In 1998 it wasn’t such a stretch for Google to position itself as an anti-corporate entity ready to shake up the technology world. The company did just that, of course, to the point where its very name became synonymous with Web search. Seventeen years and tens of billions of dollars later Google has morphed into a massive global entity juggling its cash-cow search-and-advertising efforts with world-changing “moonshots” to deliver driverless cars and drone-based delivery services.
No more. Larry Page announced on Monday that he and co-founder Sergey Brin have reorganized Google into a new collective of companies called Alphabet. Essentially Page and Brin have put Google on a diet, trimming out some of the more fanciful endeavors they added over the years so each of these projects can develop independently of the larger Google brand. That means Google’s Calico anti-aging biotech unit, Google X startup incubator, Nest Internet-connected devices and several other initiatives will get their own CEOs, who can run things as they see fit. Google X is also known as the company’s “moonshot factory” because its mission is to move any idea or technology forward 10 times beyond its current state. Page and Brin become Alphabet’s CEO and president, respectively.
Meanwhile, Sundar Pichai takes the helm of Google, the largest entity within Alphabet, with the goal of advancing that company’s biggest moneymakers: search, advertising, the Android mobile operating system, YouTube, apps and maps. Pichai joined Google in 2004 and most recently served as the company’s product chief.
In an effort to find its “Act II,” Google has shrewdly used the money generated by its core businesses to invest in new technologies and projects over the years, says Semil Shah, a venture capitalist and general partner at Haystack Fund. “Today, Google is a very large place, and governing it smartly likely posed a challenge,” he says. Alphabet’s structure puts the company “more operationally on-par with its main competitor—Facebook—which has shown tremendous agility in buying and integrating important, new, global networks into its framework, such as Instagram and Whatsapp.”
Page and Brin are now ostensibly free to play a larger role in their company’s more cutting-edge projects. Perhaps more significantly, the plan to install CEOs to run each of these projects as individual business units gives these executives freedom in the way they hire, fire and motivate people, says Rob Coneybeer, founder and managing director of venture firm Shasta Ventures.
These leaders can also be more aggressive in how they compensate employees taking the biggest risks in order to deliver the most innovative results. It’s not easy to offer one employee millions and millions of dollars to build an autonomous car without creating ill-will among the rank and file working on more mundane efforts that nonetheless drive lots of revenue, Coneybeer says. “In any large company it’s all about motivating and empowering people to work,” he adds. “You want to make sure all of the incentives are aligned properly.”
That goes for Pichai as well. Alphabet’s formation is about risk taking, but Google’s restructuring was also essential to keeping top talent and spurring them to reach for new heights. Retaining people like Pichai and others is going to be a big issue for Google, if it isn’t already, Coneybeer says. It’s just the nature of what happens to a company when it reaches a certain level of maturity and cultivates the kind of experience and knowledge that are in demand, he adds.