Google's Eric Schmidt has been replaced as CEO by co-founder Larry Page. Photograph: Paul Sakuma/AP
Eric Schmidt's departure after nearly 10 years as chief executive of Google, to be replaced by the intense Larry Page
(after whom Google's PageRank algorithm, the system for determining
where web pages should rank in search results, is named), has been quite
a while coming."Day-to-day adult supervision no longer needed!" Schmidt tweeted as the announcement was made on Thursday evening.
But the truth is that Google needs much more adult supervision as it
enters its second decade as an organisation. Like so many before it, the
company is hitting the barriers to growth: how to stay as nimble as
when it was younger given that it is now much, much larger.The move has clearly been planned for some time; in a blog post,
Schmidt admitted the move had been planned "over the [Christmas]
holidays". Of course the trio – Schmidt, Page and his co-founder Sergey Brin
– had figured out that if Schmidt had simply announced it on 2 January,
all hell would have broken loose: the stock would have tanked, and
everyone would have picked the financial results announced on Thursday
night apart like vultures on a carcass.Instead, everyone noted
the top-line numbers (which are good – revenue $8.44bn, up 26% on a year
ago, and net income of $2.54bn, up 28.7%), agreed they were good, and
started obsessing over how it would happen and listening to Schmidt's
jolly words complimenting his younger colleagues.It resembled the
easy ride that Apple, which timed its announcement of Steve Jobs's
open-ended medical leave for a time when markets would be closed, and
brought forward its financial results to the day after. Not a single
analyst asked Apple what Jobs's absence might mean.This time,
analysts simply accepted that Schmidt's explanation that the move
followed "a long series of conversations" and moved on.Though
it's not obvious, Google's problem has been in focus and execution of
strategy. Despite having something like a 90% search share in most
markets, its fabled search algorithms are being exploited by spammers;
despite the huge growth in sales of smartphones using its Android
operating software, it hasn't been able to persuade mobile networks or
handset makers to give customers the best deals by automatically
upgrading their software; and more dangerously it faces an antitrust investigation in Europe over whether it cross-promotes its own services in its search results.The
first two are problematic, but the third could be murderous to company
culture, as Microsoft discovered after it was found guilty in the US
(and later in Europe) of antitrust violations.While Wall Street
analysts purred at the numbers, the (amateur) analysts were a lot
tougher on Twitter. The reason why Schmidt had to go? (Because you can
bet he didn't really want to go. It's a cool gig being the chief exec.)
Google's organisation was starting to get too big to make things happen,
sources suggested."Google's core search is troubled, and [Wall
Street] seals prattle about how lovely it is that BrinPage have matured
into execs," said Paul Kedrosky,
an investor and (amateur) analyst acidly. "In case anyone pays
attention to such things, [JP Morgan] saying all [Google's] numbers
tonight ahead of expectations, except margins, which missed," he added.
"Not to be all self-serving, but I read Google's mgmt shakeup as a
confession that the co is a decision-making mess losing its way in
search," he said, adding: "Ask employees. Any engineer with initiative has been going mad at processes and vacillation."Why
would that mean Schmidt should go? Because the arrangement in which he
was chief executive and Page and Brin, the co-founders, had an equal
role eventually has led to drift.Google needs someone who will
speak, singularly, for the company. At the other two of "big three"
technology companies around at the moment – Microsoft, Apple, Google –
the co-founders (Paul Allen, Steve Wozniak) faded into the background as
the ones better suited to leading the company took over.Ignoring
search and Android – its two giant (but flawed) successes – one can see
myriads of little failures. Google hasn't gotten into social networking
or social search that Facebook has conquered; instead, in trying to
create a Twitter clone, it had its embarrassing debacle of Google Buzz, which led to a class action settlement
when users sued over being enrolled automatically. Then there has been
Google Wave, a product so revolutionary that nobody could quite
enunciate what it was for, including Google. There has been the accidental collection of personal data via Wi-Fi while generating its Street View product, leading to a privacy investigation that has rumbled on and on.None
of those failures could be laid directly at Schmidt's door, but each
one is a failure of corporate culture – and that is down to Schmidt.Google
needs to become a tight ship where products are not pushed out of the
door without really careful examination of their value both to the
company and to customers. I spoke last week to someone who has worked
for all of Microsoft, Apple and Google (though presently working for
none of them), who noted that unlike the other two companies, in Google
the attitude is that "it's software on the web. If you get it wrong,
then you just roll it back to how it was before."Such a laissez-faire attitude won't work once you get bigger, as the Buzz example shows.Page
now has a couple of urgent tasks. Search needs attention (and has
received it since criticisms grew louder over Christmas). Android needs a
strong negotiator on Google's side who will insist that handset makers
and mobile networks do not hold up software updates to customers – many
of whom are frustrated at not getting the latest versions of Android on
phones which can run it.Compare the iPhone, where statistics show around 90% of users are on the latest version of its operating system,
and Android, where about 58% are on the widely used 2.2 version (and
developers complain that "fragmentation", where different versions
proliferate, is putting them off developing for it.)By contrast, Microsoft has indicated that it will push through software updates for its new Windows Phone 7 handset.Page
now has a tough task of slowing and reversing a tendency for Google's
teams to act too independently, and create coherent products that fit
with the rest of its strategy. Last night it emerged that Google is
going to develop its own clone of Groupon, the wildly successful
discount voucher company that Google tried to buy last year; called
Google Offers, its launch date is unclear but the company is trying to
recruit local companies that will take part.It could be a huge
success. But it will need all of Google's considerable heft to make it
work well. Groupon's success is down to its focus on its task. Google
has grown so big it is missing some of that. Page and Brin can make it
happen. But it's not going to be easy.
