A couple of weeks ago Alphabet Inc. emerged as a parent holding company of Google as announced by Larry Page on Google’s blog. The two main reasons given for this move is to make the company cleaner and more accountable. By cleaner, it means that products that are not related to each other would become separate wholly owned subsidiaries of Alphabet Inc. which includes Google, Calico, X Lab, Ventures and Capital, Fiber and Nest Labs. By becoming more accountable, it means that leaders of these wholly owned subsidies would be held to even higher standards and accountability of where money is and should be spent. This move would help Wall Street understand that Alphabet is willing and structurally capable of going into areas that are unrelated.
It seems that on the surface the announcement of creating Alphabet Inc. has deemed to be a good move as many pundits and professors have pointed out ever since its emergence. The reasons of cleanliness and accountability are great for internal purposes. However, if we dig a little deeper we would find that there are external purposes that are at play here as well. Firstly, due to Alphabet Inc.’s cleaner approach, mergers and acquisitions of unrelated industries would become much easier and thus accountability of each wholly owned subsidiaries would be justifiable to Wall Street. Secondly, Alphabet Inc. would now be able to enter into industries or create new industries altogether. This move could mean that Alphabet Inc. could also be the next big 3D manufacturer of electronic equipment or even the next Big Bank that finally removes paper-based transactions. While both of these examples are interesting and achievable due to Alphabet Inc.’s deep pockets. In order for Alphabet Inc. to really disrupt or create new industries, strategic consideration should be taken into the following:
In the Future
|Who is leading the organization(s)?
|Who should lead the organization(s)?|
|What processes are being followed?||What processes should be followed?|
|Where are products and services being deployed?||Where products and services should be deployed?
|When do people, process, technologies, products and services disrupt/create markets?||When should people, process, technologies, products and services disrupt/create markets?|
|Why already bought companies make sense?||Why companies should be bought?|
Alphabet Inc. leadership also has to realize that any organizational structural changes are not without consequences. These consequences could entail: (1) Stocks could become more volatile as even any slightly negative news concerning the wholly owned subsidiaries could affect Alphabet Inc. stocks, (2) Due to autonomy and fiefdom creation, collaboration across people, process, technologies, products and services among the wholly owned subsidiaries could be compromised and (3) There could be rise of duplicative functional teams (e.g., HR, Finance etc.) across all wholly owned subsidiaries thus taking resources away from core business pursuits.
One of the ways to address the above mentioned conglomerate issues would be to create a task force with enough teeth within Alphabet Inc., and cross-organizational teams across all wholly owned subsidiaries who can help find and remedy these issues. This task force and its teams could be similar to internal consultants whose lessons learned and methodologies could help Alphabet Inc. become more efficient and effective. Perhaps these practices could also open the door for Alphabet Inc. to dominate the Management Consulting industry as well.