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September 25, 2006

Innovation, Emerging from Google Chaos

Chaos theory Fortune has an interesting article about Google's management called Chaos by design. Adam Lashinsky illustrates the difference between Google and other companies using a weird situation:

"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, Google's co-founder and unofficial thought leader. "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."

This example speaks a lot about Google's attitude. They launch a lot of products, without thinking too much about their future or if they're going to be successful. Even if you make mistakes, there's always a lesson to be learned.

The article also mentions some interesting details about Google Earth, a software that has been downloaded more than 100 million times. Google makes money from Google Earth by placing ads and by offering users Google Toolbar. "We know the lifetime value of a toolbar user. So we know how much value we're getting back out of somebody who downloads Google Earth and then subsequently downloads the toolbar," says Marissa Mayer. Instead of charging users for Google Earth (a Microsoft-like attitude, and the initial strategy of Keyhole), Google chose to monetize their software in a not-so-obvious way.

Google also decided to transform orkut's failure in an opportunity to learn more about social networks. They'll provide search and ads for MySpace. "Winning MySpace kept the Web's gem of the moment out of the hands of Microsoft and Yahoo, which both privately claim that Google overpaid by several hundred million dollars. Whether that's true won't be known for years."

If this chaotic way of doing business will continue to work for Google, that remains to be seen. But if you're doing things chaotically, it's always a good idea to control the situation, at least apparently. Chaos has a small chance of creating a better order by innovation, but a small change can lead to butterfly effects.

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