How Google’s Innovation Formula Can Fuel Your Growth
In today’s results-driven world, many CEOs focus on hitting short-term profit targets. But not Eric Schmidt. In the book How Google Works, the tech-industry veteran who was Google’s CEO from 2001 to 2011, outlined the model that allowed the company to meet ambitious goals while simultaneously positioning itself for success down the road.
With a market cap of over $400 million, ranking among the top five companies globally, Google is a remarkable story. At the core of its success is a simple planning model that advisors can adopt to make 2016 a pivotal year in fueling your future growth.
Here’s how Schmidt described the model that Google began using in 2002:
We examined our top-100 list (of development projects) and put the projects into three different buckets. About 70% of the projects were related to the core businesses of search and search advertising, about 20% were related to emerging products that had achieved some early success and about 10% involved completely new things that had a high risk of failure but a big payoff if successful.
That started a lengthy discussion, the end result of which was that 70/20/10 became our rule for resource allocation: 70% of resources dedicated to the core business, 20% on emerging and 10% on new. While the 70/20/10 rule ensures that our core business would always get the bulk of the resources and that the promising up-and-coming areas would also get investment, it also ensured that the crazy ideas got some support too and were protected from the inevitable budget cuts. And 10% isn’t a lot of resources, which is fine, because overinvesting in a new concept is just as problematic as underinvesting since it can make it much harder to admit failure later on.
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Four steps for an effective plan
Failing to innovate is a key reason that many companies and advisors stagnate. It’s all about the right balance: Emphasizing proven strategies makes obvious sense, but if all you do is focus on what worked in the recent past, you will miss out on new opportunities for growth.
To accelerate future growth, borrow from Google and consciously allocate 10% of the time and money you invest in your business to explore and test new ideas. As we’re entered October, some advisors are beginning to work on their 2016 business plans.
Here are four steps that form the framework of an effective plan:
- Select the key drivers for your business – what is it that will fuel your continued success?
- For each of these, identify wins in the past 12 months that represent activities to build on and continue.
- Brainstorm new initiatives in some of these areas to test out in 2016.
- Put a strategy in place to ensure that these new initiatives get the focus they need to ensure that, in the words of the late Stephen Covey, “the important isn’t pushed out by the urgent.”