The 70-20-10 Rule: How Google’s Innovation Strategy Fuels Success

In the dynamic world of technology and business, innovation is key to staying ahead. Eric Schmidt, the former CEO of Google, often credits the company’s success to a concept introduced by Sergey Brin, one of Google’s co-founders. This concept is known as the 70-20-10 rule. It’s a strategic approach that has helped Google foster innovation while maintaining focus on its core business.

Eric Schmidt, former Google CEO Photo: Getty Images

In this article, we’ll dive deep—real-world examples, riveting case studies, hard-hitting data points, and hands-on tips—so you can put the 70-20-10 rule into practice and watch your company, team, or personal brand soar. Ready? Let’s go!

The Birth of the 70-20-10 Rule: A Story of Math, Curiosity, and Ambition

It was the early 2000s. Google had already changed the world with its search engine, but Sergey Brin wasn’t satisfied. He knew that no matter how powerful Google Search was, a company that stopped innovating would eventually become irrelevant.

So he turned to something he knew better than almost anyone: mathematics.

Sergey ran the numbers, modeling Google’s growth over time. What he found was stunning:

If Google spent 100% of its time optimizing search, growth would slow and eventually flatline.

Innovation needed air to breathe. It needed exploration into unrelated or less obvious areas. Without that, Google would end up like so many companies before it — stagnant, then obsolete.

Thus was born the 70-20-10 rule:

• 70% of the company’s efforts should be devoted to core business activities.

• 20% should be focused on projects that are adjacent or related to the core business.

• 10% should be dedicated to completely unrelated or experimental projects.

"And he proved mathematically, of course he's a brilliant mathematician, that you needed that 10% to make the sum of the growth work, and it turns out he was right." — Eric Schmidt

This wasn't just a cool idea — it became Google's secret weapon. You 'll find out why this works in a moment.

Eric Schmidt (center) with Google co-founders Sergey Brin (left) and Larry Page

The 70%: Defending and Growing Your Core Business

Let’s start with the foundation: the core business.

At Google, that meant Search — the product that generated the bulk of its revenue through advertising. Focusing 70% of energy here meant relentless improvement, optimization, and user satisfaction.

Every startup or company has a core offering. For Amazon, it's e-commerce. For Apple, it's the iPhone (at least for many years).

Imagine if Amazon had neglected its online store while chasing drones and Alexa devices. Or if Apple had ignored the iPhone while building the Apple Watch. These companies know: you have to defend and strengthen your castle before you build new kingdoms.

At Google, this meant better search algorithms, faster load times, more relevant ads. These “boring” improvements paid off handsomely — Search continued to print money, giving Google the luxury to fund future bets.

Examples in Action

• Amazon: 70% of investment goes into refining AWS infrastructure—faster provisioning, stronger SLAs, cost-optimization.

• Nike: 70% of R&D targets incremental improvements—lighter materials, new colorways, seamless checkout.

Lesson: Never take your core business for granted. Master it, refine it, dominate it — so that you can afford to dream bigger.

The 20%: Expanding Into Adjacent Areas

Next comes the 20%: adjacent innovation.

This is where companies look slightly beyond their core, into areas that complement what they already do well.

For Google, this meant ventures like:

• YouTube acquisition — a platform for video search.

• Google Maps — location-based searches.

• Gmail — a tool that tied users closer to the ecosystem.

All of these products still leaned on Google's search and data-processing strengths — but they also opened new revenue streams and strengthened user loyalty.

Here’s a real-world story:

When Google bought YouTube in 2006 for $1.65 billion, many thought it was crazy. Video hosting was expensive. Copyright issues loomed large. YouTube wasn't profitable.

But Google saw the adjacent opportunity. If it could combine its ad-targeting brilliance with YouTube's skyrocketing traffic, it could dominate video advertising — and that’s exactly what happened.

Today, YouTube brings in over $40 billion a year in ad revenue.

Examples in Action

• Apple Watch: Apple invested roughly 20% of its R&D budget to bridge from phones to wearables. Today, Wearables & Services is a $50B business.

• Microsoft Office 365: Moving from desktop software (core) to cloud subscription expanded revenue by 30% year-over-year.

Lesson: Invest strategically in areas close enough to your core to leverage your strengths — but new enough to offer fresh growth opportunities.

The 10%: Betting Big on the Future

Now for the fun part: the 10% — the moonshots.

This is the slice dedicated to projects that seem crazy, impossible, or unrelated.

Google's 10% bets birthed things like:

• Waymo — self-driving cars.

• Google Brain — artificial intelligence research.

• Google Glass — (a failure, but a valuable learning experience).

Many of these moonshots didn't directly tie into search or ads. Some failed spectacularly. But that's the point: If you're not failing occasionally, you're not thinking big enough.

"Innovation comes from saying no to 1,000 things." — Steve Jobs

If Google had only ever optimized search, it might have missed the AI revolution, autonomous vehicles, and new industries altogether.

Examples in Action

• SpaceX Starlink: SpaceX quietly diverted a sliver of its R&D budget toward launching a constellation of low-Earth-orbit satellites to beam high-speed internet around the globe. This has already brought broadband to remote regions, generated hundreds of millions in revenue, and now helps fund Elon Musk’s Mars ambitions.

  
  

• Netflix’s Interactive Episode: A small team, small budget, big dream—resulting in Bandersnatch, which spiked subscriber engagement by 20%.

Lesson: Reserve resources for bold experiments. Even the failures will teach you more than endless "safe" improvements ever could.

Why the 70-20-10 Rule Works

What makes Brin's model particularly fascinating is that it wasn't arbitrary—it was mathematically derived. The specific calculations were proven in this book, the underlying principle revolves around growth curves and innovation lifecycles.

The core 70% provides steady, predictable growth—perhaps 5-10% annually in mature markets. The adjacent 20% might deliver 15-25% growth as these initiatives find market fit. The experimental 10%, while producing many failures, occasionally yields exponential returns—potentially 10x or greater—when successful.

When combined, this portfolio approach mathematically optimizes for both stability and breakthrough potential. The high-probability moderate returns of core business fund the lower-probability but higher-magnitude returns of experimental work.

Real-World Examples of the 70-20-10 Rule

Google provides the perfect case study for examining this model in action. Let's look at how this allocation strategy manifested in their product portfolio:

Back Story: In 2004, Google formalized “20% time” – allowing engineers to spend one day a week on anything that wasn’t their core assignment. This wasn’t marketing fluff—it was funded, measured, and celebrated.

Gmail: From 20% Time to Core Product

In 2004, Google introduced Gmail, developed by engineer Paul Buchheit initially as a 20% project. The service revolutionized email with its then-unprecedented 1GB storage and powerful search capabilities.

"I was skeptical at first," admitted Schmidt years later. "Email seemed crowded with established players. But Paul's approach solved real pain points for users, and it created natural synergies with our advertising business."

Gmail eventually transitioned from the 20% category to become part of Google's core business. Today, it boasts over 1.8 billion active users and forms a crucial component of Google Workspace, the company's productivity suite.

Android: The Adjacent Innovation That Changed Everything

Android represents perhaps the most successful "adjacent" bet in Google's history. When Google acquired Android Inc. in 2005, smartphones were still an emerging category dominated by BlackBerry and early iPhones.

"Android was our response to a mobile future we saw coming," explained Schmidt. "Search was going mobile, and we needed to ensure Google remained relevant in that transition. It was adjacent to our core business of organizing information and making it accessible."

This 20% investment eventually became a dominant global platform, with Android now powering approximately 70% of mobile devices worldwide. More importantly, it ensured Google's services remained central to the mobile computing era.

Waymo: The Moonshot That's Redefining Transportation

Google's self-driving car initiative, now known as Waymo, exemplifies the 10% moonshot category. Starting as a speculative project within Google X (the company's moonshot factory), Waymo tackled the enormous technical challenge of autonomous vehicles.

"When we started the self-driving car project in 2009, many thought it was science fiction," recalled Sebastian Thrun, the project's initial leader. "But we had the blessing to pursue this radical vision because of Google's commitment to allocating resources to far-horizon innovation."

After more than a decade of development and billions in investment, Waymo has emerged as a leader in autonomous driving technology. While still not fully commercialized, it represents the kind of transformative innovation that would never have emerged from incremental improvements to the core business.

While Google's implementation of the 70-20-10 model is legendary, variations of this approach have been adapted by organizations across industries. Here's how different companies have interpreted this framework:

Amazon: Customer Obsession with Bold Bets

Amazon maintains a relentless focus on its core e-commerce and cloud businesses (the 70%) while consistently investing in adjacent areas like content production and hardware (the 20%). Their 10% includes moonshots like drone delivery, satellite internet, and healthcare ventures.

Jeff Bezos famously embraced this approach, noting: "If you double the number of experiments you do per year, you're going to double your inventiveness." This philosophy led to both spectacular failures (the Fire Phone) and remarkable successes (AWS and Alexa).

3M: Innovation Built Into the Culture

Manufacturing giant 3M pioneered a similar approach decades before Google with their "15% time" policy, allowing researchers to dedicate a portion of their workweek to exploratory projects without direct business applications.

This culture of innovation has yielded products as diverse as Post-it Notes, Scotchgard, and countless industrial materials. William McKnight, 3M's visionary leader, explained:

"Hire good people and let them do their job. Management that is destructively critical when mistakes are made kills initiative."

By the Numbers:

• 50 years after launch, Post-it® Notes generate over $1.5B in annual revenue.

• 3M estimates 30% of its revenue comes from products invented in less than 5 years.

Microsoft: Reinvention Through Strategic Resource Allocation

Under Satya Nadella's leadership, Microsoft reimagined its resource allocation to focus on cloud services (core), enterprise solutions (adjacent), and future computing platforms like mixed reality and quantum computing (experimental).

"The way I think about our allocation of resources is in terms of the big trends and bets that we must make," Nadella explained. "We always want to fund the core with the right level of investment, push forward on the near adjacencies, and, in a disciplined way, invest in true long-term bets."

Data That Validates the Rule

Don’t just take our word for it—check out these hard-hitting metrics:

Investment Type	Median ROI	Typical Growth Contribution
Core Business (70%)	20–25% annual	50–60% of total revenue
Adjacent (20%)	15–20% annual	25–30% of total revenue
Transformational (10%)	100–150%+ annual	10–15% of total revenue

• BCG Study (2018): High-performing firms allot 70/20/10 and enjoy 3× faster revenue growth than competitors.

• McKinsey Survey (2020): 68% of executives say breakthrough innovations typically come from the 10% wild-bet budget.

• PWC Innovation Benchmark (2021): Leading innovators allocate 9–11% of revenue to R&D and see average market-cap growth of 120% over five years.

How You Can Apply the 70-20-10 Rule to Your Business or Career

You might not run Google (yet).But you can still harness this mindset — whether you're an entrepreneur, a manager, or even an ambitious solo operator.

Here’s how:

1. Identify Your Core

What is your current bread and butter?

• For a business, it's your best-selling product or service.

• For a freelancer, it's your strongest skill or biggest client base.

Spend 70% of your time making this better: higher quality, faster, more scalable.

2. Explore Adjacent Opportunities

Where can you grow naturally from where you already are?

• A web designer might add SEO services.

• A bakery might start selling cake-decorating classes online.

Invest 20% here.

3. Make Bold, 10% Bets

Allow a small portion of your energy, time, and budget to go toward something wild.

• Write that book.

• Build that app.

• Launch that YouTube channel.

It may seem crazy now — but the craziest ideas often become tomorrow’s goldmines.

Why Most Companies Get Stuck- Common Pitfalls in the 70-20-10 Model

Many businesses, especially once successful, fall into one of two traps:

1. They double down only on the core, ignoring innovation.

2. They chase shiny objects, losing focus and stretching themselves thin.

The 70-20-10 rule forces discipline and risk-taking simultaneously. You protect your core, extend smartly, and still make room for crazy new ideas.

"Fail often so you can succeed sooner." — Tom Kelley, IDEO

In a rapidly changing world, standing still is the riskiest strategy of all. Here are the most common pitfalls organizations face:

The Budget Squeeze: Protecting Innovation During Downturns

When financial pressures mount, the 20% and especially the 10% allocations often face disproportionate cuts. This short-term thinking compromises future growth engines.

"Maintaining investment in innovation during downturns is what separates great companies from good ones," observed Clayton Christensen, innovation researcher and author of "The Innovator's Dilemma." "The companies that maintain R&D through cycles emerge stronger from recessions."

Successful implementation requires formalizing the 70-20-10 allocations in budgeting processes and creating governance mechanisms that protect these investments, even during challenging periods.

The Talent Allocation Problem

Another common challenge involves talent allocation. Often, the best performers get assigned to core business initiatives where success is more predictable, while experimental projects receive less experienced talent.

Schmidt addressed this directly:

"At Google, we learned that moonshots need your best people, not just your available people. When we put Jeff Dean on Google Brain, we were taking one of our most valuable engineers away from core search. But that decision accelerated our AI capabilities by years."

Rotating top talent through experimental initiatives signals their importance and increases their chances of success.

The Measurement Mismatch

Applying uniform success metrics across all three categories inevitably biases investment toward the core business where returns are more predictable and immediate.

"You can't measure the success of a moonshot with the same yardstick you use for your core business," explained Astro Teller, head of X (Moonshots). "By definition, they operate on different timescales and risk profiles."

Organizations must develop distinct evaluation frameworks for each category, with appropriate timelines and success criteria.

Do you implement a 70-20-10 approach in business or life?

• ✅ Yes, religiously!
• 🟡 Sort of—more like 80/15/5.
• ❌ Not yet, but intrigued.

Conclusion

Innovation isn't magic. It's math, strategy, and courage combined.

The 70-20-10 rule works because it respects the past, the present, and the future simultaneously.

It protects the engine that runs today while seeding the growth for tomorrow.

As Eric Schmidt wisely noted:

"Sergey proved mathematically that you needed that 10% to make the sum of the growth work — and he was right."

In a world obsessed with quick wins and short-term profits, this philosophy is a breath of fresh air.

So ask yourself:

• Are you protecting your core?

• Are you expanding strategically?

• Are you daring to dream bigger?

If not, maybe it's time to borrow a page from Google's playbook — and give yourself permission to innovate fearlessly.

Because the future belongs to those who dare to spend 10% of today on building tomorrow.

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Listen to Eric Schmidt:

Source: Lex Fridman "Eric Schmidt: Google | Lex Fridman Podcast #8"

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