Google Australia lost two key people over the past couple of weeks – Lars Rasmussen, one of the developers of Google Maps and Google Wave, and Kate Vale, their first employee in Australia. It seems like the main motivation in both cases was the possibly premature death of Wave, but Vale made some comments that are instructive:

“I think Google has become more corporate over the years. When I started and when Lars started it was a much smaller company and it was a lot easier to get things done but companies change as they grow.”

Vale said that when companies were small “you really get to shape an organisation and you have a say in what goes on, but as a company grows it becomes harder to do that … things get slow”.

This illustrates how hard it is to remain innovative while you grow. Most new firms are founded on an innovative idea, so even if they don’t have an explicit innovation strategy, they tend to be at least a little innovative. The question then is: how do they stay innovative as they grow?

The problem is that as start-ups become more successful, they naturally get more structure and bureaucracy. In Silicon Valley at least, the perception still seems to be that at a certain point in the growth cycle, firms need to bring in professional management. That’s why Apple hired John Scully, which led to Steve Jobs leaving in the mid-90s, and that’s why Google hired Eric Schmidt.

In part this is necessary, but it can be incredibly frustrating for the early hires who were attracted to the excitement and innovation present when launching a business. This is certainly reflected in Vale’s quotes above. How do address this? Google’s approach has been to ensure that the structures put in place to support growth include mechanisms for encouraging innovation. Here is what head of engineering Alan Noble says in the same article:

He said working at Google today was “exciting as it ever has been” and programs like Google’s 20 per cent time allowed employees freedom to innovate and explore their own ideas.

“I don’t think it’s reasonable to equate getting big … [with] becoming corporate or becoming slow,” he said in a phone interview.

“If you want to build an application that can reach tens of millions of users, I can honestly say that there would be no better company on the planet than Google to take that idea.”

I think that’s mostly true. However, there is no way that you can be the size that Google is now and still be quick and responsive (at least, I can’t think of any examples of this – can you?). That’s a big part of the reason that most of the new job growth in the US over the past 20 years or so has come from firms that are 5 years old or younger.

In short, I don’t have a great answer to the question of how to best stay innovative while you grow. You have to be aware of the pitfalls, and as you add management structure you have to make sure that you include support for innovation.

But it’s another innovation paradox – the small firms that might be most innovative often don’t have the market clout to get their ideas to diffuse. The firms that are big enough to get ideas to spread might not have ideas worth spreading.