© 2011 Baylor University
Innovation in Silicon
Valley: The Case of
Todd A. Finkle
In May 2009, Sergey Brin and Larry Page, co-founders of Google, Inc., were trying to determine how they were going to navigate Google through the worst recession since the Great Depression. Their primary problem was how to maintain the company’s culture of corporate entrepreneurship and innovation in the face of stagnant proﬁts and a host of other issues. Google sought answers on how to increase corporate entrepreneurship and innovation during the worst economic environment that the company had ever experienced.
In May 2009, Sergey Brin and Larry Page, co-founders of Google, Inc., watched Green Day in concert at the famous Shoreline Amphitheatre in Mountain View, California. The brilliant young entrepreneurs had many things on their minds. They tried to determine how they were going to navigate Google during the worst recession the United States had seen since the Great Depression (Willis, 2009). The Standard and Poor’s 500 (S&P 500), one of the most popular indicators of the U.S. economy, had dropped to an intra-day low of 666.79 on March 6, 2009 from an intra-day high of 1576.09 on October 11, 2007 for a collapse of 57.7% (S & P 500 Index, 2009). Worldwide stocks had decreased on average by approximately 60%.
Warren Buffett, Chairman of Berkshire Hathaway and one of the most proliﬁc investors of all time, foresaw the current economic turmoil in early 2008. Buffett stated, “Even though the numbers do not state it, the United States was in for a deep long-lasting recession” (Buffett, 2008).
By early 2009, U.S. retirement accounts also dropped by an average of 40% or $3.4 trillion (Brandon, 2009). Many U.S. retirees saw their pensions cut in half and many were forced to go back to work or rely on their families to support them. Brin and Page had never witnessed anything like this in their young lives. Even the ever successful company they created in 1998, Google, Inc., was feeling the effects of Please send correspondence to: Todd A. Finkle, tel.: (509) 313-7048; e-mail: ﬁnklet2000@yahoo.com. This case is intended to stimulate class discussion rather than to illustrate the effective or ineffective handling of a managerial situation. The company, names, and ﬁnancials are all real.
the crisis. At its low point, Google’s stock price dropped 51.35% from an intra-day high of $713.587 on November 2, 2007 to an intra-day low of $259.56 on November 20, 2008. The stock price picked up momentum recently and traded at $410 as of May 28, 2009. As the young entrepreneurs listened to the Bay Area band Green Day, they pondered their next moves. Google had problems. The company’s primary problem was how to maintain the culture of corporate entrepreneurship and innovation in the face of ﬂat net proﬁts from 2007 to 2008. As a result of this, the ﬁrm had to ﬁre several employees for the ﬁrst time in the company’s history and eliminate products that made no money (Blodget, 2009). Furthermore, employees left for a variety of reasons (e.g., lack of mentoring and formal career planning, too much bureaucracy, low pay and beneﬁts, high cost of living in the area, desire to start their own business, etc.).
In a little over 10 years, Google had grown to a company with over 20,000 employees. If Google wanted to continue its main strategy of growth through innovation, it would have to ﬁnd a way to recruit the best employees and retain them (see Tables 1–3 and Figure 1).
Background of Founders
Google was founded by Larry Page and Sergei Brin, who met in 1995 while they were PhD students in computer engineering at Stanford University. Page was born in Lansing, Michigan on March 26, 1973 and was the son of a computer science professor at Michigan State University who specialized in artiﬁcial...