AH Alphabet-2

AH Primetime: Google/Alphabet Restructure Could Have Consequences

August 11, 2015 - Written By Justin Diaz

 

In what was likely a shock to many people yesterday afternoon, Google announced that it would be doing some heavy reorganization with the company. This included promoting Google’s Senior Vice President Sundar Pichai to the role of CEO. It also involved the creation of an entirely new company called Alphabet, which Larry Page and Sergey Brin are now the CEO and President of respectively. As part of this change all of the previously Google-owned companies are now more or less independent companies (along with Google) under the Alphabet umbrella. According to statements from Larry Page this decision was one they’ve been thinking on for a while now, and at least part of it was made with the idea in mind that Google along with the other companies like Nest, Google X, Calico, and others could run things with otherwise “strong and independent CEO’s” without the need for Page to take on all the decisions and managerial duties for each.

In this restructuring though, there could be consequences down the road, some which could end up spelling more disaster than if things had been left the way they were. There is some immediate good coming out of this change. As mentioned yesterday, Alphabet’s use of the .XYZ extension for their domain name has caused a significant rise in popularity of the extension and thus helping the XYZ.com’s CEO blow up. For Google and the rest of the companies though who are now owned under the Alphabet parent company, things could end up sending them through a rough patch.

One of the major issues could come out of giving all these companies now owned by Alphabet a strong CEO to lead them in Page’s stead. With a CEO at the helm of each company, all having strong wills and the desire to see their  projects succeed, they could all end up having conflicting interests which may have the potential to spur some unwanted clashing between the companies. Google is still going to be the core business. Ads will still end up driving the most revenue and profit, and Alphabet is going to use a portion of that to fund the bigger, more outlandish projects like Google’s self-driving cars. With Sundar Pichai now in the CEO seat though, what happens if he decides to question why Google’s profits are going to funding for the other companies?

Ultimately the money allocation is still a decision that belongs to Page, but a similar risk of clashing could come from each CEO wanting more funding for their own projects and if someone gets left out that is likely to cause some friction. The other issue which could some fallout is the act of transitioning Google itself into one of the companies now owned by Alphabet. Alphabet’s focus will be on larger projects which Page and Sergey see as some of their aspirations which they want to continue working towards. Things like the Google X projects. This essentially is telling the rest of the companies that there is more excitement to be found in new, bigger aspirations than the Google’s most popular offerings like Gmail, Android, and YouTube. This doesn’t necessarily mean Page doesn’t see any of these offerings as exciting, but it’s entirely possible that’s how things could be conveyed, and could cause some division in the ranks of company employees.