Why Googles Alphabet Reorganization is a Brilliant Move

It used to be that businesses could see their competition coming and anticipate the threats. Clayton Christensen, with his theory of disruptive innovation, taught that a new entrant attacked a market leader by launching low-end, low-priced products and then relentlessly improving them. Now Christensens frameworks have themselves been disruptedbecause you can no longer see the competition coming. The entrants come from different industries and attack the core business models. In the same way that Netflix decimated the video-rental industry and Uber is changing transportation, new business approaches and technological advances will disrupt practically every industry.

There are no proven models for innovation in this era of exponential technologies. You cant look to companies such as Procter & Gamble, Johnson & Johnson, and General Electric for ideas on how to innovate, because they really have not reinvented themselves. They are doing more of what they did before, with the same old business models and organizational structures.

Googles founders, Larry Page and Sergei Brin, understand advancing technologies better than almost anyone else does. And they seem to have realized that dramatic change was needed in order to get their company to continue to be a technology leader. So they are trying another grand experiment: breaking Google into competitive piecesbefore they are forced to do so for survival.

This is what Microsoft should have done years earlier and many other former technology leaders did not do. As I wrote in 2013, Microsoft was like the former Soviet UnionPolitburo, five-year plans and all. Its best strategy would have been to break itself into independent companies, each free to build innovative products and compete with the others. This could have been along the lines of the markets that Microsoft goes afterenterprise, personal computing, mobile, and entertainmentor by product: Windows, Office, Xbox, and Surface. Instead, it was busy defending its old businesses and its employees were bogged down in internal political battles. So it lost its lead and its momentum. Its new management team is struggling to reinvent the company and has an extremely difficult task.

Small independent companies can compete better than large monoliths can because such a structure unleashes the talent of its people and allows them to attack other parts of the company that need to be put out of business or transformed. By breaking the company into separate divisions that can independently focus on existing as well as newmarkets, Google is also enabling its founders to get back to doing what they do best: innovate. The independent divisions of the company can now develop new virtual realitybased operating systems that make its Android operating system obsolete; self-driving cars and mobile entertainment systems; health-monitoring systems for the home; and contact lenses that take you into holographic worlds. It can also get into crazy new fields, such as life extension, and build nanobots to kill disease cells. These businesses wont need to coordinate their efforts with one another or worry about divisional politics.

These are the types of bold changes that companies must make to survive in this era of exponential technologies. They must take big risks and disrupt themselvesbefore someone else does. Only a few companies, such as Dell, Apple, and Starbucks, have had the courage to do so. As management guru Jeff Sonnenfeld, of Yale School of Management, notes: Digital Equipment, Data General, Wang, Prime Computer, Apollo, Control Data; Nixdorfand Motorolamight have been alive if they stirred up the pot more. Maybe Andy Groves philosophy at Intel model shows this bestthat only the paranoid survive. Too often founders, like Ken Olsen of Digital and Ed Land of Polaroid, become religious symbols of sacred rigid past greatness Sonnenfeld says that Brin and Page are following the lessons of Grove, Michael Dell, Steve Jobs, and Howard Schultz.

Only time will tell whether Googles moonshots and restructuring will pay off. But what is certain is that if Google had not done it, it would have gone the way of the dinosaurs.

Link to article on Washington Post’s website

About Author

Vivek Wadhwa is Vice President of Innovation and Research at Singularity University; Fellow, Arthur & Toni Rembe Rock Center for Corporate Governance, Stanford University; Director of Research at the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering, Duke University; and distinguished visiting scholar, Halle Institute of Global Learning, Emory University. He is author of ”The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent”–which was named by The Economist as a Book of the Year of 2012. Wadhwa oversees the academic programs at Singularity University, which educates a select group of leaders about the exponentially growing technologies that are soon going to change our world. These advances—in fields such as robotics, A.I., computing, synthetic biology, 3D printing, medicine, and nanomaterials—are making it possible for small teams to do what was once possible only for governments and large corporations to do: solve the grand challenges in education, water, food, shelter, health, and security.

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