Interesting article in WSJ about Google's founder Mr. Page taking over and trying to instill his old style back in company. Remember he was original Google CEO till 2001 before Mr. Schmidt took over.
I strongly believe that founders should leave company to professionals and take up non-management roles in company (at the most). I have watched couple of companies closely, where founders continued role at top management and after initial phenomenal success but then became bottleneck for companies growth. There are very few Steve Jobs or Larry Ellison type of founders or CEOs. But wait.. in case of Steve Jobs, he was also kicked out of company and honestly he was more successful on his second stint. Any how that is not main reason for this note..
I was wondering about these changes. Especially in a big company like Google. Basically, what Mr. Page is trying to do is to replicate another success similar to what they had done in early 2000. That early success still accounts for 95% of google's revenue till date. At the same time Google as a company has tons of load of bureaucratic machinery around it. Which is nothing more but a legacy of Professional CEO (no offense to Mr. Schmidt) trying to build execution machinery. However, most of the time as companies grow, this results in higher baggage then the real productive hands. Even though Google is famous for its creative and very intelligent workforce but we are yet to see any significant breakthrough in product line-up..
Does that mean if we get rid of all this machinery build-up (I am assuming it will be easily 80% of total Google workforce), will we be still able to maintain revenue level in core search business? Unfortunately or fortunately.. answer is yes.. We will still be able to see same revenue base with almost same growth pattern if we get rid of all non-search based groups. So why not do it.. Answer I think lies in Google stock price, which is mainly driven by hopes of future growth. It is in $600 USD range not just for growth in search.. but hoping that there will be some other magical blockbuster product which will further double Google's revenue overnight.. Also, we need to understand that Google's employee cost is still insignificant as compared to total revenue. So they have lot more buffer to blow up before they should worry about this extra baggage.
Now, what Mr. Page is trying to do is to reverse the ever increasing trend of cost structure without any significant upside or benefit. Lot of time when companies become big and bureaucratic they have hundreds or thousands of projects which shows dreams about billions of dollars of revenue on paper but in reality they will be lucky to touch million dollar mark. Along-with bigger machinery and structure lot of these projects and their owners can hide and do something or other... not necessary really useful. It will be really interesting to see if Mr. Page can weed out these dumb projects or cultivate couple of real good winners from them.. In general I like his style so far though it is too early to say anything. Though it is literally impossible to these things single handedly, I am sure Mr. Page will be able to clear some dust for sure.
Even though Google has plethora of other successful products, revenue base is still basic Search and Adsense model. Sooner or later, other search engines will close up the gap and their cash cow will get weaker and weaker. So Mr. Page doesn't have any option but to create some other blockbuster product which is not only good for users but also for Google in terms of revenue. Off-course, with the amount of cash Google has, they can fire all the engines and try multiple projects to replicate original success along with buying some other good startups with real cool ideas..
What I have seen so far, bigger companies it is hard to build something really useful so I am more inclined to spend money on buying some good small companies where idea or process is good and you can leverage your big machinery to scale it to universe. Having said that, I would think that Mr. Page shouldn't get obsessed by internal projects and operations. He should try to cultivate them, as it is good for great companies.. but shouldn't get obsessed with it.. There is limit to what a big company can do in creativity and new things... Ideally they should hire some good COO who can take care of operations and day to day management, and these visionaries should continue on vision and directions of companies.. more importantly on some good acquisitions which can be aligned and enhance their core business model and process.
Other interesting way to do this could be to cultivate fork-out and merge culture. In bigger companies like Google if some of the mid/senior management is so sure about their idea or project and the revenue numbers, then give them seed money and ask them to start their own company. This group of employees should get shoe-string budget and incubation time of a year or two max. If they are successful then companies should buy them back at hefty premium (still a peanut for companies like Google). If they can't live up-to their promised numbers then they should be allowed to be taken care by market forces. Essentially cultivate real "High Risk High Reward" culture and eliminate complacencies due to fat and guaranteed minimum salaries. In other words give real responsibility and ownership.
Finally, here is the original article from WSJ:
http://online.wsj.com/article/SB10001424052748703784004576220902706041400.html
I strongly believe that founders should leave company to professionals and take up non-management roles in company (at the most). I have watched couple of companies closely, where founders continued role at top management and after initial phenomenal success but then became bottleneck for companies growth. There are very few Steve Jobs or Larry Ellison type of founders or CEOs. But wait.. in case of Steve Jobs, he was also kicked out of company and honestly he was more successful on his second stint. Any how that is not main reason for this note..
I was wondering about these changes. Especially in a big company like Google. Basically, what Mr. Page is trying to do is to replicate another success similar to what they had done in early 2000. That early success still accounts for 95% of google's revenue till date. At the same time Google as a company has tons of load of bureaucratic machinery around it. Which is nothing more but a legacy of Professional CEO (no offense to Mr. Schmidt) trying to build execution machinery. However, most of the time as companies grow, this results in higher baggage then the real productive hands. Even though Google is famous for its creative and very intelligent workforce but we are yet to see any significant breakthrough in product line-up..
Does that mean if we get rid of all this machinery build-up (I am assuming it will be easily 80% of total Google workforce), will we be still able to maintain revenue level in core search business? Unfortunately or fortunately.. answer is yes.. We will still be able to see same revenue base with almost same growth pattern if we get rid of all non-search based groups. So why not do it.. Answer I think lies in Google stock price, which is mainly driven by hopes of future growth. It is in $600 USD range not just for growth in search.. but hoping that there will be some other magical blockbuster product which will further double Google's revenue overnight.. Also, we need to understand that Google's employee cost is still insignificant as compared to total revenue. So they have lot more buffer to blow up before they should worry about this extra baggage.
Now, what Mr. Page is trying to do is to reverse the ever increasing trend of cost structure without any significant upside or benefit. Lot of time when companies become big and bureaucratic they have hundreds or thousands of projects which shows dreams about billions of dollars of revenue on paper but in reality they will be lucky to touch million dollar mark. Along-with bigger machinery and structure lot of these projects and their owners can hide and do something or other... not necessary really useful. It will be really interesting to see if Mr. Page can weed out these dumb projects or cultivate couple of real good winners from them.. In general I like his style so far though it is too early to say anything. Though it is literally impossible to these things single handedly, I am sure Mr. Page will be able to clear some dust for sure.
Even though Google has plethora of other successful products, revenue base is still basic Search and Adsense model. Sooner or later, other search engines will close up the gap and their cash cow will get weaker and weaker. So Mr. Page doesn't have any option but to create some other blockbuster product which is not only good for users but also for Google in terms of revenue. Off-course, with the amount of cash Google has, they can fire all the engines and try multiple projects to replicate original success along with buying some other good startups with real cool ideas..
What I have seen so far, bigger companies it is hard to build something really useful so I am more inclined to spend money on buying some good small companies where idea or process is good and you can leverage your big machinery to scale it to universe. Having said that, I would think that Mr. Page shouldn't get obsessed by internal projects and operations. He should try to cultivate them, as it is good for great companies.. but shouldn't get obsessed with it.. There is limit to what a big company can do in creativity and new things... Ideally they should hire some good COO who can take care of operations and day to day management, and these visionaries should continue on vision and directions of companies.. more importantly on some good acquisitions which can be aligned and enhance their core business model and process.
Other interesting way to do this could be to cultivate fork-out and merge culture. In bigger companies like Google if some of the mid/senior management is so sure about their idea or project and the revenue numbers, then give them seed money and ask them to start their own company. This group of employees should get shoe-string budget and incubation time of a year or two max. If they are successful then companies should buy them back at hefty premium (still a peanut for companies like Google). If they can't live up-to their promised numbers then they should be allowed to be taken care by market forces. Essentially cultivate real "High Risk High Reward" culture and eliminate complacencies due to fat and guaranteed minimum salaries. In other words give real responsibility and ownership.
Finally, here is the original article from WSJ:
http://online.wsj.com/article/SB10001424052748703784004576220902706041400.html
1 comment:
I wish we could try some of these kind of things in other bigger companies..
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