Have Google reorganised to be a financial conglomerate
or are they still a big data pioneer looking to better the world at a profit?
I must confess (as a guy
who gives my Macbook & iPhone pet names) to being fascinated with Google’s
rise and dominance in the market place. Google is the wacky place where weird
ideas come to life, transform into something great and change the world!.. well
a little bit anyway!... So have the Godfathers of big data succumbed to the
Corporate World and joined the ranks of low innovation cash cow companies that
present a “safe bet” for investors?
It would appear the
media fallout from the big announcement last week suggests that it has but one
thing is still clear; Larry Page and Sergey Brin are still in charge. Their
rising star Sundar Pichai is now CEO of Google inc and is getting the positive
press he rightly deserves. Google clearly have some positive goals in the
restructuring that are consistent with the Google way in my view. The
reorganisation will see a holding company (Alphabet) oversee subsidiary groups
like the profitable Google (Inc) and YouTube, which will all be segregated from
its high risk ventures like Self Driving Cars and storing human DNA in the
cloud. The segregation of Google’s core business and high risk businesses in
spin off subsidiaries present a conglomerate type set up that is arguably
similar to that of Warren Buffett's Berkley Hathaway group.
Whilst ‘Wall Street’ may
be joyful at the greater transparency of seeing the profitable businesses not
carry those high risk ventures that may change the world, the entrepreneur in
me sees a greater benefit in the better use of valuable acquisitions (e.g.
Twitter) that have a corporate identity, brand and culture, which should be
developed, not dissolved into Google’s identity. The flexible nature of what is
proposed by Alphabet/Google leaves me with the impression that not only are
they looking to shore up their over reliance on advertising (90%+ of revenue), the
acquisition ability of the company may diversify into new markets whilst
protecting their core brand assets of Google, YouTube, etc. This will allow
them to innovate as well as acquire in a safer manner.
Its also noted that
Google management in particular has promotional limitations given the prior
centralised structure where Page and Brin were the decision makers on
everything and it ALL went through their office.. IF they are willing to
delegate real power to these new companies that operate under their umbrella,
they have a greater shot at retaining quality management they developed from
junior roles into senior roles that subsidiaries will now have. It also frees
them up for group strategy management which can become very cumbersome
especially if you become diverted and start meddling in the operational affairs
of subsidiaries. Page and Brin’s trust in their talent to manage their
subsidiaries must be well founded and developed with real track records. A majority
of senior management appointed from within increases company longevity once
there is a giver culture environment present (team player, collaborative, value
your peers in get stuff done, etc).
So, with innovation
taking a different seat at the table, it is fair to say that even bullish analysts
are buoyant at the changes due to the increased profitability view. I would be
moderately impressed if they would see this move as part of a larger prize move
on strategy by Google, which in my eyes has the following elements:
- Insulated and “profitable” company brands like Google/YouTube within Google inc can continue the revenue generation wonders whilst having their brands insulated against possible brand failures in the newer and/or high risk ventures.
- Google’s internal promotion culture can take a shot in the arm with the ability to promote executes into spin off companies doing more senior jobs they they would ever have gotten as the old Google. Talent retention at Google will increase.
- An alarming amount of Technology acquisitions are considered failures due to not meeting set goals, unforeseen integration problems and/or failure to create value in post acquisition settings. Google has not got a good track record on acquisitions, so they are rightly wary of them. Afterall, when bought, acquired companies are “Google”, which is a risky premise for Google’s brand should it all go wrong. The new structure mitigates that risk by allowing them to be a stand alone subsidiary as they were pre acquisition. They can be developed with their own brand, culture and business practices or if adding value to Google’s brand, they be integrated into Google inc.
- Google’s transparency and structure will give a better platform for M&A should they want to go down that road. That said, they are innovating internally just fine, which will also benefit from the new structure.
The internal restructure
of Google has allot of important points that are being worked out all over the
internet and beyond. The biggest thing Google need to remember is what made
them great, what will continue to make them great and never loose sight of why
they get up in the morning, which is to make the world a better place with
their products, services and ideas. “Don’t be evil” for Googlers is about being
ethical in achieving that positive impact on the world. If they stick to it,
they may well rise under Page and Brin’s strategic guidance in this new
structure as a revamped Google that will last far longer than anybody thought
it would. What happens next?... thats anybody’s guess.. whats your opinion?
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