Wednesday, March 30, 2011

Larry Page's New, Speedier, Leaner Google- Will It Really Recapture The Old Magic?

This past weekend Wall Street Journal edition had a page-one article concerning Lary Page, Google co-founder's aim "to clear red tape." Good luck with that!

Will Google return to the good old days? For some perspective, take a look at the firm's equity price history as compared to the S&P500 Index.

Google, according to the Journal article, had 200 employees in 2001, when Eric Schmidt became CEO. Ten years later, it employs some 24,000, or two orders of magnitude greater.

No, Larry, you're not in Kansas anymore. And trying to get an idea-themed internet sofware and services behemoth to be as prolific and successful a decade and so many more employees later is, truthfully, likely to be a futile task.

Page is doing what sound like sensible things, i.e., requiring short project descriptions from each manager, making himself and other senior managers physically available during afternoons "on small couches outside a board room in Building 43 at Google's headquarters."

However, a member of a leadership consulting firm is cited in the Journal piece observing that Page is attempting to foster more innovation by adding controlling processes to a very large organization. She describes it as "antithetical."

I agree.

In terms of the average amount of time during which companies' total returns can consistently outperform the S&P, Google may well have already seen its time in the sun come to an end. Let's be candid. Page and Brin are late 30-something engineers who, as far as I'm aware, have zero managerial education or background. Originally exploiting some technological search innovations and combining them with ad sales, the two spawned a successful startup and profited handsomely.

Now, however, Google is in a very different place as a company. The firm's ability to succeed, as evidenced by its recruiting Eric Schmidt ten years ago, will be more a function of management than sheer innovation. Its size dictates that, because the sheer weight of people and activity means that the few breakthrough ideas which occur at Google may not be seen in time to matter or, if they are, may not be capable of carrying the overhead of the rest of the firm.

Management is as much art as it is a discipline or science. That a 37-year-old software engineer, albeit a billionaire, now thinks he can, without any training in the field, simply step in and recreate Google's early days of success is sort of laughable. Chances are better the firm has simply grown and morphed into something that's never going to be capable of recapturing the early days and successes which made it into what it now is.

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