“Many leaders of big organizations, I think, don’t believe that change is possible. But if you look at history, things do change, and if your business is static, you’re likely to have issues.”~ Larry Page
“People may doubt what you say, but they will believe what you do”, said Lewis Cass. This quote suddenly came into my mind when the Google wizardry cooked up some really cool stuff and announced the formation of a new parent company, namely Alphabet, making Google a major subsidiary of the conglomerate. Who said kids can’t give birth to parents? Well, guess just like one goes to search for anything over Google, one can expect anything to happen in Google as well. When Larry Page had talked of how static businesses are likely to have issues, I wonder how many would have really thought he could have been planning Alphabet already.
When in doubt, Google it.
When in Google, take the Alpha Bet.
What is Alphabet? As Larry puts it across in the famous letter, “Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main internet products contained in Alphabet instead.” The market always behaves like one excited kid in a candy store whenever there’s a acquisition, merger or as in this case, the formation of a parent company making the existing entity just a major subsidiary of the same; and so as expected, the stocks jumped up few points while the world was still trying to come to terms with the new announcement made by Google. So, what’s the entire buzz about? Why did Google go for a restructuring like this? What would be the implications of this change? Will it be good for the market? Will it affect the spirit of innovation? Well, when the topic is Google, the excitement has to bring out countless results, isn’t it? So, what’s cooking?-Let’s find out.
What’s the bet?
Innovation versus Profit Making
One doesn’t even need to stress upon brain cells to understand that experiments don’t come with the guarantee of success. But investors and shareholders are surely focused on reaping the maximum returns out of their money. When the two things clash, things can get messy for both. Even the smart Google had to fall prey to this tussle. As Neil Irwin also puts across in the New York Times, “”What’s best for shareholders and what’s best for innovation aren’t always the same”. The restructuring neatly demarcates the overtly ambitious projects of Google from the established and profitable ones. The signal to the market is clear- Google doesn’t wish to mix things and the market can surely get a more transparent view of the businesses; something Google has been under the scanner for since last few years since it started venturing into projects which have less chances of yielding quick returns.
Not the first time for the market
“Sometimes it’s important to wake up and stop dreaming. When a really great dream shows up, grab it” ~ Larry Page
The decision of Larry Page and Sergey Brin does find few counterparts in the pages of history. Comparisons are being drawn with Berkshire Hathaway, General Electric and AT&T. While Berkshire’s interests have spread far from insurance, to include mobile homes, private jets, and even ketchup and battery brands; GE has been balancing its association with television broadcasters and far flung different class of products like automotives.
Playing it safe and smart
The financial implications of the decision seem to be quite on the positive side; suiting the taste of both the change makers as well as the money minters. While Google will have the advantage to stay unaffected if any of the ambitious projects backfire, the Alphabet businesses will get a fresher outlook instead of the routine and pressure of sustenance of an established successful entity. According to Brian Wieser, analyst at Pivotal Research “On balance the news is positive as this provides for incremental transparency into Google’s business and suggests the company is looking for ways to balance founder and employee interests with those of investors.”
Considering the new boss, Sundar is more of a doer than an innovator; this crucial restructuring can go a long way in positioning the search engine as more dominant and profitable. Alphabet is likely to become a huge investment group with an expertise in strategic direction; just like the large private equity companies. On a non-serious yet meaningful note, when Alphabet goes and buys a battery company; investors wouldn’t wonder why a search engine company needs to make batteries. Similarly, the different subsidiaries of Alphabet can go for mergers or acquisitions and partnerships without bringing Google’s shares into the picture. We might get to see Google Maps planning a merger with Waze after all.
While on one side, Google is losing its omnipresent status; Larry and Sergey are getting a blank huge canvas to innovate – just as would be the dream of any entrepreneurship venture. The web address itself – abc.xyz – itself gives a great start to the whole thing- entrepreneurship just got more exciting?
‘Lots of companies don’t succeed over time. What do they fundamentally do wrong? They usually miss the future’ ~ Larry Page, 2005
Wise Men learn from Mistakes of others
When start-ups strike gold, they embark on that unstoppable road to glory which finally comes to a big hurdle when extreme ambition and desire to do it all messes things up or complacency takes its toll. That’s when Wall Street becomes impatient and calls for a leadership change in all ways possible. This has happened to most of the big brands- like Microsoft, Apple, IBM etc. When it came to Google, the company thought ahead not just in terms of technology but also in terms of business acumen and did the restructuring before the mess up could worsen and Wall Street went crazy.
Is there more to it than what meets the eye?
As is usually the case with any major change, several questions and doubts are being raised from different corners and responses for the same are hard to figure out as of yet. Susan Adams in her piece in the Forbes, entitled “What’s Not To Love About The Google Alphabet Move” sheds light on the not so sunny parts of the Google-Alphabet story.
In a piece in The New York Times, David Larcker, a Stanford business school talks of the apprehension of Wall Street towards the holding company structure, which is what Alphabet will have. “If you go backward in time, the gigantic conglomerates unraveled between the 1970s and the 1990s because it became too unwieldy to manage them,” Larcker remarked. In another report, Jan Dawson, writes for News Corp (-owned MarketWatch) how unlike Berkshire Hathaway, Alphabet doesn’t even address its management principles in the blog post announcing the restructuring. “It’s not clear that Larry Page or any of the other senior managers at Google has this skill set or that there’s any investment strategy other than doing things that Larry and Sergey find personally interesting or ‘important and meaningful’ to borrow the phrase they use in the post.” That’s surely something the investors won’t find a welcome move.
The Economist has given a heads up on how Alphabet faces a risk in Europe, where regulators are pushing back against Google for abusing its market power by favouring its own products in its search results; Google has a deadline to respond to these charges by August 17th.
The other word gaining all the buzz apart from Google and Alphabet is definitely Sundar Pichai; the Indian techie-business wiz. So, what’s the story of this man who has become an icon overnight?
Appointment of Sundar Pichai- Due recognition of talent or more?
Fortune Magazine writes, “A little-known and soft-spoken middle manager has become a clear No. 2 to Google CEO Larry Page”. Fame brings with it equal number of friends and enemies; and Sundar’s appointment has suddenly brought to surface several tales about him and his rise to one of the most enviable positions. When the launch of Google Chrome didn’t go as it was supposed to, what would have been Sundar’s reaction- was he upset or did he always know nothing is going to come in his way to where he is today? While some say that he was being consciously groomed for this day; the majority thinks he got his due. Sundar is known for his gentle disposition and great skills at delivering successful projects, Google Chrome being one of the most prominent examples.
On one end, Sundar is a technology geek with an expertise in management backed u with a Wharton MBA. When his name was in news as a top contender against Satya Nadella; Dave Vellante, the chief analyst at Wikibon had said in a statement to Silicon Angle “The market has been looking for a CEO who can balance the role of leading the enterprise transformation while keeping that consumer momentum. Pichai is the total package of technology leadership and business acumen.” On the other end, he is the same guy, who, according to Business Insider, was skilled at staying out of politics and drama at Google. When he reported to Marissa Mayer, he reportedly sat outside her office for hours, if necessary, to make sure his team had good performance reviews. It’s also said that he was the one who tried to convince Jan Koum not to sell WhatsApp to Facebook. So, was it just his technology skills or his amazing rapport with Larry that landed Sundar this deal? Well, whatever is the case, this man surely knows his technology and business well; and so he should be a great bet for Alphabet and Google.
While many young boys and girls worldwide dreamt of bagging a dream job in the likes of cool cats like Google, Facebook, or Twitter; Sundar Pichai might be sitting and pondering over a cup of filter coffee- who should I choose to work for? The rumour has been doing rounds that Sundar had been approached for top management position at Twitter. Not to forget, when early in 2015, Microsoft had to get a new boss, Satya Nadella had competition from Sundar too. While Microsoft possibly preferred to go for in-house talent instead of getting someone from outside; Twitter definitely had its own reasons to lose out to Google even if Alphabet was nowhere in news.
Another fear that’s ripe in the air is that this spin off might herald the end of innovation for the Google subsidiary. Did Larry just left Google as a successful entity under the leadership of someone who has been a big part of the journey so far, just to keep it running with slight evolution over time? I would definitely wish to hope that with Google business becoming slimmer, leaner and specific, it should prove better for Google. As Larry writes, “Sundar will always be focused on innovation—continuing to stretch boundaries. I know he deeply cares that we can continue to make big strides on our core mission to organize the world’s information.” Madhavan Narayanan nicely describes in the Hindustan Times, “Sundar Pichai is spicy rasam* in Google’s fuzzy Alphabet soup. It is the Android-and-Chrome cocktail that makes Pichai a natural fit to lead the giant’s core cash cow in its next wave.” [In case you were wondering, “Rasam” is a thin, very spicy Southern Indian soup, served alongwith other dishes.]
NASSCOM has congratulated Sundar Pichai on his appointment as the new CEO of Google, and feels that Sundar will be instrumental in infusing a new sense of enthusiasm and innovation in the sector globally. They believe Sundar is a new age leader and with his immense experience in the field of software products, he will be a valuable asset for Google and the industry in its next phase of evolution and growth. Last year, NASSCOM with 10,000 Startups had the privilege of hosting Sundar at a session for technology start-ups in Delhi and they look forward to work more closely with him in his new role. Sundar’s appointment is testimony to the success that Indian talent has achieved at a global stage.
Needless to say that mobility and the Internet of Things are paving the way to the future. In such a market, the major technology giants shall definitely make a rush for the whole of the internet economy pie on offer. While Satya Nadella is all bent on trying to make MS leaner and better, with the Android king Sundar Pichai proudly making his rebranded entry into the arena, now the world will see two Indians battling it out for the bigger share of the pie. The world has got nothing to lose; the future just seems even more exciting now. As Larry had remarked once, the target is a world where machines do all the work while men do what they want to. It’s undoubtedly an amazing feeling knowing that the innovation geniuses are at work at the Alphabet trying to change lives radically while a tech-business cocktail takes helm to lead the tech arm to make it better. The technology world has got a fresh breather while innovation got a new name. It might be way too early to predict the exact consequences of this “Alpha” bet; but yeah one thing is for sure- MORE EXCITEMENT IS ROUND THE CORNER!!!
Anybody can take a safe bet; but doing it like a Boss would, Google has taken an ALPHA bet…
Stay tuned for greatness to unfold…
“We are still trying to do things other people think are crazy but we are super-excited about.” ~Larry Page
