Online Extra: What Eric Schmidt Found at Google

Says the CEO: Innovation comes from invention, which you cannot schedule. That's the secret

Eric E. Schmidt joined Google in early 2001, just as the search phenomenon began its meteoric rise. Today, the 48-year-old chairman and CEO is charged with guiding this 1,500-person company through a wrenching transition, as Google fends off hefty competitors and eyes the public market.

BusinessWeek Correspondent Ben Elgin spoke with Schmidt in March, discussing everything from Google's unorthodox management to sharing power with founders Sergey Brin and Larry Page. Edited excerpts of their conversation follow:

Q: Yahoo! (YHOO ) and Microsoft (MSFT ) have established assets, including e-mail or the desktop operating system, which could allow them to search more realms of information. How much of a threat is this for Google?


It's important to have really strong competitors. That keeps you honest. I think our competitors are doing a good job. That competition is pushing us to excel.

Since I've been at the company, there have been numerous proposals for this new approach to either search analysis or navigation of information or integration of other things. And they usually work pretty well in demonstrations, and they usually don't work at scale. So the way we think about strategy is the following: We need the innovation you're describing, but it has to work for the world's problems, not just a narrow problem.

I also believe, and I want to be really clear here, the press is beginning to get this mindset that somehow this is a zero-sum game. My personal opinion is that this space is extremely large, and there's more than one way of solving the world's problems about information, and that multiple approaches will be successful. Google's will be one, but not the only one.

Q: Are you working hard to find a way to create more lock-in with your users?


You're asking a perfectly reasonable question of a normal company. That's not how Google works. The way Google works is about innovation. We are awaiting the discovery of what will achieve your objective. Do you see the distinction?

Innovation comes from invention, which you cannot schedule. That's the secret. When I look at Google News or [Google's social networking site] Orkut, I never could have anticipated their success.

Q: So you guys at the top level don't sit and say, "Gosh, we would be much better served with greater customer interaction, how can we accomplish this?"


I say that. But what we really talk about is how can we attract and develop this creative culture. This is important. The Google answer is an innovative one, it's a surprising one, which is why this is such a fun place to be. It's genuinely unanticipated.

I would like to have something with more customer lock-in. But I don't call up an engineer and say "I talked to Ben, he has done a competitive analysis, and you need to get your butt in gear." It just doesn't work that way.

Q: You guys strive for bottoms-up idea generation.


Which is different, and it works for us. But it may or may not work for other companies.

Q: But does that translate well into a public company?


I don't know. Google today is a private company. We've had the benefit of being below the radar screen. On the other hand, we've told our employees we run the company today pretty much the same way we would as a public company.

Q: How do you manage a company with two founders who are very smart, yet very headstrong?


Well, I knew it going in. It was fully disclosed in my first interview, when Larry and Sergey argued with me for an hour-and-a-half. So, it's not like it was a surprise.

We get along socially very well. We work together literally every day, seven days a week. We talk either on the phone or in person every day, Saturdays and Sundays included. And as we've worked together, the strengths and weaknesses of each has become clearer to the group of three.

Maybe it's easier if I describe how we work. If there's anything that's really important and really big, we agree that we have to agree. And I prefer that, to be honest. It's very, very lonely, if you're the only person with a very hard decision to make. And the odds of you making the wrong decision are much higher.

This has been a great partnership. I intend to do this for many, many years. And they've indicated the same. We work extremely well together. And you build trust over time. We're having a good time, the model works well for us as a group.

I don't think that Larry and Sergey particularly want to deal with the day-to-day stuff that I do, and they're better than I am at what they're currently doing. I might have been as good as they were 20 years ago, but there's no question they're better now. No question.

Q: Do you guys typically debate business vs. technology?


We debate everything. We'll debate whether I should wear a tie today. They'll say: "Why did you wear a tie today, Eric? There must be something wrong." And I'll say to Sergey: "So you dressed for work?" He shows up in these little gym shorts and a T-shirt. And Larry came in on roller blades yesterday and all white. I said: "Larry, I can see you're dressing up."

I've been studying the question of how do partnerships work. As long as you don't undercut each other, they work great. And we have that agreement. And the board is obviously pleased with that, because the history of bringing in CEOs to founder-driven companies is not good. There's a long list of failures, where the CEOs can't share power, the founders don't want to give up control, they don't agree on business direction, they don't like one another, the board forces them on the founders. We have none of those problems.

Q: [Google director] Michael Moritz has said all search companies will try to extend search into every nook and cranny of the computing experience.


Mike has so much consumer experience. His contribution has been to say, "Eric, you do not understand how big this is." I'm always a little bit behind the power curve [laughs]. I'm still in the enterprise software business. And here's Mike saying, "Eric, you're not paying attention. This is much bigger. You have to think of this at a bigger scale." He's right.

And so Mike has argued for a very broad mission statement for the company, which I think is very good. Because of his venture position, he sees a lot of interesting things and, like the other board members, run a little scared and they're always worried -- that's not the right term -- about the next innovation that we're not doing. They're constantly asking, what are we doing in this space? Do we really understand it? What's our cost structure here? This is the way you want a board to work.

Q: Would you guys consider a partnership with a Linux desktop company?


You know, we talked about that. I did that [while running Novell (NOVL )]. We've taken the position that we want to stay more focused on information and search. And we define information as more than Web information.

So, I think if you came back with a proposal about a Linux desktop company, you'd have to understand it in the context of information search. We would not do it independent of that. We would have to convince ourselves it somehow furthered information search.

Q: Would Microsoft have an unfair advantage if it bundled search into the operating system?


I don't think we have an opinion on this question. Right now, search is a very big space. We're certainly not running around saying the sky is falling because of the alleged claim of bundling. Again, it hasn't been a high priority for us.

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