Hungry beasts and ugly babies: Why Facebook’s Aquila failed and Alphabet’s Project Loon succeeded
In the past few weeks, two announcements have been made with respect to the ongoing efforts to provide universal low cost access to the internet. On 27th June, Facebook announced that it was shutting down Aquila, its project to deliver connectivity to rural and unconnected places through solar-powered drones. Exactly two weeks later on 11th July, Alphabet announced that they had succeeded where Facebook had failed, successfully graduating two of their moonshot projects from X: Project Loon and Project Wing. Project Loon aims to deliver the Internet to rural and unconnected places using high altitude balloons. Project Wing aims to change the way goods are delivered around the world using drones.
Facebook’s Aquila and Alphabet’s Project Loon set out to solve the same problem: delivering global connectivity. They also proposed very similar solutions: high altitude vehicles beaming the Internet down to Earth. So why has Alphabet succeeded, whilst Facebook has failed?
I do not believe that the answer lies in the different technologies each company is using. Instead, the answer can be found at a more fundamental level, in how the two companies are managed and their approach to innovation.
Facebook has traditionally relied on ‘hackathons’ to generate and develop new ideas. Hackathons are great for developing novel solutions to specific problems, but they do not provide the time or space for people to identify the problems that they want to solve, especially when those problems are not directly linked to their day jobs. For this reason Facebook’s hackathons have delivered value-additive solutions that optimise Facebook’s core digital advertising business, but perhaps not been as successful for breakout innovation.
Facebook’s first attempt to set-up a system that would lead to truly new and innovative ideas was called Creative Labs. It was built as a start-up within Facebook and spawned ideas such as Slingshot, Riff and Rooms. However, in retrospect few of its ideas were truly innovative and most were poor replicates of other ideas on the market, leading to Facebook closing the division in 2015 after just two years.
More recently in 2016, Facebook announced the launch of a new hardware lab called Area 404. This is the company’s next attempt to create a lab that prototypes new ideas, such as Aquila, Virtual Reality and next-gen servers. The problem is that all of the ideas that are developed in Area 404 are aimed at helping Mark Zuckerberg reach his ten-year roadmap. This reduces personal ownership of the problems that the employees are trying to solve because those problems have been supplied top-down. Not only this, but Mark Zuckerberg is not allowed in to Area 404. The very person responsible for setting the innovation unit’s agenda is not able to see the progress first-hand.
Pixar’s founder, Ed Catmull uses an analogy of “the hungry beast and the ugly baby”. The ‘beast’ is a large group that needs to be fed an uninterrupted diet of new material and resources in order to function. For me, this is Facebook’s core business, which generates over $40b in annual revenues. The ‘ugly baby’ is an awkward, unformed, vulnerable and incomplete idea. This is a gnarly problem and solution that someone comes up with before it undergoes rigorous testing to try to kill it. Unlike Facebook, Alphabet understands how to produce and nurture ugly babies.
Let’s start with the production of ugly babies. Alphabet has famously always had a policy called “20% time”, where every employee is encouraged to spend up to 20% of their time working on what they think will most benefit Google. As Larry Page and Sergey Brin highlighted “this empowers them [the employees] to be more creative and innovative.” It enables every employee to take ownership of problems they observe and create novel solutions for them, rather than expecting problems to come to them from management. There has been criticism that the 20% policy doesn’t actually exist at Google, but as Lazlo Bock explains, the important thing is that the idea exists.
Ideas do not come from individuals working in isolation, they come from people talking to each other. This is why the 20% policy is so important. It creates a culture of ideas, experimentation and of people communicating across different teams. The problem with setting up a single innovation team is that they typically exist in isolation, which means that they never benefit from talking with people across the business and bringing together a diversity of skillsets. At Google, they produce ugly babies together.
The value that incubators and ventures teams bring is in the nurturing of those babies. The focus of these teams should be about taking the ideas that come out of 20% time and providing the protection needed to allow them to grow into fully formed ideas that can eventually be spun off into independent businesses.
This is where Alphabet’s X comes in. The purpose of X is to create the next Google, but we know from Clayton Christensen that “the worst place to develop a new business model is from within your existing business model”. So, as part of the restructuring of Google into Alphabet in 2015, the company began reporting its ‘other bets’ separately to Google so that investors were able to see what the company was spending on moonshot projects versus the core advertising business. This separation allows Alphabet to feed the beast whilst nurturing the ugly babies at the edge of its business.
A number of projects have now successfully graduated from X in addition to Loon and Wing, such as Google Watch, Verily (Life Sciences) and Project Tango. However, this has not been a quick process. X has a saying: “do the hardest thing first”. This inevitably leads to killing the vast majority of ideas, but the projects that do survive are incubated over a number of years. Alphabet recognises that it takes time to nurture its ideas, its ugly babies, to get to a point where they can operate as independent businesses.
I believe that there is something we can all learn from the difference in Facebook’s and Alphabet’s approaches to innovation.
Setting up a separate innovation team is not enough to drive innovation in businesses. The problem with entrusting a single separate team with all of a company’s innovation, is that it creates a divide in the business. The responsibility of identifying problems and creating solutions ends up falling to a small number of people who are not engaged with the rest of the business and its problems.
Companies must develop a culture that empowers everyone to identify problems, create solutions and communicate these with each other. This creates a culture of innovation that everyone takes ownership in. If anyone can come up with an idea, anyone can become a part of the incubator or ventures team, making it an extension of the business rather than a separate entity.
If Google had followed Facebook’s approach to innovation, today they would have a highly optimised search engine with a handful of side projects that had never quite caught-on. Instead they have Gmail, Google Maps, Waymo, Android and many other new streams of business that mean one day they may no longer rely on advertising for 86% of their revenues. If Facebook also wants to enjoy long-term success by diversifying its business and reducing its reliance on advertising, it will need to work out how to feed its ugly babies.
