The NYT Digital Domain column today points out an important source of competitive advantage for Google, Google's hordes of PhD's.
But the article unemphasizes an important point. You can't build a culture of innovation by just hiring a bunch of bright people. You need to allow them to do great things. Many companies hire top talent, but then isolate them in research group in a corner of the company, away from the product teams. In a misguided effort to minimize risk, innovation is crippled.
At Google, the PhD's are integrated into the development teams. This makes the culture look like one big research lab, focused on innovation. People have the autonomy, authority, and responsibility necessary to get things done. Google doesn't just hire great people; it lets great people do great things.