What does CPC stand for

Google is hands down the most popular and profitable Search company on the Internet. It provides free online services from email, mapping, office productivity (Google Docs), blogs, social networking (Buzz, Orkut), video (YouTube).  However, it is also expanding its search and online applications into other territories such as mobile phone operating system (Android) and open source browser and operating system (Chrome). Google also recently announced this week it plans to experiment with providing super fast broadband in certain areas and government that will be 100 times faster than what we are currently used it. Google has been continuingly managing innovating because of it uses the style aptly titled “management innovation”.

Management Innovation according to Gary Hamel (Future of Management) is simply defined as “changes in the way managers do what they do in such a way that it enhances the organizational performance”. In order for innovation to develop, three conditions are required.

• A novel management principle – challenging some long-standing traditions
• Systemic – involving a range a processes and methods
• Ongoing program – rapid invention progress compounds over time

Google’s management principle for innovation is the formula 70-20-10. 70 percent of their business is focused on their core revenue and profit streams, which is Search and Advertising. 20 percent is focused on emerging technology such as mobile applications (Android). 10 percent is focused on research and development of future technology such as Green innovation, Book scanning, Google Wave, and recently broadband service. Employees at Google are also allowed to spend 20% of their time on their own pet projects as long as they finish their main responsibilities.

Google Doodles

A great example of the fruits of Google’s management innovation is the widely successful AdSense program. AdSense was originally developed for context advertising in Gmail. When a user opens an email, Google automatically scans the message and delivers ads based on the context instantly. Initially, AdSense for Gmail did not bring in much revenue from clicks nor were the developers expecting it to since click ratios (CTR) have been typically 1-3% of page view. However, Google later expanded AdSense to web publishers and bloggers. Anyone with a blog can sign up for the program and easily add context-sensitive ads on their site.  Furthermore, Google also has their own blogging platform (blogger.com) allowing publishers to contribute articles for the web. This environment of shared revenue and easy publishing naturally provides more content on the Internet that needs to be searched. Google, of course, could search the content as well because they can continue to make money off advertisers wanting exposure through content. The publisher benefits from shared advertising revenue with Google, the advertiser gets targeted exposure, and the user gets free content.  Everybody wins. AdSense now accounts for 30% of Google’s income from advertising

The environment consisting of the combination of blogging and AdSense created by Google is management innovation itself. This is because blogging allows people to experiment, share ideas, collaborate, and contribute which will ultimately innovate our world beyond just Google. This is because innovation occurs when information is easily accessible and disintermediated.  There are no barriers for truly innovative ideas because everyone’s voices can be heard

AdSense is an example of the systemic collaboration of processes and methods. The development groups in Gmail, AdSense, and Blogger were given the freedom to collaborate without fear of failure. Even though Search and Advertising are Google’s main business, they gave the teams an environment to experiment and expand further.  Google continues to rapidly improve these services so that they can stay competitive and innovative.

Management Innovation follows a power of law: for ever truly radical idea that forever changes the practice of management there are dozes that are less valuable and influential. The Power of Law is basically a numbers game. Google has many products but not all have been successful in terms of profitability or adoption. Google Wave was a hyped web service to replace our way of managing email. There was a lot of buzz in 2009 about Google Wave. However, once it was released, no one knew how to use it and it quickly fell from the headlines. Personally, I see Google Wave to be beneficial in project specific collaborative environment such as Academia and business. Google Wave itself can serve as an environment for management innovation by providing tools to communicate with other members.  Google’s management innovation creates technological environments to foster further management innovation allowing for On-Going rapid and compounding improvements.

I recently received an email from a Vanguard mailing list and one of the articles was called “Why So Many Americans Are Broke”. One of the reasons it made was that when it comes to money, people are not as rational as many economists think. The statement reiterates the New York Times article read “How Did Economists Get It So Wrong” by Paul Krugman. In Krugman’s article, he points that freshwater economists (neoclassical purists) assume that people are rational and therefore markets work.  In both the Vanguard and Krugman’s articles, they provided evidence based on small economic experiments to disprove the notion that people are rational with money. Furthermore, the Vanguard article also states that even students in Ivy League schools made mistakes when it comes to handling money.

I think the neoclassical purists assumption that people are rational with their money with the information they are given and therefore markets work is a bold claim. First, people are not often times rational themselves so how can they be rational with money? However, people do rationalize or at least find ways to justify their irrational behavior which is ironic. Secondly, the information they are given can vary in terms of accuracy, completeness, or plain bias. Impulsive purchases or buyers remorse are also simple examples of emotions being involved with money. Thirdly, the state of the economy has also to do with externalities beyond the individual such as weather, global catastrophe, technology, politics, war and many other factors that make it much more difficult to predict or fit into a math formula.

The other interesting story behind both the Vanguard and NYTimes article involves students from the highest ranked education institutions. Smart students can also make mistakes with money or are simply taught outrageous theories on economics really concerns me because these students will eventually be put in positions of trust and power as financial planners, work on Wall street, or create economic policies. Disastrous consequences, that could lead us to another Great Recession or Depression, could be results of students with very narrow, wrong, or incomplete views of the economy due to their education. In fact, our deep Recession we are going through today is a direct result of a false Appeal to Authority. In Krugman’s article, the Federal chairman Alan Greenspan at the time did not believe a housing bubble was brewing because he believed that modern financial economics had it under control and free markets would correct itself.  The lack of foresight from individuals put in positions of power allowed the burst of the housing bubble that has caused trickle down financial crisis leading to our current Recession.

The title for my first post was inspired by my favorite band Depeche Mode’s first album of the same name. This blog is a collection of thoughts and essays on MindOS, leadership, world news, systems, education, and philanthropy. Subjects that are important to me that are beyond my other passion music and film which you can also read on www.quangly.com.