Why Has Google Restructured Under A New Company Called Alphabet?

Google’s founders had Internet users searching for answers today when they revealed the firm’s structure was being flipped on its head.

The search giant will now run under a newly formed company called Alphabet, Google co-founder Larry Page revealed in a blog post.

Unconventional

Since Google’s creation, Page and fellow co-founder Sergey Brin were clear that they never intended for Google to be a “conventional” business.

“We also said that you could expect us to make ‘smaller bets in areas that might seem very speculative or even strange’ when compared to our current businesses,” Page explained. “From the start, we’ve always strived to do more, and to do important and meaningful things with the resources we have.”

Page said he was aware that in Google’s infancy a lot of their work seemed a little crazy. “Many of those crazy things now have more than a billion users, like Google Maps, YouTube, Chrome, and Android. And we haven’t stopped there,” he said. “We are still trying to do things other people think are crazy but we are super excited about.”

Page reiterated the founders’ long-held belief that, over time, companies tend to get comfortable doing the same thing, just making incremental changes. This belief has been a huge driving force behind the creation of Alphabet. In the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant, he added.

Although Google is a well run company today, according to Page, he believes it can be made “cleaner and more accountable.”

Page takes his place on the Alphabet borad as CEO while Brin has been named as company president.

Alphabet is comprised of a collection of companies – the largest being Google. “This ‘newer’ Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead,” Page said.

Prime examples of what he means by “far afield” are the partners’ health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). “Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related,” Page added.

The Alphabet model aims to ensure the independent companies founded by Page and Brin each have a strong CEO running the business. Page and Brin, meanwhile, will handle capital allocation and work to make sure each business is executing well.

“In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole,” Page explained.

He added: “Sergey and I are seriously in the business of starting new things.” Alphabet will also include X lab, which incubates new efforts like Wing, the team’s drone delivery effort. “We are also stoked about growing our investment arms, Ventures and Capital, as part of this new structure,” Page explained.

“For Sergey and me this is a very exciting new chapter in the life of Google – the birth of Alphabet. 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!”

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