Google was too big for its own good. Housing everything from its search engine to robots to life-extension technologies in one corporate hierarchy made for a lot of managers. Smart people often loathe such paralyzing bureaucracy. That’s why breaking up the company under the new parent company name, Alphabet, could save Google from itself.
Google today declared its name will now just host its core business. Its other, more far-flung projects like Life Sciences (glucose-measuring contact lenses) and Calico (life extension), will live somewhat independently alongside Google inside the new conglomerate it calls Alphabet.
The reasons why are scattered throughout the announcement:
- “Our company is operating well today, but we think we can make it cleaner and more accountable.”
- “This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google”
- “Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related.”
- “Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed.”
Essentially, Alphabet is the answer to Google’s talent problem.
It formalizes a solution Google had already been trying to execute. When talent at the main company grew antsy with the slow-moving bureaucracy and all the cooks in the kitchen, Google would find another place in its family for them to work. Product designers in Search would go to YouTube. Managers would join Google Ventures or Google Capital. Scientists would be sent to work on robots.
Yet over the past few years, the competition for talent has only gotten steeper. More giants like Facebook are rising to become research institutions. Unicorns offer astounding financial upside and leadership opportunities. And an abundance of early-stage capital makes starting one’s own company easier.
The result has been Google failing to attract the best talent, losing superstars, or paying obscene retention bonuses to keep them. It does very well, but to execute on all its moonshots while continuing to grow its top businesses, it needs all the brains it can get.
[Update: There are other reasons for the restructuring too. It lets Larry Page hand the Google reigns to Sundar Pichai while still getting to work on his passion projects. And it could make acquiring or selling different businesses easier.]
But talent is a big part of it. Alphabet effectively creates more independent fiefdoms for Google’s superstars to rule. Rather than being the senior vice president or “head” of something, now they’ll be made CEOs with more of the power that comes with such a title. These wardens will control their domains, while receiving help from the crown when necessary in exchange for all the money funneling up to Alphabet.
If it’s starting to sound a bit like Game Of Thrones, that’s because it is. Rather than one giant realm ruled by a single family, Google is dividing its empire into territories. By naming its most worthy servants as wardens of these kingdoms, it keeps them loyal to the throne.