Why was Eric Schmidt suddenly demoted as Google's CEO? There are as many opinions as there are analysts, but I think the reason is clear: Google is worried that it's suffering from Microsoft syndrome, and thinks having Schmidt step aside may be the cure.
What is Microsoft syndrome? There are several symptoms. One is when a tech company becomes so successful in a market and grows so quickly that it overlooks potential new markets. Another is when a tech company gets so large that it becomes increasingly difficult for it to innovate.
To understand why Google has begun to suffer from Microsoft syndrome, you have to take a look back at Schmidt's tenure there. He was hired in 2001, when Google was privately held, still relatively small and run by two brilliant engineers who knew a lot more about Internet search than building and running a successful, profitable company.
Schmidt, who had previously been Novell CEO and Sun CTO, was brought on to bring business discipline and focus, establish a clear business plan and then put it into effect. As he has frequently said over the years, he was brought on to provide adult supervision.
He's certainly done that, and turned Google into a profitable powerhouse that's dominant in search. Without his guidance, it's unlikely that Google would be as successful as it's become.
But on his watch, Google missed the next big thing -- social networking. Facebook, launched in 2004, became a worldwide phenomenon, and according to the Web-tracking site Experian Hitwise, became the most popular site on the Internet for 2010 among U.S. users, with 8.93% of all U.S. site visits, compared to 7.19% for Google. (To be fair, though, if you add in all of Google's sites, they beat Facebook, with 9.85% of visits.) Google's own attempt at social networking, Buzz, was poorly designed and indifferently received, and it's rarely used.
In addition, Google appears to have built up the kind of bureaucracy that stifles engineers and creative professionals. Douglas Bowman, visual design lead at Google, for example, left in 2009 when he found himself spending far too much time debating issues such as whether a border should be three, four or five inches. And he cites an instance in which a Google team had to spend its time user-testing 41 gradations of blue for the color of a Web page.
For many engineers, Facebook has become more attractive than Google as a place to work. And Google is seeing an outflow of those looking to start their own companies, because Google is no longer the entrepreneurial place it had once been.
Schmidt is at least partially responsible for all this, for the very reason he has been able to help build the company into the success it's become. A focus on the right business model and on efficiency tends to overlook potential markets and to build a rigid corporate structure.
All this is not to say that Google has been unable to be innovative and recognize new markets. Its astonishing success with Android shows that's not the case. So the company can't yet be said to be suffering from Microsoft syndrome.
But the top executives at Google were smart enough to recognize that the company was headed in that direction. By moving Schmidt aside and putting Larry Page, Google's co-founder, in charge, the company is returning to its roots. A creative engineer will once again be at the top of the company. Google's hope is that Page will be able to recognize new opportunities more quickly than Schmidt did, and help forestall any potential brain drain.
Of course, engineers aren't always the best CEOs. Still, Google sawthat it had begun to stagnate, and this move is a good first step toward ensuring that won't happen.
Preston Gralla is a contributing editor for Computerworld.com and the author of more than 35 books, including How the Internet Works (Que, 2006).