“If you are not doing some things that are crazy, then you are doing the wrong things,” Google co-founder Larry Page had once said.
Google’s decision to dismantle its current operating structure has created a separate funnel for its innovative and futuristic projects, in yet another indicator that the firm doesn’t recognise convention.
Don’t fix something that ain’t broken some say, but try telling that to Page and fellow Google-founder Sergey Brin. The importance of being nimble is not lost on the company, something that many large technology corporations failed to achieve with disastrous consequences. The corporate restructuring—creating an umbrella company called Alphabet—is an attempt at underlining the importance of a focused approach, in what many regard as the world’s most innovative company.
Google, to be now headed by new CEO Sundar Pichai, will be housed under Alphabet which will act as the parent company that operates smaller firms under its ambit. Each of those will have a separate CEO. Alphabet will include X-Labs, which incubates new efforts like Wing, the drone delivery project, and the life sciences initiative among a clutch of highly innovative themes. “We are also stoked about growing our investment arms, Ventures and Capital, as part of this new structure,” says Page in his latest blog, while announcing the new structure.
The restructuring will give Google the much desired space to focus on internet products, creating a fence around all futuristic talk that may have sometimes disturbed employee focus or gave concerns to investors. Android, YouTube, search and ads will continue to remain an integral part of Google, and Pichai and his team can concentrate on developing them further.
On the other hand, Page and Brin will now have the opportunity to chase opportunities in life sciences, X Labs and Calico, all of which have the power to write history. Under life sciences, the company is driving research on blood glucose measuring contact lenses, with X Labs it is chasing driver-less cars and then with Calico, it is in search of life longevity.
Take for instance, Google’s driver-less car project. Its autonomous driving technology banks on advanced data modelling capabilities and high resolution Google maps. According to an automobile expert based out of Michigan, if GM were to mimic the same, it would have to develop or purchase the software capabilities. Google is getting to a stage where cutting across categories is not much of a deal anymore. Projects like these will now get freed up, with Google under a whole new roof. The new companies that will arrange themselves under Alphabet will have greater liberty to take risks, and fail fast or succeed big.
Wall Street has to be happy with this as it gives a better view of what goes on at the company. Google was immediately up 7%, to $708, in trading after the announcement came through. Analysts have raised a toast to the move, which they expect may result in more financial disclosures. According to Page’s post, Alphabet will eventually report Google’s earnings separately and will also replace Google as the publicly-traded company on the Nasdaq stock exchange. All shares of Google will be converted to Alphabet shares eventually. Company shares will continue to trade on Nasdaq under the same GOOGL and GOOG ticker symbols.
From the fourth quarter of this year, Alphabet will release financial results for Google Inc, as well as for the parent company. Some of the analysts see this as a window for more disclosures in the future, such as breaking out results for YouTube or any other new initiative.
Google had posted $17.7 billion in sales last quarter, registering a profit of $4.3 billion. About 90% of the revenue came from advertising sold through search, Android and YouTube. For most companies on this planet, this would have be an over-achievement and no tinkering would have been thought of, for fear of upsetting the momentum. But then Google is not just another company.
“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes,” Page wrote in his blog. “But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.” Can’t argue with that, can you?