Real change at Google, or just shuffling the cards?

The departure of Eric Schmidt as CEO of Google has led to speculation about changes at the company as Larry Page moves back into that job in April. But there will be no changes because there is essentially no change in the management of Google.

People forget that Eric Schmidt held the title of CEO in name only. The decision making was shared between the founders: Larry Page, Sergey Brin and Schmidt in what they termed a “triumvirate”.

Here it is explained in extracts from Larry Page’s 2004 Founders’ IPO Letter:

“Eric has the legal responsibilities of the CEO… We run Google as a triumvirate. Sergey and I have worked closely together for the last eight years, five at Google. Eric, our CEO, joined Google three years ago. The three of us run the company collaboratively with Sergey and me as Presidents… We hired Eric as a more experienced complement to Sergey and me to help us run the business.”

Why would we expect anything to change at Google if there is no new management?

The only thing that’s changed is that the founders have regained some of their lost dignity. Schmidt was brought in as CEO to provide the founders with “adult supervision” as he termed it. Google’s chief investors believed that the upcoming IPO would do better if a veteran Silicon Valley executive was seen to be at the helm.

Continuing to have “adult supervision” ten years later when you are nearly 38 years old must be embarrassing for the founders. Especially since wonder kid Mark Zuckerberg has been doing great without having any official adult supervision. He’s tripled the value of Facebook in less than a year and he’s just 26.

Schmidt was brought in as CEO in August of 2001 because of pressure from Kleiner Perkins, one of Google’s chief investors. His goal was to provide “adult supervision” to the young founders as Google was preparing for an IPO.

Differences of opinion

The Google triumvirate has worked reasonably smoothly but there have been large differences of opinion between the founders and Schmidt, especially over China. Brin was in opposition to Google’s entry into China and he advocated an end to its China operations, against Schmidt’s position that Google should overlook China’s human rights record.

Schmidt has served as a useful “lightning rod” at Google and he has consistently distracted the media from paying much attention to the founders. Sometimes Schmidt’s less carefully considered remarks have gotten him into trouble.

His unusual leadership style has attracted a number of critics. For example, Elizabeth Corcoran, senior editor at Forbes, once asked “Who’s Really Running Google?” –

“…as charming as he is, Schmidt runs Google about as much as much as the Dalai Lama runs the world’s spiritual life.

“…he has defined his job not so much as leading Google but as running interference for it–placating the investment community, soothing nervous regulators and policymakers and doing whatever it takes to create a magical force field protecting Googleteers…”

He hasn’t had much success at “running interference” with Wall Street and policy makers.

– Google is facing increasing scrutiny from the US administration over possible anti-trust business practices. That’s despite Schmidt’s very public support for President Obama.

– Google has run into big problems internationally with its books scanning project and with European anti-trust authorities.

– Its relationship with Microsoft is very bad, because Google actively opposed Microsoft’s acquisition of Yahoo and other deals.

– Schmidt has managed to upset newspaper companies both in the US and internationally. He has failed portray Google as an ally rather than as an adversary.

– Google’s relationship with Apple soured badly, especially after Google introduced its Nexus phone, and then dropped it. Schmidt was forced to resign from Apple’s board.

– Schmidt admitted that he persuaded the Google board to pay $1 billion more than YouTube was worth. Critics said that was to reward VCs who were investors in both Google and YouTube at the cost of GOOG’s shareholders. Google is still trying to figure out how make YouTube profitable.

– Google has failed to diversify its business away from search and online advertising despite many acquisitions.

Page will now have to step out of the shadows and assume a much more vocal and public role. That will be a challenge for a shy software engineer who is much happier working on engineering problems than schmoozing Wall Street analysts and building media partnerships with other companies.



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