New Parent Company Alphabet is Google’s Bet on Small Startup Culture

This week, Google made a surprising and bold move. The company that once pledged to “do one thing well” — namely, help us search the web — but which has pursued a multitude of interests ever since, is now the subsidiary of a new parent company named Alphabet.

In a lengthy letter, Google co-founder Larry Page wrote that the aim of the move was to make a “cleaner and more accountable” collection of companies. Alphabet will be headed by Page and his co-founder, Sergey Brin, and each subsidiary will be given its own CEO. The newly slimmed down Google will be led by engineering supremo Sundar Pichai. On the financial side, publicly held shares in Google Inc. will be directly converted into Alphabet equity. In New York, said shares rose 4.1 per cent on the day that the news broke.

Although apparently straightforward, these changes do come with risks. With a network of CEOs in control, the values held by Page and Brin might not be transferred to the companies under their control. But they are clearly not afraid of losing control — in fact, Page states in his letter that he wants “businesses prospering through strong leaders and independence.” These two pioneers no longer see themselves as business owners. Rather, they are “conglomerateurs” — magnates who seek to amass an arsenal of fledgling technologies that will shape our lives in years to come. You can think of Alphabet as the GE of tomorrow’s world.

For many of Alphabet’s newly independent subsidiaries, however, there is one other worry. These experimental projects have thus far been free to operate, unprofitably, under the shield of Google. Now, they will have to fend for themselves in the open. Of course, Alphabet will continue to provide financial support, but there is the danger that self-driving cars and internet-beaming balloons might flounder after being cut off from the successful culture of the mothership Google.

Despite the apparently drastic changes, I think the creation of the Alphabet structure is a brilliant move. How dearly so many other CEOs would love to split their giant unibody corporate organizations into small teams with startup-like enthusiasm. In time, Alphabet’s divisions will undoubtedly drift away from one another, and there might be teething problems. But given time, Page and Brin should be left with a family of firms that will stand squarely on their own two feet.

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