A Blog by Jonathan Low


Apr 6, 2015

As the Tech Product Cycle Moves Faster, Google Imposes Time Limit on Innovation

When it comes to innovation Google puts its money where its brain is.

It is arguably the largest investor in innovation in the tech industry and one of the largest in the corporate world.

But that does not mean it intends to wait patiently for years to see R&D investments bear fruit.

In a sign of the intensifying competition between the big tech companies like Amazon, Facebook, Alibaba and Apple, Google is imposing limits on the amount of time it is willing to keep funding projects, even those which show promise of commercial success as the following article explains.

The reason is that all of its competitors are moving faster as well - especially in product development and in  acquisitions of startups whose inventions may accelerate trends the bigger techs have seen but have not been able to internally capture themselves.

In addition, investors are demonstrating an increasing fascination with tech (following the Willie Sutton maxim of going where the money is) but evincing decreasing patience with the pace of change. The disruptive speed that tech injected into the rest of the economy is now being imposed with  equal impartiality on those who initiated it The question is whether speeding up the process can be managed without damaging the innovation imperative which created so much success in the first place. JL

Alistair Barr reports in the Wall Street Journal:

Google spending on R&D soared 38% last year to $9.8 billion. (It) is embracing a leaner, faster way to find the next big thing. Product cycles slow down as a company gets larger.
Google Inc. is embracing a leaner, faster way to find the next big thing amid questions about the Internet giant’s heavy spending on long-term research projects.
The company is giving its mobile-focused research group, Advanced Technology and Projects, more funding and a new building, and will unveil new projects at Google’s developer conference in May, executives say. In contrast, Google is re-thinking two projects from the better-known Google X research lab after setbacks—the Glass wearable computer and a delivery drone.
Google is one of the world’s great innovators and invests heavily in research and development. Spending on R&D soared 38% last year to $9.8 billion, outpacing percentage-wise the company’s 19% increase in revenue. That commitment contrasts with a decision at many other tech companies to cut back on research.
But Google has faced increasing questions about the payoff from such spending, including on analyst calls. Anne Marie Knott, a professor at Washington University’s Olin Business School, says Google historically reaped strong returns from its research investments.
But she says Google in 2013 was nearing her estimate of the optimal investment on R&D, beyond which companies generally see diminishing returns. She has not yet analyzed the 2014 numbers.
Some Google executives share the concern. “Product cycles slow down as a company gets larger,” said Executive Chairman Eric Schmidt. “All of us believe we could execute faster.”

Early in his career, Mr. Schmidt worked at the XeroxPARC lab, famous for developing important computer breakthroughs, including the graphical user interface and the mouse, that Xerox failed to capitalize on financially.
Hence the new emphasis on Advanced Technology and Projects, which upends some Google traditions. Most projects are limited to two years, after which they are killed, moved into Google, spun off into independent firms or licensed to others. The group jettisons project leaders after two years and hires mostly outside experts.
There have been 11 projects in the group, including Ara, a smartphone with switchable components; Tango, a 3-D mapping technology; and Spotlight Stories, interactive animations and short films for smaller phone screens.
The approach is the brainchild of Regina Dugan, the former head of the U.S. Defense Advanced Research Projects Agency. She joined Motorola, then a division of Google, in 2012 and is close to Mr. Schmidt, who’s been spending more time at the research lab recently.
“We like this model because it puts pressure on people to perform and do relevant things or stop,” Mr. Schmidt said. “I’ve spent an awful lot of time on projects that never end and products that would never ship.”
Analysts applaud the idea of bringing more discipline to Google’s research agenda. “If Google can make research projects shorter and with less investment, that’s positive,” said Ben Schachter, an analyst at Macquarie. “It’s going to be less worrying if projects fail.”
Advanced Technology and Projects has about 100 permanent staff, but about 1,000 non-employee subject experts work on various projects. The projects are risky, but limits on time and personnel mean the investments are relatively small, Dr. Dugan said. Google declined to disclose the group’s budget.
“It would be very difficult for Regina’s group to spend $10 million very quickly,” Mr. Schmidt said, given its structure.
When Tango’s two years ran out early this year, the 3-D project was moved into Google to support the company’s augmented-reality gaming efforts. Two other projects will move from the lab to Google this year, Dr. Dugan says, declining to provide details.
We like this model because it puts pressure on people to perform and do relevant things or stop. I’ve spent an awful lot of time on projects that never end and products that would never ship.
—Eric Schmidt, Google’s executive chairman
Other previously undisclosed group projects include an effort to use encryption techniques to improve the security of connected devices and an initiative to develop new applications and experiences using data collected by smartphone cameras and sensors.
The lab has killed projects, including an attempt to reduce the power used by mobile devices. The group couldn’t get the five-to-ten times improvement it sought and the effort was shut down after about nine months, according to Kaigham Gabriel, chief executive of Draper Laboratory Inc. and the former deputy director of Advanced Technology and Projects and the defense research projects agency.
Another project aims to boost the sound quality of mobile-device speakers. The technology worked, but Google chose to license it to other manufacturers. Those talks are ongoing, Dr. Dugan said.
“The two-year time frame forces these decisions,” she added.
Occasionally, a project is extended, if executives deem it important and there’s not a natural home elsewhere at Google. Ara, the modular smartphone, recently was granted an extension, and a market test is planned in Puerto Rico this year.
Dr. Dugan is stricter when it comes to project leaders. Dr. Gabriel left last year when his two years were up.
Limited tenure can mean people don’t worry about climbing the Google career ladder, Dr. Dugan said. It also can create a sense of urgency: each week is about 1% of a leader’s time in the group.
Dr. Gabriel recalls trying to sign a contract in a few days with a vendor to make Ara prototypes. Google typically takes up to four weeks to certify a vendor, but Dr. Gabriel persuaded managers to eliminate some steps and completed the deal in 48 hours.
Advanced Technology and Projects hires specialists, and quickly—Dr. Dugan says her record is under five hours from interviews to job offer. Google typically takes weeks or months to hire generalists who can stay for years.


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