Tuesday, August 18, 2015

As easy as a-b-c...well, not quite

Google...er, Alphabet's search for a new org structure is somewhat disorganized

The Harvard Business Review avers that the creation of the Alphabet brand is driven by a desire to avoid diluting the Google brand too far in the consumer's mind. This explanation makes sense, but represents a rather limiting view. The listed entity is now Alphabet which includes all the "far-afield" brands such as Calico etc. and will suffer from the dilution problem in the eyes of the media, analysts and investors anyway. Thus the move needs to be seen thru a wider lens rather than just from a branding standpoint.

At one level, these are to be seen as growing up pangs, as Google transitions from being a hugely profitable tech icon unhindered by mundane pressures of financial disclosure et al to a regular, down-to-earth company. The iconic company hasn't yet been quite able to escape the one-trick pony fate, still deriving the vast bulk of its revenues from good old-fashioned search. Although enormously innovative, the new initiatives haven't begun paying for themselves.

Thus, this reorg has a simple raison d'etre : force Google's multifarious initiatives to grow up by subjecting them to the not-so-gentle pressures of Wall street.

The move may not quite pan out as intended. Google's promise to divulge more financials on the extended brands is both feeble and undesirable - feeble because most of those initiatives are too early-stage without even revenues in most cases, and undesirable because ventures such as Calico thrive best away from Wall street's prying eyes.

I think the better strategy to bring those initiatives to fruition is not more financial pressure but less.  Wall street is notoriously poor at recognizing or nurturing long-gestation initiatives, and is all too likely to force Alphabet to become just another regular, incrementally-innovative company rather than the radical innovator it is best suited to be. They could perhaps have retained Google  (the search+ company) as the listed entity and taken the rest of the ventures private to give them the space they need to grow up. As each initiatives matures, it could be "exposed" to fiduciary discipline either by bringing it under the Google umbrella or by taking it public on its own. That would of course entail many challenges, both financial and human-resource-related*.

However, beneath the logic presented to the outside world, I suspect like most organizational revamps, this too is driven by a somewhat idiosyncratic need - i.e., to please the key individual players rather than a grand design that they're convinced will work well for either customers or investors. The founders wanted to distance themselves from day-to-day operations and focus on "blue-sky" ventures, the new CFO wanted more disclosure and accountability, and they needed to keep key talent from sprinting nimbly off to work for competitors. The leaders have  worked out a solution that "satisfices" all of them without actually doing much long-term good for the company or its investors.

Overall, I have to say this is a rather half-baked, poorly-thought out move (to say nothing of the fact that it did not appear to have occurred to them that such a commonplace name as Alphabet would already be trademarked, as indeed it is - by BMW, as well as a host of small companies!**). To their credit, they're probably thinking of this highly sub-optimal structure as a work-in-process that will be fine-tuned as they go on, but they would do well to remember that you don't get too many shots at rebranding and there's the ever-lurking danger that people will run out of patience with too many ongoing changes.

Google has been a marvelous company doing a fabulous job of achieving its mission of organizing the world's information - let's just hope it doesn't trip up in organizing itself .
* such as giving away too much power to the new Google CEO which was perhaps unacceptable to the leadership.

** or more likely, this did occur to them but they forged ahead without buying out the trademarks / domains being infringed - a rank poor strategic move. There's too much at stake in the corporate world to let exuberance trump due diligence.