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In the dynamic world of technology and business, innovation is key to staying ahead. Eric Schmidt, the former CEO of Google, often credits the company’s success to a concept introduced by Sergey Brin, one of Google’s co-founders. This concept is known as the 70-20-10 rule. It’s a strategic approach that has helped Google foster innovation while maintaining focus on its core business.
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The Origin of the 70-20-10 Rule
About 15 years ago, Sergey Brin, a brilliant mathematician, proposed an intriguing allocation of resources and time within Google. He suggested that:
70% of the company’s efforts should be devoted to core business activities.
20% should be focused on projects that are adjacent or related to the core business.
10% should be dedicated to completely unrelated or experimental projects.
Brin’s idea was not just a shot in the dark. He used his mathematical prowess to demonstrate that this distribution would optimize growth and innovation. And he was right. This balanced approach has been instrumental in Google’s continued success.
Breaking Down the 70-20-10 Rule
1. Core Business (70%) The majority of resources and efforts are concentrated on maintaining and improving the primary products and services. For Google, this includes the search engine, advertising, and other essential services. By focusing 70% of the time on these core activities, the company ensures that its foundation remains strong and competitive.
2. Adjacent Business (20%) Adjacent projects are those that complement or enhance the core business. These could be new features, services, or expansions that build on existing capabilities. For instance, Google Maps and Google Drive started as adjacent projects. They are closely related to the core search and data management functions but offer additional value and services to users.
3. Experimental Projects (10%) The most innovative aspect of the 70-20-10 rule is the 10% dedicated to completely new and unrelated ideas. This allows employees to explore bold, out-of-the-box concepts without the immediate pressure of commercial success. Projects like Google X, which focuses on moonshot ideas such as self-driving cars and internet balloons (Project Loon), originated from this experimental approach.
Why the 70-20-10 Rule Works
Encourages Innovation: By allocating a portion of time and resources to experimental projects, Google creates a culture where innovation is not just encouraged but expected. This leads to breakthroughs that can transform the industry.
Balanced Risk: The rule ensures a balanced approach to risk. While 70% of resources are securely invested in proven, profitable activities, the 20% and 10% allocations allow for calculated risks that can lead to substantial rewards.
Employee Engagement: Allowing employees to spend part of their time on projects they are passionate about increases job satisfaction and motivation. This not only retains top talent but also attracts creative minds eager to explore new ideas.
Real-World Examples of the 70-20-10 Rule
Google AdSense: What started as an adjacent project to Google’s core search advertising business became a major revenue driver. AdSense allows website owners to display Google ads on their sites and earn money when users click on them. It complements the core business while opening new revenue streams.
Gmail: Gmail began as an experimental project, utilizing the 10% innovation allocation. Today, it is one of the most popular email services in the world, demonstrating how giving space to bold ideas can lead to significant successes.
Google X Projects: Google X operates as a semi-secret research and development facility. Projects like Waymo (self-driving cars) and Project Loon (providing internet access via high-altitude balloons) are born from the 10% rule. These high-risk, high-reward initiatives have the potential to redefine entire industries.
Conclusion
The 70-20-10 rule is more than just a resource allocation strategy; it’s a philosophy that balances focus with freedom, stability with experimentation. Sergey Brin’s vision, supported by Eric Schmidt’s leadership, has proven that maintaining a firm grasp on core business while daring to explore the unknown can lead to extraordinary outcomes. This approach not only fuels innovation but also ensures that a company like Google can continue to lead and evolve in a constantly changing tech landscape.
By understanding and applying the principles of the 70-20-10 rule, businesses of all sizes can foster a culture of innovation, manage risks effectively, and achieve sustainable growth.
Listen to Eric Schmidt:
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