Thursday, October 19, 2006

Rules, Revisited

From a recent article about the perceived chaos at Google in Fortune Magazine:

Take the case of Sheryl Sandberg, a 37-year-old vice president whose fiefdom includes the company's automated advertising system. Sandberg recently committed an error that cost Google several million dollars – "Bad decision, moved too quickly, no controls in place, wasted some money," is all she'll say about it – and when she realized the magnitude of her mistake, she walked across the street to inform Larry Page, […]."God, I feel really bad about this," Sandberg told Page, who accepted her apology. But as she turned to leave, Page said something that surprised her. "I'm so glad you made this mistake," he said, "Because I want to run a company where we are moving too quickly and doing too much, not being too cautious and doing too little. If we don't have any of these mistakes, we're just not taking enough risk."

I was happy to see this article after writing a few weeks ago that my fear with joining Google is the intricate system of rules they may have devised by now. The Fortune Magazine article also mentions the book Competing on the Edge by Shona Brown, Senior Vice President of Business Operations at Google, and co-author Kathleen Eisenhardt. Since it's a hobby of mine to read vintage material from the last business cycle, I picked up a copy of this 1998 book at the ETH library. While the book's examples are clearly from a past era (Remember the AOL flat-fee capacity crisis? Or the Steffi Graf vs. Arantxa Sanchez-Vicario matches?), the ideas are surprisingly up-to-date.

The book deals with creating technology businesses that are successful in very competitive markets. The focus is on creating a framework and a culture that encourages innovation. The book advocates structured chaos: There are rules, there is supervision, and there is cooperation, but just barely enough of it to hold it all together. This is the way things are apparently done at Google.

One of the early chapters deals with the trade-off of regulation vs. creativity. Too many rules stifle innovation but increase effectiveness: The company will crank out widgets cheaply and quickly, but will miss the next big thing – it's stuck in the bureaucratic trap. The other end of the spectrum is the chaos trap, where there are no rules and those that exist are consciously broken. Creativity ensues, and innovative products come out, but because the business lacks discipline, these products are too late to the game, strategies stay unrealized, and market position is lost.

The optimum is somewhere in the middle of this spectrum. Personally, I'm most comfortable just on the edge of chaos, which is exactly where Fortune Magazine places Google. Phew.

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