By Alistair Barr
Google Inc. is embracing a leaner, faster way to find the next
big thing amid questions about the Internet giant's heavy spending
on long-term research projects.
The company is giving its mobile-focused research group,
Advanced Technology and Projects, more funding and a new building,
and will unveil new projects at Google's developer conference in
May, executives say. In contrast, Google is re-thinking two
projects from the better-known Google X research lab after
setbacks--the Glass wearable computer and a delivery drone.
Google is one of the world's great innovators and invests
heavily in research and development. Spending on R&D soared 38%
last year to $9.8 billion, outpacing percentage-wise the company's
19% increase in revenue. That commitment contrasts with a decision
at many other tech companies to cut back on research.
But Google has faced increasing questions about the payoff from
such spending, including on analyst calls. Anne Marie Knott, a
professor at Washington University's Olin Business School, says
Google historically reaped strong returns from its research
investments.
But she says Google in 2013 was nearing her estimate of the
optimal investment on R&D, beyond which companies generally see
diminishing returns. She has not yet analyzed the 2014 numbers.
Some Google executives share the concern. "Product cycles slow
down as a company gets larger," said Executive Chairman Eric
Schmidt. "All of us believe we could execute faster."
Early in his career, Mr. Schmidt worked at the XeroxPARC lab,
famous for developing important computer breakthroughs, including
the graphical user interface and the mouse, that Xerox failed to
capitalize on financially.
Hence the new emphasis on Advanced Technology and Projects,
which upends some Google traditions. Most projects are limited to
two years, after which they are killed, moved into Google, spun off
into independent firms or licensed to others. The group jettisons
project leaders after two years and hires mostly outside
experts.
There have been 11 projects in the group, including Ara, a
smartphone with switchable components; Tango, a 3-D mapping
technology; and Spotlight Stories, interactive animations and short
films for smaller phone screens.
The approach is the brainchild of Regina Dugan, the former head
of the U.S. Defense Advanced Research Projects Agency. She joined
Motorola, then a division of Google, in 2012 and is close to Mr.
Schmidt, who's been spending more time at the research lab
recently.
"We like this model because it puts pressure on people to
perform and do relevant things or stop," Mr. Schmidt said. "I've
spent an awful lot of time on projects that never end and products
that would never ship."
Analysts applaud the idea of bringing more discipline to
Google's research agenda. "If Google can make research projects
shorter and with less investment, that's positive," said Ben
Schachter, an analyst at Macquarie. "It's going to be less worrying
if projects fail."
Advanced Technology and Projects has about 100 permanent staff,
but about 1,000 non-employee subject experts work on various
projects. The projects are risky, but limits on time and personnel
mean the investments are relatively small, Dr. Dugan said. Google
declined to disclose the group's budget.
"It would be very difficult for Regina's group to spend $10
million very quickly," Mr. Schmidt said, given its structure.
When Tango's two years ran out early this year, the 3-D project
was moved into Google to support the company's augmented-reality
gaming efforts. Two other projects will move from the lab to Google
this year, Dr. Dugan says, declining to provide details.
Other previously undisclosed group projects include an effort to
use encryption techniques to improve the security of connected
devices and an initiative to develop new applications and
experiences using data collected by smartphone cameras and
sensors.
The lab has killed projects, including an attempt to reduce the
power used by mobile devices. The group couldn't get the
five-to-ten times improvement it sought and the effort was shut
down after about nine months, according to Kaigham Gabriel, chief
executive of Draper Laboratory Inc. and the former deputy director
of Advanced Technology and Projects and the defense research
projects agency.
Another project aims to boost the sound quality of mobile-device
speakers. The technology worked, but Google chose to license it to
other manufacturers. Those talks are ongoing, Dr. Dugan said.
"The two-year time frame forces these decisions," she added.
Occasionally, a project is extended, if executives deem it
important and there's not a natural home elsewhere at Google. Ara,
the modular smartphone, recently was granted an extension, and a
market test is planned in Puerto Rico this year.
Dr. Dugan is stricter when it comes to project leaders. Dr.
Gabriel left last year when his two years were up.
Limited tenure can mean people don't worry about climbing the
Google career ladder, Dr. Dugan said. It also can create a sense of
urgency: each week is about 1% of a leader's time in the group.
Dr. Gabriel recalls trying to sign a contract in a few days with
a vendor to make Ara prototypes. Google typically takes up to four
weeks to certify a vendor, but Dr. Gabriel persuaded managers to
eliminate some steps and completed the deal in 48 hours.
Advanced Technology and Projects hires specialists, and
quickly--Dr. Dugan says her record is under five hours from
interviews to job offer. Google typically takes weeks or months to
hire generalists who can stay for years.
Write to Alistair Barr at alistair.barr@wsj.com
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