Google has been a Silicon Valley pioneer since its inception in 1998, spearheading initiatives in fields ranging from longevity research to high-speed fiber communications to the exciting new era of the "smart home."
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But its boldest move yet might be this month's announcement that it would restructure Google into a parent company called Alphabet, under which its major divisions will operate as distinct companies.
Let's take a look at three reasons Google decided to shake things up, and why other companies might want to take a cue from the search engine behemoth in Mountain View, California.
1. Independence and innovation.
Google's new Alphabet structure divides the company into a handful of distinct entities:
- Google X (the company's so-called "moonshot" projects are the most out-of-the-box ideas, such as driverless cars and Google Glass),
- Fiber (high-speed internet),
- Google Ventures (venture capital),
- Google Capital (long-term tech investment),
- Calico (studying ways to increase human lifespan),
- Nest (smart home products including smoke alarms, thermostats and cameras),
- Google itself, with its core search business as well as bellwethers like Android, YouTube, and Maps.
Kris Duggan, CEO of BetterWorks, a Silicon Valley-based software company aimed at helping organizations, says that "Altering the company structure to accommodate independent units equipped with independent leaders, will allow for even more diverse and innovative ideas and projects in the future," he says.
2. Brand confusion/distinction.
Peter LaMotte, senior vice president and chief of digital engagement at Levick, a communications firm with offices in New York, Chicago and Washington, D.C. said:
"The reorganization also serves to reduce risk by creating barriers between the brands," "Should one business suffer a crisis or reputational disaster, it is far less likely to be associated with the business engine that will remain under the Google name. This separation allows for more risks to be taken in emerging business lines now that direct association with Google is reduced."
3. Focus on the big picture.
Lastly, and perhaps most importantly, a restructuring may become necessary to keep management focused on big-picture ideas without getting bogged down in the nitty-gritty.
Anil K. Gupta, a business professor at the University of Maryland, thinks this is especially relevant to Google.
"In 2005, Microsoft consolidated seven divisions into three: product platforms and services, the business division and an entertainment and devices division," Gupta says. "Three years later, it reorganized the platforms division further, separating Windows from online services. Microsoft constantly faces the question: 'How can you regroup to operate most efficiently?'"
Whether efficiency, innovation or the brand is at the heart of a reorganization,
it's not just the name that's changing – it's the company itself.