AH 2015 A New Google LOGO-5

Google to Continue Innovating As Part of Alphabet

October 8, 2015 - Written By Fernando Bonilla

Google’s new parent company Alphabet made headlines last week after Google’s transition was complete. Now, the tech company’s CFO, Ruth Porat, is adding that Google might retain more of its former self than previously thought.

Alphabet was announced as a way for Google to restructure its business. The new organization would theoretically help the company’s smaller interests reach the level of care they needed in order to succeed in the future. These more ambitious tasks could end up hidden under the needs of Google’s core businesses, and in the long run not live up to their initial aspirations. Under Alphabet, these “moon-shot” businesses are subsidiaries, as is Google itself. Not only does this release Google’s possibly inefficient grasp on the smaller companies, but it allows the tech giant to focus more on its essential money-makers, like YouTube or its original search function.

It seemed that after last week Google would hand over its moon-shots to Alphabet and wash its hands of these businesses. However, that no longer seems to be the case, as CFO Porat explained. Speaking at the Vanity Fair New Establishment Summit, Porat described Google’s interest in continuing to pursue radical investments. She pointed to the “70/20/10” rule first established by Google’s co-founders, Larry Page and Sergey Brin. The rule’s vision is rather simple: Google’s resources are to be divided into three segments, one of which will receive 70% of funds, another 20%, and the last 10%. As you may imagine, the largest portion is sent to Google’s primary businesses. The smaller 20% percentage is distributed to relevant side businesses while the smallest share is given to new divisions like the GoogleX factory and Calico, the company seeking to medicate death. Not too many resources are given to these projects because they almost certainly lose money at first instead of generating it.

Alphabet appeared likely to take over these experiments, but Porat has stated that Google would still have a hand to play, saying, “innovation within Google is still key to the overall Alphabet family as a whole.” Google is likely to keep at least one advantage over Alphabet in that it enables its moon-shots to shift needed expertise around to more than just one business. However, Porat noted that Google is pressed to offer best-in-class innovation for its employees to work on. If not, it is possible for Alphabet to intervene and place talent where it’s needed most.