Google plants seeds for its innovation destruction [Update]

(MoneyWatch) Google (GOOG) has reportedly effectively ended its long-standing policy of letting employees put 20 percent of their time into their own projects. That freedom to create has helped define the company's reputation as a haven for creativity.

The reason may well be the need for Google to focus and not scatter its resources and attention in too many directions. But at a time when competition has sharply increased and impressive technology become commonplace, significant innovation is a key to business success.

• Google's new competitor duo: Firefox and Foxconn
• Apple loses mojo with the young
• With Windows 8, Microsoft's self sabotage intensifies

[Update 19-Aug-2013 1:30pm: According to an official source at Google who did not wish to be named or directly quoted, the company still wants engineers to work on side projects -- the 20 percent ones -- that interest them. Even if the hours don't add up to 20 percent, the person said that the spirit of having engineers develop their own ideas was core to Google's culture.]

Not that the company has necessarily outlawed personal project time: Some Google engineers insist that personal project time is still available. Others, though, say that 20 percent time is effectively dead because career advancement is more tied to main projects, meaning that 20 percent time becomes 120 percent time -- what engineers and designers do over and above regular work. What's to keep them from then developing ideas on personal time and starting their own businesses?

On the surface, it might seem foolish to think of Google possibly losing an innovative edge. After all, the company's Android mobile operating system has a 79 percent market share, according to Gartner. Such projects as Google Glass (a new patent hints at monetization schemes) and self-driving cars have garnered enormous attention. It's not as though it skimps on research. In the quarter that ended June 30, R&D spending was about 15 percent of revenue. The year before, the portion was 14 percent.

And Google did need to bring some focus to the company. Every service, every product, every piece of software became another voice competing for attention. Larry Page was right when he became CEO to narrow the breadth of activities. Even if there were enough employees to churn out new ideas, there were limited strategic planning and oversight resources in management.

Enabling innovation revolution

And yet, there's a big "but." There are two types of innovation: Revolutionary and evolutionary. Revolutionary innovation comes when people develop ideas and implementations of them that no one has seen before. Combining touch interfaces, a strong design aesthetic, downloadable apps, and cellular technology resulted in the early iPhone. Recent iPhones have exhibited more evolutionary innovation, in which concepts and products are refined over time.

Both types are innovation and both are necessary. Sticking with the first version of something new would leave a company with something that would eventually be seen as relatively crude in execution. However, revolutionary innovation is generally the sort that takes new markets by storm. Such innovation needs freedom to put ideas together and follow trails that may ultimately lead to nowhere. Nothing is guaranteed about revolutionary innovation. And yet, for all the small projects that Google has winnowed out, there have been some winners over time, like Gmail, as Quartz reported. (The site also mentioned AdSense, but that was actually acquired by Google years ago.)

If Google is discouraging engineers from working on personal projects, then it depends on management to recognize all good ideas and consistently guess correctly which ones could propel the company into a new phase of growth. Unfortunately, that level of accurate prognostication doesn't exist anywhere. If often takes developing an idea to let others see what might be valuable in it.

Maybe Google assumes that wildly speculative idea generation is best served by startups that could be acquired. But there's no guarantee of getting the company and technology you think is critical. Google wanted to invest in Facebook and couldn't. It didn't get to grab Twitter. For better or worse, Google didn't ultimately buy Groupon, although it came close. And the right innovation snapped up by a competitor can be a disaster.

One of Google's management strategies that has apparently worked well in the past, whether for developing ideas or attracting the right people, was offering personal project time. Management at 3M created a long-lasting innovation bonanza by instituting personal project time. (Post-It notes were one result.) By moving away from personal projects to become more directed, Google could undo a major foundation of its innovation and competitiveness.