10 things Google has taught us

NEW YORK (Fortune) -- In researching his new book, Googled: the End of the World as We Know It , to be published next week by Penguin Press, author Ken Auletta had extensive access to the company's inner workings and reported widely on its impact on the media landscape.

In a Fortune.com exclusive, he offers ten enduring lessons drawn from his journey into Google's realm:

1.) Passion wins

Start with the words of advice -- "Don't settle" -- that Larry Page offered the Stanford graduating class in 2002. This intensity was revealed in the zeal with which he and Sergey Brin inspired the entire company to "serve the user," to take more risks, to radically improve search.

Or as CEO Eric Schmidt told me: while he assumed that "Google would be an important company; the founders always assumed that Google would be a defining company."

A moment after venture capitalist Michael Moritz finished describing Google as "a rare" company, I asked Moritz, an early investor in both Yahoo and Google (GOOG , Fortune 500 ), whether he felt the same enthusiasm for Yahoo (YHOO , Fortune 500 ).

He winced, hesitated, then finally said: "Yahoo is a company I've been close to for a long time and feel a lot of affection and loyalty towards. But within the first 18 months to two years of being associated with Google, I began to understand this was a very different company than Yahoo. It was rooted in the studies of the founders. Google was built on a foundation of Larry's and Sergey's intellectual pursuits. Yahoo was built on the foundations of Jerry's and David's interests. And there's a big gulf between those two."

That deficit of passion, he suggested, was a reason that Jerry Yang and David Filo chose not to be fully engaged full-time with the company they created.

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2.) Focus is required

Passion without focus can lead you astray. Bill Campbell, chairman of Intuit and a Silicon Valley mentor who spends a couple of days each week at Google, thinks the key to Google's success is "focused passion." He credits Schmidt for bringing a focus to the founders.

In an interview with Betsy Morris of Fortune, Steve Jobs offered an interesting and, typically, upside-down perspective on focus: "People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the 100 other good ideas that there are. You have to pick carefully. I'm actually as proud of the many things we haven't done as the things we have done."

Media mogul Barry Diller, who had an unsettling session with Page and Brin in the early days of Google, when Page would not look up from his PDA to talk to him, now thinks what might be construed as rudeness was really focus.

"They had their own method of communicating and processing," Diller said. "They give much less quarter than other people do to common business courtesies. They've stayed true to this. It's a spectacular strength. It means you never get de-focused by the crowd."

3.) Vision is required too

Without vision, even the most focused passion is a battery without a device. "Don't be evil" is a vague incantation. But Page and Brin's effort to make "all the world's information available,"and to first and foremost serve users, is a vision.

It's one that successfully drove Google to index the Web, make news and books searchable, treat ads as information and to reject dollars if the ads were not "relevant," help users search for the best or cheapest products, find simple travel directions, store and search their e-mail, and share calendar information.

Such a vision does not come from survey research. In his 2005 speech to graduating engineers at the University of Michigan, Page told them they didn't have to go to business school. He said he had read an entire shelf of business books when he was younger, and among the lessons he learned was that "many of the amazing insights that happen in business actually come from people who really aren't in the business."

4.) A team culture is vital

Google's allocation of 20% of employee time to projects of their own choice give them a sense of proprietorship. True to its open-source, wisdom-of-the-crowd ideals, Google has created a networked management that functions from the bottom-up as well as the top-down. In both directions, it unleashes ideas and effort.

As Larry Page astutely observes: "There is a pattern in companies, even in technological companies, that the people who do the work -- the engineers, the programmers, the foot soldiers if you will -- typically get rolled over by the management ... you end up kind of demoralized. You want to have a culture where the people who are doing the work, the scientists and the engineers, are empowered. And that they are managed by people who deeply understand what they are doing."

5.) Treat engineers as kings

For most Valley companies, engineers are the equivalent of the television writer, the movie director, the book author. They are the creators. The 20% time Google grants its engineers gives them a sense that they are liberated to take risks, to follow their passions.

Innovation, as Bill Campbell told The McKinsey Quarterly , comes when "the crazy guys have stature, where engineers really are important.... empowered engineers are the single most important thing that you can have in a company."

It is no accident that Page and Brin and Schmidt spend so many hours each week in meetings with engineers. For most traditional media companies, the engineer is less central.

However, as digital is now part of the mainstream, and as older media companies struggle to master its challenges, they would do well to heed the advice Google's David Eun offers: Don't do what these companies traditionally do and stick "the geeks in a corner." Instead, CEO's should have at their elbow "a top Chief Technical Officer."

6.) Treat customers like a king

An important reason Google is usually listed among the world's most trusted brands is that it conveys a sense that the user comes first. Advertising may produce 97% of Google's revenues, but to a user it doesn't feel that way. Google services are free, and they're user friendly, just as an iPod is.

The lessons Larry Page took away from reading Donald A. Norman's The Design of Everyday Things while a graduate student at Stanford, helped shape Google's approach to its customers. Or as Page said, "Having an attitude that your customer or users are always right, and your goal is to build systems that work for them in a natural way, is a good attitude to have."

To understand how Google earned the trust of its users, go back to its 2004 IPO. Again and again it referred to the users as sacrosanct: "We believe that our user focus is the foundation of our success to date. We also believe that this focus is critical for the creation of long-term value. We do not intend to compromise our user focus for short-term economic gain."

By focusing on the user, Page and Brin provided an organizing principle for Google employees that echoed Sam Walton's adage: " 'If you don't listen to your customers, someone else will.'"

7.) Every company is a frenemy

What Lord Palmerston said of nations applies as well to corporations: There are no permanent allies, only permanent interests. A medium like the internet blurs the borders between companies, sometimes making it more difficult to sight a potential rival or to distinguish between ally and foe.

Google started as a search engine, but quickly realized it could efficiently sell ads or aggregate news or search books or use its infrastructure to create cloud computing or expand into video by acquiring YouTube or expand into mobile devices.

At the same time, Google's AdSense helps newspapers by supplying them with ad dollars; AdWords partners with ad agencies to sell products; YouTube is a coveted promotional platform for the television networks; Android software supplies an operating system for more than a few mobile telephone companies.

These horizontal ambitions, coupled with the fears aroused by the speed of technological change, inevitably frays the bond of trust among companies. Most companies become frenemies, both cooperating and competing.

8.) Don't ignore the human factor

As a journalist, the deeper one burrows, the more complicated narratives and the people who populate them usually become. Among the enduring truths I keep bumping into when there is the luxury of time to get to know people or institutions, is that their decisions are often made for what are not, strictly speaking, reasons of logic. These can be ascribed to human factors. How to measure wisdom, judgment, sensitivity, relationships?

Google has been wise in winning the trust of its users, in building a team culture, and in thinking long-term. But when you start from a blanket assumption that the old ways of doing things are probably wrong, as Google does, you're bound to make unwise mistakes.

Page was unwise to assume Google could immediately digitize all books, just as Google was wrong to assume that it could devise formulas to better sell ads for newspapers and broadcast radio, two efforts it has since abandoned. Google has not always been wise in avoiding battles, in being insensitive to copyright, or privacy, or the concerns of government.

9.) There are no certitudes

Today, Google appears impregnable. But a decade ago so did AOL, and so did the combination of AOL Time Warner.

"There is nothing about their model that makes them invulnerable," Clayton Christensen, the Harvard business historian and author of the seminal, The Innovators Dilemma , told me. "Think IBM. They had a 70% market share of mainframe computers. Then the government decided to challenge them. Then the PC emerged."

Seemingly overnight, computing moved from mainframes to PCs. "Lots of companies are successful and are applauded by the financial community," Christensen said. "Then their stock price stalls because they are no longer surprising investors with their growth. So they strive to grow but forget the principles that made them great -- getting into the market quickly, not throwing money at the wrong thing. When you have so much money you become so patient that you wait too long. Look at Microsoft. No one can fault them for not investing in growth ideas. But none of these have grown up to be the next Windows."

Maybe, Christensen added, we are now beginning to "see this at Google." The company has poured money into YouTube and Android and cloud computing, but has yet "to figure out the business model for each."

10.) "Life is long but time is short."

The words belong to Eric Schmidt, who explained: "Life is long in the sense that we have long memories. Time is short in that you have to move very quickly. But to me the most important thing to know is that life has a way of working things out. We forget so quickly what the problem was three or four years ago. So my personal view of life is that every problem is an opportunity."

This is a reason to think and act boldly, as Google has, to take risks, and not to be anchored down by "long memories."