Remember when Google was nothing but a simple search engine? If you’re young enough, the answer to that question might actually be “no”, since the company has expanded its reach to everything from self-driving cars to pharmaceuticals to venture capital within the last decade or so. Thus, Google has decided to change its whole corporate structure to reflect all the interests it has come to boast by launching a new parent company by the name of ‘Alphabet’.
Co-funder and chief executive of Google, Larry Page, made a blog post on Monday explaining the move, saying that Alphabet would hold many other companies in its technological family alongside Google, including Nest, the home automation company known for it’s ‘smart’ thermostats, and Calico, a research and development biotech company. Page is set to run the new parent company with Sergey Brin, Google’s other co-funder.
“For Sergey and me this is a very exciting new chapter in the life of Google — the birth of Alphabet,” stated Page in the blog post. “We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search.”
Investors have recently been expressing concern over Google’s diverging from its initial web search business. Alphabet is essentially a response to this – a way of organizing all of the innovative projects the company now has in its portfolio. Mr. Page wants to keep the entrepreneurial culture Google has grown into without straying too much from their original focus, and Alphabet will achieve this by giving the company’s divisions more room to experiment and make their own creative decisions as virtually separate entities. The decision will also implement more financial transparency, says The New York Times. Alphabet will give out financial results for itself and Google Inc. beginning in the fourth quarter of this year, illustrating how the business is doing and how much money they are putting towards new ideas – details that Wall Street has been consistently pushing for. It seems this development is beneficial all-around for the company.
“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes,” wrote Mr. Page “But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.”
The structural change will bring Sundar Pichai, Google’s senior vice president in charge of products, to the forefront as chief executive of the company, as well as give chief financial officer of Google, Ruth Porat, the same position within Alphabet on top of his current role.
Alphabet will also encompass such divisions as Google Fiber, the ‘ultrafast’ internet service provider, Google Ventures, the company’s venture capital affiliate, Capital, a sector for private-equity like deals, and Google X, which covers the more ambitious projects like self-driving cars and drone delivery services – with Google X being governed separately by Mr. Brin.