The enduring struggle of life is figuring out how to maximize all the good parts and minimize all the bad. So it is with Alphabet, the technology giant formerly known as Google.
Alphabet was created to separate Google, the search giant, from the constellation of appendages — the self-driving cars, the pharmaceutical company, the two venture capital funds — that many current and former employees say had made the company too sprawling to manage. The last three months of 2015 were the first quarter of the new holding company’s life, and the contours of the organization are starting to fall into place.
It has hired new leaders, such as an auto industry veteran who was recently tapped to run the self-driving-car project. It is developing new processes, like an internal system that would have Alphabet companies pay Google for dull but important services like human resources, accounting or access to Google’s technological infrastructure, according to people familiar with the matter, something first reported by The Wall Street Journal.
These are normal processes in large companies, used to make sure business units have a handle on expenses.
But the company is also asking questions about how it might achieve the dream that has eluded so many other big companies: find a way to take advantage of its heft while being nimble like a start-up.
Larry Page, Google’s co-founder and chief executive of Alphabet, has said that he wants his company to be a home for entrepreneurs. If the Alphabet concept plays out as advertised, company chiefs would have more autonomy to make strategic decisions on such matters as whom they hire and how they spend money, or even to raise their public profiles.
But the pitch — in particular to acquisition targets — is also about what they would not have to do. They would not have to worry about building a large server infrastructure for their technology to run on. They would not have to worry about whether to use their money to hire another accountant or another engineer. In the case of more mature companies, they could skip the mounds of paperwork and reporting requirements that come with going public.
That broad idea — that entrepreneurs do best when they are focused squarely on new technology rather than distracted by corporate building blocks that every company needs but also take lots of time to build — has taken root across Silicon Valley. It is why, in addition to money, venture capital firms now give their companies access to all kinds of marketing, sales and other services in hopes that their start-ups can more quickly become grown-ups.
Alphabet has a lot to offer in this regard. Google has a sprawling human resources department, some of the world’s fastest supercomputers and a near-impenetrable information security system. That infrastructure, which took two decades and untold billions to build, is one of the company’s key competitive advantages and could be a potent accelerant to internal start-ups or companies Alphabet might acquire.
One key question will be how to share those big-company resources without subsidizing a bunch of money-losing companies in perpetuity. So far, Google executives have centered on the idea of a system that would have upstart divisions like X — home of the self-driving-car project — pay Google for services like the vast array of servers that make it one of the most dominant technology companies in the world.
An extreme example can be seen at Niantic, a Google-founded company that builds an “augmented reality” video game where players explore the real world. Niantic, which was recently spun off from Alphabet, has had to negotiate deals to license Google mapping technology, according to people familiar with the matter.
That concept, figuring out some price to charge for Google services, is likely to be applied to Alphabet companies, though the exact details would be different since, unlike Niantic, they would still be wholly owned by the same company.
Of course, some companies are already so dependent on what might be called “Old Google” that it makes sense to let them be. Take YouTube, the video site, which generates billions in annual revenue — Alphabet does not disclose the exact figure — but chews up epic amounts of bandwidth and processing power, while getting a lift from Google’s advertising sales force, resources that it could never replicate on its own.
And then there are the questions of what might stay the same. One of the things that attracted so many great engineers to Google was a fluid culture in which they were encouraged to move among a diverse range of projects, or, in some cases, to create new projects of their own.
The first good glimpse of all this will come early next year, when Alphabet, for the first time, will separate Google’s search and advertising businesses from Alphabet’s more speculative divisions. But it will take months or years for Alphabet to figure out how to create the best of all possible worlds. If such a thing exists.