Innovation Lessons From One of the Best

by: Rene van Diepen

I was struck by a recent article about Google in the Report on Business section of the Globe and Mail (“Alphabet and Microsoft miss targets”, April 22). I’ve copied the paragraph below. It reminded me of several innovation best practices.

“Losses increased at the company’s Other Bets business, which includes its broadband business Google Fiber, home automation products Nest, self-driving cars and X – the company’s research facility that works on ‘moon shots’ ventures.”

Under the re-org that produced the holding company Alphabet, Google created Other Bets. It’s a business unit to focus on everything beyond the traditional elements of Google like search, maps, YouTube, Google Play etc.

Beyond the cool factor and the disruption of what they are working on, there are interesting observations on how they are doing it. I was reminded of three best practices for successful innovation from the article:

Innovation requires a separate structure

As if Google did not provide a sufficiently creative, collaborative and innovative enough environment, they have split off a separate entity for leading edge, highly imaginative, long term bets and product development. Google is already famous for its “20% time” – when staff can work on anything they think will benefit Google, and yet they still established Other Bets to create the right conditions for innovation.

Innovation requires different rules

The article provides some staggering numbers. For the Other Bets business unit, losses have risen from $633M in 2015 to $802M in 2016. In any typical business unit normal corporate performance management would launch swift action to stop the losses. However, during the same period revenues doubled from $80M to $166M which means they grew faster than the losses – which is promising. While Google is taking steps to manage these numbers and their portfolio of initiatives, clearly there is a mandate and set of conditions that imply an appetite for risk and a tolerance for failure.

Innovation requires nimble decision making

The common adage of ‘failing fast’ holds true at Other Bets too. As its portfolio indicates, Google is quite willing to venture into a wide array of businesses. Flexibility for venture models and partnering further enable projects to get into test markets. Yet there are limits and Google has pulled out of a number of ventures (robot builder Boston Dynamics was recently put up for sale). Google will increase spending on bets that show promise, asking outside investors to contribute where it makes sense (e.g. driverless cars), but will reduce their position on less favourable bets.

If innovation is a key aspect of your organization (and the common view is that it is critical but that is another blog post), it is worth ensuring you have created the conditions for success. A separation from the core business? Different operating rules, performance measures, risk tolerances and investment procedures? The appropriate staffing mix? And most importantly the ability to move in and out of initiatives quickly.

Want to learn more about innovation-friendly practices? We’ve put together a document to help you out! Read IP Strategies for Innovative Companies.

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