Letter Perfect

Google Reorganizes Itself under Alphabet

Google_Alphabet_lWhen a company’s name becomes a common verb, it could be difficult moving the firm’s focus in new directions.

Yesterday, Google announced it would reorganize itself under the corporate name Alphabet, which will be the parent of a diverse set of technology companies. Google’s co-founders Larry Page and Sergey Brin will become Alphabet’s CEO and president respectively.

The classic Google services will become one of seven Alphabet subsidiaries. Google, which will have former product chief Sundar Pichai as its CEO, will retain responsibility for online services such as search, ads, maps, Gmail and YouTube as well as Android, and will be Alphabet’s key profit centre.

The other Alphabet subsidiaries are Calico, a biotech company researching issues related to ageing; Fiber, a firm rolling out fibre-based broadband in select cities; Nest, a developer of smart home devices; Sidewalk, a company looking into developing smart cities; and investment firms Google Capital and Google Ventures.>

As Alphabet’s Google subsidiary will continue to maintain the key consumer-facing services, users aren’t likely to notice the corporate changes. The eponymous Google search brand is expected to continue as Alphabet’s key trademark for years to come.

However, the company changes are more than an issue of semantics. The new structure provides greater sovereignty to each subdivision than the groups had previously, raising them above “science project” status to true profit-and-loss centres with greater visibility. There will be a requirement for long-term planning and eventual financial returns, assuring investors that even moon-shot ventures are responsible for the bottom line over time.

Google was founded in 1998 and has become synonymous with search, services and experimentation. New products come, some stay and some go. The company’s “20 percent time” rule provided employees with time to spend on side projects, ensuring that Google continued to innovate.

The formation of Alphabet as a complex and potentially bureaucratic conglomerate suggests a company that’s growing up and beyond its original roots. There’s always at least a dose of politics in all major reorganizations, and it would be surprising if the increased separation and isolation of units weren’t at least partly prompted by some internal pressures and personnel preferences.

There’s a risk that the company’s new legal structure will create silos, with sharing of information across Alphabet’s subsidiaries becoming both legally and practically difficult and resulting in lost synergies. There’s also danger that innovative cross-corporate business models lose support should one subsidiary be hesitant to sacrifice itself for another.

The company previously known as Google is now a holding company, which could allow it to explore new business areas and possible spin-offs. The founders are moving beyond search, and there’s the possibility the firm can reinvent itself when its original purpose runs dry. It’s readying itself for long-term changes — something not many companies have the vision to do.

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