Google made a startling re-branding announcement in the first week of August this year by creating a parent entity called the Alphabet. The move appeared like a plot from the HBO comedy hit series “Silicon Valley”, but Google’s co-founders are dead serious about the new company and it’s name.
Larry Page and Sergey Brin have successfully gone back to the ABC of business by announcing an Alphabet company to turn their lucrative grad-school invention to something much bigger and more efficient. Google has been largely associated with search, advertising, YouTube, and Android. But, after the latest move, Google will be a part of Alphabet and Sundar Pichai has been asked to head the section.
What Will Alphabet Do?
Alphabet will take on various experiments, which includes a self-driving car, Google X, and health-related investigations besides the offbeat projects like Nest and two other investment arms.
According to Fortune:
“… The most obvious reason for the shift is clarity. When Google later this year starts reporting two financial segments—core and non-core—investors will have a better sense of the amazing strength of the former and the profligate spending of the latter. (Fortune’s Erin Griffith astutely pointed out Monday that for all its “moonshots,”Google fundamentally remains an advertising company.) Should the future Alphabet decide it wants to ditch, separate, or create new capital structures for any of its non-core businesses, the new division will facilitate matters …”
There are a few other factors that are also part of the reason behind the change. Firstly, Larry Page will not get an opportunity to return to the role he loved while Schmidt looks after Google. Can we really blame Page for wanting to take a back seat and start dreaming again for something new? This time round, there’s slight difference. Page will be looking after fellow adults, including Pichai.
Page has described his role in an essay as that of an “asset allocator” which is similar to the role Warren Buffett plays for his companies.
Secondly, Page also sets in motion what is called a positive domino effect of talent by backing and promoting Pichai, one of the most capable executives.
What’s more, Omid Kordestani, who had retired many years back, has returned as an advisor to Alphabet. By creating this parent company, Page is sending a clear message that not only technical executives can dream of running Google. The promotion of a top product executive over top business executives shows that individuals from every department now have an equal opportunity to climb the corporate ladder at Google. Ruth Porat, who has been retained as Google’s chief financial officer, will be taking up the same role at Alphabet.
Porat, who is relatively fresh at Google after coming from Wall Street, would be the best person to explain to the company how much investors want transparency from the gigantic search major. Porat could also easily play the “bad cop” with regard to Alphabet’s investments in the future. She has already played played the “good cop” to investors in the market, where she had spent the major chunk of her successful career.
So, outside of ‘who is doing what’ the short answer as to why the name change comes straight from the source:
” …As Sergey and I wrote in the original founders letter 11 years ago, “Google is not a conventional company. We do not intend to become one.”… “