Google isn't afraid to shake things up, even when it means overhauling its own company. This week, the technology giant announced it was restructuring itself into a Berkshire Hathaway-like collection of companies, separating its main Internet business from its more ambitious ventures, and having all of these factions live under a new umbrella company called Alphabet Inc. It's a big change, but Google has never been known to play it safe.
"We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes," Google co-founder Larry Page wrote in a blog post. "But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant."
The two drivers behind the restructuring, Page and co-founder Sergey Brin, are now CEO and president, respectively, of Alphabet Inc., leaving Sundar Pichai in charge of Google.
"Page has always bristled at the notion of being an administrator, a bureaucrat," wrote Tom Austin, Gartner analyst. "That’s what he had become as CEO. At heart, he’s an innovator. The reorganization lets him shift most of the worries of being a CEO to Sundar."
Under this new structure, core Google products and services -- like search, Chrome, Google Maps, Gmail, YouTube and Android -- will continue under the Google name, while "moonshot" projects -- like Life Sciences, Calico, Google's X lab and its robotics department -- will operate as separate entities under Alphabet. The goal, along with increased transparency, is to keep focus on innovation while retaining the main offerings that have made Google what it is today.
"It will free up Larry and Sergey to play more with the ideas that they feel are more important and, frankly, more fun," wrote Glenn O'Donnell, vice president and research director at Forrester. "I don't think either of them wants to run a company in the traditional sense. They're two brilliant geeks passionate about a mission far bigger than just running Google."
Google stock spikes
Larry PageGoogle Co-Founder
It's a good move investment-wise too, because with increased transparency comes reduced anxiety on Wall Street, according to Gartner's Austin. This puts less pressure on Page and Brin to cut back on bigger, more uncertain investments. Luckily for them, investors are responding well to the restructure, with Google's stock spiking 6% shortly after the announcement.
An important aspect of Alphabet is that it gives Page and Brin the freedom to innovate via their bigger projects, which include developmentson glucose-sensing contact lenses, self-driving cars, Wi-Fi balloons and efforts to extend human lifespans, to name a few. As Vox reported, by making those bold initiatives separate businesses subsidiaries similar to that of Google, they are legitimizing their importance in the company's overall business plan.
"They’ve separated their smartest creatives (Larry and Sergey) from the day-to-day activities of a CEO and COO," wrote Austin in an email. "They’ve let them retain control (including voting control) but given them the freedom to create, ideate, innovate and revolutionize."
Google for Work
Jonathan Reichental, CIO for the City of Palo Alto, took to Twitter to show his excitement for Alphabet's future, and to praise the announcement as a win for innovation:
This innovation-first approach to business may serve as an example to other tech companies and CIOs of what's possible with some creative thought, according to O'Donnell.
"Hopefully more business leaders, including CIOs, will see the wisdom behind what initially appears to be quixotic insanity," O'Donnell wrote. "Regular business people need to dream more. Dreams are the lifeblood of innovation. Call them crazy, but the crazy people always change the world, not the curmudgeons."
More good news for enterprises: Rather than having to worry about other Alphabet entities, Google's new CEO will be able to focus more specialized attention on his set of products, likely resulting in "more rapid development of the Google for Work suite," according to Reichental.
But what works for one company may not work for everyone else. Or should I say what works for Google may not work for everyone else. So, the question is not only whether other companies should follow suit, but can they?
Farhad Manjoo of The New York Times went so far as to refer to Alphabet as a "template for the next evolution of a modern tech firm," but Austin wasn't so sure that others could keep up.
"Are most companies made of the same stuff?" he wrote. "I’m afraid not. Google marches to the beat of its own drummer."
CIO news roundup for week of August 10
Here are more technology headlines from the week:
- Harvard student Aran Khanna recently lost his internship at Facebook after launching an application that exposed a long-standing privacy flaw. Khanna's application -- suitably named Marauder's Map after a wizard-locating map in the Harry Potter series -- was a Chrome extension that used data from the Facebook Messenger app to chart where users were at the time they sent the messages. “I didn’t write the program to be malicious,” he told Boston.com.
- Apple may be on the cutting edge of technological development, but it still has a ways to go when it comes to diversity. Despite successful efforts to hire more women and underrepresented minorities in the past 12 months, Apple, like other tech companies, is still overwhelmingly white and male. "Some people will read this page and see our progress. Others will recognize how much farther we have to go. We see both," Apple CEO Tim Cook said on the Apple website.
- Twitter is not a good place to get defensive. The popular dating app Tinder had somewhat of a meltdown on Twitter following the release of a Vanity Fair article that criticized Tinder's role in a growing hookup culture. Tinder responded on Twitter with a 30-tweet rant spewing out statistics and self-justifying mantras, sparking ridicule across the Twitter-sphere. Tinder later released a comment stating that it has "a passionate team that truly believes in Tinder."
- The mobile payments industry grew today as Samsung announced the U.S. launch of Samsung Pay at the company's Unpacked 2015 event. The service, originally rolled out in South Korea, is seeking to differentiate itself from Apple Pay and Android Pay with special features compatible with Samsung's newest phones.