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How does an analytic company like Google make its most important decisions?
If we are to believe the Google myth, we learn, first and foremost, that they test everything:
We test everything at Google. While any company would prefer real-life data to hunches and guesses, Google is more focused than most (or any) on getting conclusive proof that a new feature or function improves the user experience. We release many of our products in beta on Google Labs to get this kind of feedback early in the process so that we can influence the design and iterate quickly.
The ability to test lots of products and features on hundreds of millions of users is enormously valuable. This test-bed of users (otherwise known as google.com) provides Google with an incredible advantage over enterprise-only search vendors. Bad ideas can be discarded quickly and great ideas can be implemented rapidly, because we have confidence and data to show that they'll improve the user experience.
Of course, when all decision-making is data-driven, it can lead to "madness."
Here's how Douglas Bowman explains why he quit Google:
When a company is filled with engineers, it turns to engineering to solve problems. Reduce each decision to a simple logic problem. Remove all subjectivity and just look at the data. Data in your favor? Ok, launch it. Data shows negative effects? Back to the drawing board. And that data eventually becomes a crutch for every decision, paralyzing the company and preventing it from making any daring design decisions.
In the end, said Bowman, he "won't miss a design philosophy that lives or dies strictly by the sword of data."
The testing culture doesn't end there. On the Google Testing blog, James Whittaker describes the testing frameworks he's observed among the job applicants he's looking to hire:
- Input Domain Framework
- Divide and Conquer Framework
- Fishbowl Framework
- Storybook Framework
- Pessimists Framework
Which one of these frameworks will be best for Google, asks Whittaker.
Which leads us to the topic of
this blog post: Just how do the executives at Google
make
decisions?
Do they base their decisions on the data? Let's look at one well publicized executive decision and the executive decision-maker: Eric Schmidt and his decision to buy YouTube.
On October 9, 2006, in a deal valued at $1.65 billion, Google outbid a number of other competitors to snag YouTube, the online video site which was growing at a rate far outpacing Google's own Video site.
The official Google line was as follows:
The YouTube team has
built an exciting and powerful media platform that complements Google's
mission
to organize the world's information and make it universally accessible
and
useful," said Eric Schmidt, Chief Executive Officer of Google.
"Our companies share similar values; we both always put our users first
and are committed to innovating to improve their experience. Together,
we are
natural partners to offer a compelling media entertainment service to
users,
content owners and advertisers."
So how did Eric Schmidt value Google? Was he analytical, precise, objective?
By his own admission, Schmidt says, in a deposition by lawyers in the Viacom copyright lawsuit, that there was very little revenue coming into YouTube to justify the price his company paid.
Schmidt says that he told his company's board of that YouTube was worth $600 million to $700 million.
Via CNET, we get Schmidt's own words:
Viacom attorney Stuart Jay Baskin: And what was management's valuation?
Eric Schmidt: Much lower than we paid for it.
Baskin: And how was that communicated to the board?
Schmidt: I told them.
Baskin: So why don't you tell us what you remember telling the board in connection with the valuation?
Schmidt: I believe YouTube was worth somewhere around $600 million to $700 million.
...
Baskin: What methodology did you use to come up with that number?
John P. Mancini, an attorney working for Google, objects.
Schmidt: My judgment.
Baskin: Was it based on cash flow analysis? Comparable companies? What were you using as the basis for your judgment?
Mancini objects.
Schmidt: It's just my judgment. I've been doing this a long time.
...
Baskin: I'm not very good at math, but I think that would be $1 billion or so more than you thought the company was, in fact, worth.
Mancini objects.
Schmidt: That is correct.
Later...
Baskin: Can you tell us what reasoning you explained?
Schmidt: Sure, this is a company with very little revenue, growing quickly with user adoption, growing much faster than Google Video, which was the product that Google had. And they had indicated to us that they would be sold, and we believed that there would be a competing offer--because of who Google was--paying much more than they were worth. In the deal dynamics, the price, remember, is not set by my judgment or by financial model or discounted cash flow. It's set by what people are willing to pay. And we ultimately concluded that $1.65 billion included a premium for moving quickly and making sure that we could participate in the user success in YouTube.
What this tells us is that even in the most analytic company in the world, the big decisions are still made on intuition.
Here's why. Analytics can only tell us about the past. We have no data on the future. So Eric Schmidt was making an intuitive decision about Google's own future through examining the intangibles.
For example:
1. YouTube's popularity was sky-rocketing, making
it the
runaway market leader among video-sharing sites.
2. It was crushing his company's own site, Google Video.
3. YouTube was up for auction and would be sold to a competitor unless
Google
jumped first.
4. Google overbid to ensure YouTube didn't fall into rival hands.
And that doesn't take into account two other points which made the deal a winner. From the very beginning, the Google philosophy has been - get attention first, then monetize it. And that is what this bet was all about.
Schmidt saw the attention trajectory in YouTube's growth, and he knew that if anyone could monetize that attention it would be Google. To leave YouTube for Murdoch, Microsoft, or Yahoo was not an option.
In hindsight, it may have been a brilliant move. Although the monetization has proved difficult, Google is breaking even today, which is far better than what has happened at MySpace, for example.

According to a recent report in the Wall Street Journal, L'Oréal SA, the world's largest cosmetics maker, reported flat sales for the first quarter of 2009 as consumers shied away from its luxury skin creams and shampoos in favor of its cheaper brands. The maker of products ranging from Giorgio Armani perfume to Lancôme skin cream and Maybelline eye shadows said sales increased 0.3% to €4.37 billion ($5.83 billion) in the first three months of 2009. Jean-Paul Agon, L'Oréal's chief executive, said that he would not offer specific guidance for the year but that results would "improve" during 2009.
After accounting for the effect of currency fluctuations, sales fell 9.3% in Western Europe and 5% in North America. This shortfall was partly offset by an increase in revenue in Asia.
Sales at L'Oréal's luxury cosmetics division fell, while sales of its consumer drugstore lines increased slightly.
This is an unfortunate turn for L'Oréal which has always been known for its commitment to scientific research and exceptional financial results.
In fact, you might say there is an unresolved tension in its culture between creativity and business results. This tension is visible even on its website. If you read about the "profiles they are looking for" under the marketing category, here's a description you'll find:
Creativity, imagination, openness to new ideas - coupled with the highest professionalism.
• Project-oriented, natural team player, at ease working with others in an environment of entrepreneurial challenge.
• Global-minded, flexible, able to juggle multiple priorities.
• Strong analytical thinker, excellent communicator.
You have a keen eye on the latest fashions, a finger on the pulse of emerging consumer and cultural trends. Highly developed interpersonal skills, a passion for results. The personality to make a difference.
Diagnosis: L'Oréal - When East dominates West...
For the past few years I have been working with L'Oréal to change this dynamic.
The challenge: help marketers and managers develop a sensitivity to the creative nature of the beauty product development process and specifically gain an understanding for the process of research and development.
When the cosmetic group decided to develop a world wide talent appraisal process Sir Lindsay Owen Jones articulated the need to develop a competence key to the success of the group in the eye of the CEO, and that is: sensitivity to métier. What Sir Lindsay Owen Jones was aiming for was to develop a global, shared understanding for beauty products development, for L'Oréal customers, and for a number of other confidential important characteristics identified by the CEO as key factors for success in the beauty industry.
The Human Company was commissioned to research how to define this specific aptitude and how to develop it and train for it. We developed an international training track that is seen today as one of the most successful and inspiring training program available at L'Oréal.
Our approach consists in helping marketers understand how to engage and inspire creative people to contribute the best of their creativity. We used the The Intuitive Compass™ to highlight the tension between results-driven managers and creative teams.
Our analysis: L'Oréal has a product innovation driven business model whereas most of its competitors have often a market-driven model. The company believes in scientific innovation to promote growth. Its founder was a scientist. It is how L'Oréal sustained 20 years of double-digit growth and became the world leader in cosmetics. There is, as I mentioned earlier, a tension in its culture between creativity and business results.
Results: We helped L'Oréal's teams understand the perspective of the different teams. The creative teams learned about the business aspects they had neglected, while the managers and marketers were helped to understand the creative process. The bridge is intuitive intelligence. Our training program is seen today as one of the most successful and inspiring training program available at L'Oréal. (Average rating: 19.5/20) because it is very relevant with the innovation imperative prevailing in the beauty Industry, articulated by the CEO Jean Paul Agon in his mandate.
Over the past few weeks, I've seen how teams of students have used the ideas we discussed, both on creativity and applied intuitive intelligence, to learn more about the possibilities for exploring new avenues for growth. They are full of enthusiasm and passion for their work - and that is what true education is about. May they keep the fire with them always!


Thanks to everyone for such a wonderful evening: FIT's Dr. Joyce Brown and Professor Stephan Kanlian, our gracious hosts; my industry colleagues: Karen Grant, Marc Gobe, Candace Corlett, and Mark Pritchard; and of course, Ellen Byron from the Wall Street Journal.
And most importantly, thank you to the students. Yours is the task of building a tomorrow that keeps us alive, hopeful, and yes, sometimes, truly joyful!
My keynote presentation is available here >>
Early on, as my work took me deep into this realm - the world of intuitive intelligence - I struggled to build a model to explain why this was so. And so it was by accident, and by now we know that there are no accidents, that the model of The Intuitive Compass™ took shape:

Oddly enough, I was using Cartesian coordinates to explain the flaws in our linear thinking. The two principal axes, Play-Results and Instinct-Reason, give us four quadrants (NE, SE, SW, NW). Each of these quadrants represents a function or even a mindset in an organization. Let's make a few generalizations to explain the framework:
The NE quadrant is the area where reason and results prevail. This is the realm of business administration and management. Most companies excel in this department, led by teh twin beacons of "maximizing shareholder value" and "cost management."
The SE quadrant is the area where instinct is at the core and results are the rule of the game. This is the mindset one finds in a sales department, or in an athlete.
The NW quadrant is the area where reason engages in a creative thinking process as in strategic planning or marketing (think of an architectural firm or engineering company).
Finally, the SW quadrant is the area where instincts are at the heart of the creative process to invent and create from the unknown and the depth of the unconscious. This is where creators, scientists, researchers, and inventors experience eureka moments. Most executives and almost all companies, even those engaged in creative fields, lack a way to connect this quadrant back into the rest of the business.
The Intuitive Compass™ becomes a tool we can apply to assess and chart progress as companies (and executives) learn to harness intuitive intelligence in four key areas:
Strategy: how to employ intuitive intelligence to create sustainable, innovative business models which deliver real value to customers in their local environment.
Leadership: the transformative power of intuitive intelligence energizes, and builds movements - with clarity of vision and purpose.
Work Culture: the ecosystem health of your business culture is reflected in your bottom line results. The Intuitive Compass™ helps create the open culture you need to succeed in the intelligent economy.
Consumer Needs: map your customers needs and wants using The Intuitive Compass™ - creating a value innovation agenda for your customers.
The bottom line is convergence - with customers, employees, management and leadership.
Going forward, we'll use The Intuitive Compass™ to chart how companies and leaders can use intuitive intelligence to shape the future - both in their industries and in the larger world.
As I studied the root cause of these failures, a common thread appeared over and over again, and still appears today. Executives manage their companies in analytic ways, focusing on shareholder value. By focusing on the business results, they fail to do what is required to achieve the very results they desire. They can't engage their key stakeholders, whether employees or customers.
- Our minds are essentially unconscious (80% of our grey matter is dedicated to subconscious thinking)
- Play gives access to our unconscious
- Most
innovative solutions are limited by our analytical minds, because our
analytical mind knows only what it knows
- Creativity originates in our unconscious. Breakthrough ideas often elude the rational mind
- People can rise above their perceived limits when they are inspired
Intuitive intelligence is the ability to combine our analytical mind with our intuitive aptitudes to solve problems in an innovative way and succeed in the new economy.
Because we now live in a network based society consumers have gained an active voice in our businesses. Relationships with consumers are on a reciprocal basis. We need to speak to their minds, their emotions and their guts. Authenticity is now at the heart of commerce. Advertising is about creating relevant narratives for consumers as much as it is about factual information about products and services.
We must respect our ecosystems and understand that business is part of an interconnected global web.
These are the primary reasons why I authored the book Intuitive Intelligence, and its application model The Intuitive Compass™.
In this blog I will share my ideas and findings about how to use intuitive intelligence to innovate and create sustainable value in order to succeed in this new, ever-shifting economy.
We'll look at how and why our intuition is often a better guide to problem-solving than reason alone.
We'll explore ways to use The Intuitive Compass™ and make a difference - in business strategy, leadership, innovative work culture, consumer intelligence, and product development.
Won't you join us on this journey?