The Descent Of Power: An Interpretation of the Global Economic Crisis Pt VII
Now, as I was writing about Napoleon Bonaparte for my book The 33 Strategies of War, in 2003 and 2004, I became intrigued by a company that seemed to exemplify–in an almost uncanny way–the Napoleonic model I have just outlined. That company was Google. I initiated an informal study–gathering as much material and contacts within the company as possible. And as I went deeper into this subject, I saw more and more connections–confirming my idea that there is a pattern to periods of change and revolution. The following is the gist of my analysis:
Like Napoleon, the two founders of Google, Sergey Brin and Larry Page, came from a radically different background than your average CEO. They were scientists at Stanford, their field being statistics and probability. In founding Google in the late 1990s, based around their innovations in the field of search engines, they came to several important conclusions: the Internet is going to radically alter the business environment. The world is entering a new era–the Information Age. They wanted their company to reflect these changes and the historic fatality I’ve been talking about. They needed to create their own business and organizational model. And so they studied in depth how other businesses operated, particularly in technology, to see if there were lessons to be learned.
Most of these companies, like Microsoft, had intense layers of bureaucracy. They would have a giant staff of software engineers to create new products. But before such products could be launched, they had to be integrated with everything else, and they had to be as close to perfect as possible. Once the product was ready, large-scale sales and marketing teams would go into action, making sure they saturated the public. If these companies were creating any kind of content, there was an editorial staff.
To keep this all running smoothly, they had to have a very large management staff.
To roll out any new product would take years, as this machinery was slow and lumbering. All of the different departments and layers of bureaucracy had to be brought into the process. By the time the product came out, competitors had already appeared, but it was too late to adapt to what was evolving. The sheer size of the company made it difficult to maintain close ties to the public; better to make perfect products and sell them hard than respond to public feedback. Everything was geared towards market domination–using vast resources and muscle to maintain that.
All of this bureaucracy created small power bases from within the company, increasing the political games being played and adding to the slowness. A company like IBM once dominated the computer field, but completely lost ground in the 1980s, mostly because it did not believe in the personal computer. There were some from within the company that thought differently, but they could not get their voices heard or influence the entrenched culture. All of the resources that IBM had were useless in the face of such rigidity–proving that structure, strategy and ideas are more important than money and technology. (In war, a similar example would be the Blitzkrieg of 1941: the French had superior equipment and technology, but their ideas on how to use them were completely outmoded and they collapsed in the face of a superior strategy.)
To Page and Brin, a company in this new environment had to be lean and fast, able to stay ahead of the innovation cycle and adapt quickly to trends. They had to build a new kind of structure. This governed most of their key organizational decisions. They would not produce any content; Google would serve as a platform for others to create or move content, enhancing the flow of information. They would have no editorial staff. To make money, they would sell advertising space, but all of this would be automated. Customers would buy through a self-serve platform. This allowed Google to have a minimal sales staff. Any kind of feedback or data on advertising sales could flow directly and immediately to anyone within the company–there were no bottlenecks from within to slow down the flow of information.
Google would have a relatively small staff of engineers. They would hire the best but keep the numbers down. They predicated this all on their philosophy of release often, release early. They would not spend months perfecting their latest product–in fact they would release it in a beta version and let the customers help improve it with their feedback. This meant no marketing or sales team to push the new product. This would also help them to develop close ties to their client base and make people feel involved in the process.
As a result of all this, the company would need far fewer managers to keep Google running. As far as possible, employees would be self-managed.
It is this remarkable lightness of Google that has allowed them to move, adapt and expand at such a rapid rate. It is the foundation of their power, as it was for Napoleon. To ignore this simple truth is to ignore a fundamental principle of strategy.
In addition, Google created a completely different culture, to reflect the historic fatality I had mentioned in the beginning. The company was broken down into small units that could be self-managed. They created the 20% rule: all employees must devote 20% of their time to creating something of their own–a pet project, an innovative idea that could later fit into Google or if not, could be taken elsewhere. Periodically small teams of peers would review these projects and critique them. It became possible to rise fast within the company and make a fortune.
The culture was centered around the idea that Google was the spearhead of a revolution: this was the company that was going to give the world access to information, to news, to everything going on in the world, opening things up and allowing people to make what they wanted with it. This sense of being part of a cause created an extremely motivated workforce that does not need to be policed by teams of managers. A degree of chaos is allowed for and even encouraged.
With such an organization in place, Google could practice a kind of maneuver warfare. Most companies focus on dominating a particular position in the marketplace, like armies that marched to meet the enemy at a set point. This is old style warfare and business–linear and predictable. In the new environment what matters is putting your company in a position in which it can quickly adapt to the latest trend and get a toehold there before others. To do so, you have to be built for that.
As a company that focused on primarily having a search engine as its center, Google could quickly move to other areas–Gmail or Google News, et al–all with the aim of creating a kind of operating system for the Internet. If some new trend appears on the horizon, they are ready to pounce and exploit it. For instance, they saw great potential for YouTube, tried to produce their own version of it and when that failed, they simply bought YouTube. This kind of fluidity is rare in business and devastatingly powerful.
As opposed to past models, Google does not invent something they think is clever and then figure out how to market it to the masses, with all of the time and money that requires. They work on what is already there–the demand that is palpable. As opposed to the traditional business practice as it evolved in the era of mass consumption, their ideal is to create less and less distance between themselves and their customers.
I focus on Google because to me they are the most radical version of a new business model that has succeeded on a large scale. I could also bring in other companies that have experimented as well and had success. A company like Zara, which has adapted brilliantly to the new environment, has based its model on the speed with which it can produce items that respond to the latest trends, giving consumers a much wider choice. The company is structured in a similar loose fashion to Google. There are many other examples as well on smaller scales all around the world. As the tsunami of the global meltdown is receding, these are the companies that are poised to take over.
I do not mean to imply that Google is infallible and already we see signs of their limitations. Like Napoleon, they could slowly morph into the enemy, into a slightly more mobile version of Microsoft. This was merely to point out the radical departure they made in the initial structure of the company and the power that brought them. If they are smart, they could dominate the scene for years to come, but nothing is certain.
This then is the point that we have reached. What is really changing in the world is not technology, or the globalization of capital, but the relationships between people–relationships that were once hierarchical and based on the force of authority. This has been radically flattened. What matters most now are the connections between people, the interdependencies and networks that can be formed and the unimpeded flow of information. Any kind of obstruction to that flow will be seen as something from the past, someone or some group trying to halt the course of an historic fatality.
We are in the midst of a countercurrent. As the new is flowing in, the tide of the old is still there. We see signs of this decrepitude everywhere. Looking at large businesses with their big marketing campaigns, often tied around celebrities, we are simply seeing dinosaurs making a lot of noise before they disappear. The signs of this old order clinging to power are everywhere, and it will be quite a spectacle to see them become extinct in the years to come.
Without grasping this wider perspective of what is happening in the world, the crest of a change that began millennia ago but greatly accelerated by the advent of the Information Age, nothing you do will have any kind of lasting effect or power.
Stay tuned for the next installment, or read The Descent of Power as an ebook.