New operating structure plans announced by Google

Founders of Google Larry Page and Sergey wrote in founders letter that they do not see Google as a conventional company and that they might make smaller bets in other speculative areas. A number of things started by Google now have more than a billion users such as Android, Google maps, Chrome and YouTube and Google has no plans of stopping here. Companies tend to get easier when they keep doing the same thing and making improvements to it, but since the IT industry is ever evolving, the companies ought to take chances with other fields too. Larry said that even though Google is operating well, it can be made cleaner as well as accountable. Therefore, we are going to see “Alphabet” a new company which will be run by Larry and his partner Sergey. Alphabet can be seen as a collection of other companies. Google, of course is the largest company in the collection. This would help slim down Google. Companies other than the main internet products of Google will be separated from it and put into alphabet. For example, projects like life sciences, Calico etc. As Larry said this is being done to make the management of these unrelated things effective and easy.

Alphabet is about maintaining independent businesses through strong leaders. Each business will be run by a CEO whose strategies and activities will be monitored by Larry and Sergey. However the capital allocation for each business will be handled by them too. Another objective behind implementing this new structure is to put the segment reporting in to action for Q4 results. Here the Google financials will be kept separate from the other alphabet businesses. Also this new structure will make it easy to identify other great opportunities inside Google. Sundar Pichai is also a key part of this transition and has been working since last year in the product and engineering segment.

 Sundar is expected to be the CEO of the new slim Google. The recently launched Google Now and Google Photos rely on machine learning and are making tremendous progress. Google’s X lab will also be included in the Alphabet which is currently working on drone development. Some growth will also be seen in ventures and capital of this new structure. Google Inc. will be replaces by Alphabet Inc. as publicly – traded entity. Also alphabet will take over the shares of Google and Google will now be seen as a subsidiary of Alphabet. The name “alphabet” was selected as it represents the crux of the language which is of course one of the greatest innovations by the mankind. Plus the word “alpha” means investment return over benchmark. The whole point in starting alphabet is to give its child companies more independence and an opportunity to develop their self brands. This whole structure is expected to add transparency to what is being done and put more focus on Google’s operations.