Google's Schmidt: More US Innovation Needed

— -- Many U.S. companies and industries will have to shift their focus and embrace a "new online lifestyle" in order to stay competitive, Google's CEO said Monday.

Many industries, including newspapers and music labels, have adapted slowly to the Internet, Google Chairman and CEO Eric Schmidt told the Economic Club of Washington. The Internet will bring even more changes in the coming years, as users increasingly move from traditional to cloud computing, he predicted.

He called the move to cloud computing, where a user's information is kept on servers somewhere else, "a permanent shift" that will have profound implications for many businesses.

"Most incumbent [businesses] blow transitions," he said. Information in newspapers has never been in more demand, he said, but people are getting that information in ways that doesn't create revenue for newspaper companies.

Schmidt noted that the Dow Jones Industrial Average had 12 companies in 1905. Only one of them is still operating today, he added.

Schmidt urged audience members to embrace competition and open systems. Control and exclusivity in business settings will be replaced by speed and innovation in coming years, he said.

"Get that information out there, hang it all out, compete where you can," he advised. "Try to use systems that encourage people rather than prevent people."

He encouraged businesses and other organizations to embrace an information-sharing model. "People have no patience any more to wait, they want information now," he said. "If you're a scientist and you hold your [research] for six months in order to publish it, you're doing everyone a disservice. You should publish your initial results today."

Schmidt talked about his company's attempts to innovate, including allowing engineers to use 20 percent of their time to work on projects of their choosing. Many of those experience end up being important projects for Google, he said. "Part of [Google's success] is creating more luck," he said.

Success also needs a positive environment and encouragement for employees to be more creative and innovative, he added.

"It is possible to build a culture around innovation, it is possible to build a culture around leadership, and it is possible to build a culture around optimism," Schmidt said.