Alphabet Inc.: Reorganizing Google Co-founded by Larry Page and Sergey Brin in 1998, Google’s original mission was “to o

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Alphabet Inc.: Reorganizing Google
Co-founded by Larry Page and Sergey Brin in 1998, Google’soriginal mission was “to organize the world’s information and makeit universally accessible and useful.” Over the years, Google hascome to dominate that space, but the company has also diversifiedin numerous ways. Some projects and acquisitions were directlyrelevant to the company’s original mission, while other ambitious“moonshot” projects and acquisitions (for example, in health care,self-driving cars, and smart-home appliances) seemed to fall farfrom Google’s core competencies. Many analysts and investorsquestioned the heavy investments in R&D for these projects,especially since the lack of clarity in Google’s financialreporting on individual projects made it difficult to discernwhether these investments were generating or would eventually yieldany dividends for investors.
In response to increasing pressure from investors and in theface of stagnant share prices, Google announced an unusualrestructuring plan in October 2015. It created a new firm,Alphabet, Inc. to act as a holding company for Google and quite afew other independent subsidiaries under the Alphabet umbrella. Thebusinesses within Alphabet were organized into two reportingsegments Google (and related core businesses) and Other Bets andeach subsidiary was set up to run independently under theleadership of individual CEOs. Executive-level leadership and theboard of directors remained largely unchanged, and investors’shares of the former Google simply became shares in Alphabet,Inc.
Under the new structure, subsidiaries have been pushed towardgreater accountability. The intended benefits of the new structurewere to: enable each subsidiary to focus on its own mission, limiteach subsidiary’s liability for the others’ debts, enhance greatertransparency regarding cash flows and investments across the board,avert anti-trust regulation, attract and retain moreentrepreneurial-minded talent, and pave the way for more strategicacquisitions. Investors’ faith in these outcomes coupled withincreased revenues have led to an uptick in stock prices since therestructuring. However, several CEOs and other employees in theriskier “Other Bets” projects have since left the company, statingthat the pressure to perform financially has eroded the spirit ofinnovation within their subsidiaries.
Analysts feel that the new Alphabet is still a work-in-progress,and criticism of the restructured company abounds, but there arealready signs of a sharpening focus on growth from corecompetencies while simultaneously leaving room for more ambitiousor riskier projects that require a longer timeframe to yieldresults.
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