base of 120 million by 2008. The idea for Google Sky was floated by a group with an interest in astronomy who said: ‘Wouldn’t it be cool if we turned those Google Earth cameras up to the sky!’ Working in 20% time they came up with a product that allows users to point their mobile phone to the sky and be told exactly which stars they are looking at.
Gmail, said now to be the world’s third largest email platform, with over 193 million users every month, was developed in 20% time by Paul Buchheit and a group of associates, originally as an internal system, and was launched publicly in April 2004.
Given these successes, one might expect other companies to adopt the 20% innovation approach. However, in reality, this is impractical for most firms; businesses that lack Google’s resources and market dominance can’t afford to give their staff such freedom. A number of companies have taken similarly forward-thinking approaches to innovation – for example, Facebook empowers its engineers by giving them complete control over the projects they work on. However, the concept of 20% innovation has yet to enter common use around the business world.
Gmail, said now to be the world’s third largest email platform, with over 193 million users every month, was developed in 20% time.
As Google became bigger it found it harder to retain its brightest employees against the blandishments of even ‘cooler’ companies such as Facebook. In November 2010 it raised compensation by at least 10% across the board as part of Eric Schmidt’s ‘war for talent’; it also started to consider establishing an in-house incubator, conceived as ‘20% time on steroids’, to give people the chance to devote all of their time to innovation.
Larry Page took over as CEO of Google in 2011, with Eric Schmidt moving aside to the post of executive chairman. Schmidt has been using his own 20% time to investigate how technology can change the public sector and international relations.