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Three cheers for the end of Google as we knew it

IMD Professor Reacts: Bill Fischer on Google's "Alphabet"

August 17, 2015

Ask any group of innovation enthusiasts to name their favorite organizations and the odds are that Google will top the list. It could well be the most daring, if not the most innovative, company of our times. But, the catch is that there never was a real Google, or at least there never was one Google that we could model.

For a long time now, Google as been a multi-business business: search (of course), but also driverless cars, e-payment systems, social media attempts, mobile phone operating systems, thermostats, etc. etc. The list is a fascinating one and goes on and on; some in industries with amazingly fast clock-speeds (Google, for example, and Google Ventures), and others in industries where time had seemingly stood still for several decades (Nest, for example, is in industries with historically slower clockspeeds, although that will likely change with the Internet of Things). How can you build one corporate culture for such varied competitive contexts? The answer is: you can't! In fact, you shouldn't even try. Each of these businesses deserves a culture that is best suited for the needs of the industry that it is in, and that is the genius of this biggest of all Google innovations: Alphabet.

Alphabet recognizes the multiple realities that Google inhabits and legitimizes natural cultural differences between these realities. It makes no sense to proclaim "One Google" when your business models span the range of variety that Google's does. To deny these differences is the first step toward losing leadership credibility. To their credit, Google's leadership team recognized this and has chosen to run each of its many businesses as if they were truly different, which they are, rather than pretend that there are organizational synergies, which there aren't.

I have long thought that the next new thing in innovation, beyond open innovation and business model innovation, will be organizational innovation. Google's may be the opening salvo in that revolution. Here are three things to look for as the story unfolds before us, that will signal if this is developing as it should:

1. Is the action truly taking place at the business unit level? When watching the Google story play-out, keep your eyes on the divisions not the group. Alphabet can be a distraction. The real action needs to take place at the level of Google, Nest, Calico and the rest of the business units. In fact, what the Google reinvention illustrates is that strategy and culture are truly business unit prerogatives rather than Group dictates. The choice of strong, self-confident leaders such as Sundar Pichai to run the new Google, and Tony Fadell to run Next, is a sign that Alphabet takes business unit autonomy seriously. The next thing to watch for is how the relationships between Alphabet CEO Larry Page and President Sergey Brin and the business unit CEOs evolve over time to reflect the changing balance between group and business units.

2. How sharp are the decisions being made? Great organizations outperform because they have constructed corporate cultures that better leverage the talent that they have attracted. These cultures are the outcomes of managerial choices made in a variety of decision realms (vision, talent and skills, organization structure, processes, values, measures, and rewards). In high-performing organizations, the degree of detail and precision regarding these choices is considerably greater than what is found in average organizations.

Last year, the book "How Google Works", by former Google Executive Chairman and ex-CEO Eric Schmidt and former Senior VP of Products Jonathan Rosenberg, showed us just how thoughtful and detailed such choices were in the building of the organization that we used to know by the Google name. The new business unit leaders will have to replicate those choices again for each of their new organizations and they need to be as detailed as their predecessors had been in the past.

3. How coherent is the new narrative? A new organization is a new narrative about how we are going to adjust to the future. As with any such story, there has to be a high degree of coherence if it is to work as a blueprint for how change will occur. As precise as the cultural choices need to be, they also need to reinforce each other. Organizational cultures fray when there are disconnects between the choices made. I once wrote about why Samsung would never overtake Apple in high-tech/high-profile consumer electronics, the reason was Samsung's inability to build a coherent narrative about how it would move into this new future. Google has been good at this in the past, but it now needs to do it all over again, and this time for each of its business units.

The reinvention of Google into the Alphabet family is a bold move. On the one hand, it could well provide some relief from the never-ceasing concerns of investors who worry about how the old Google was spending their funds. And, it opens up leadership opportunities to many more people within the former Google family, thereby offering the potential to liberate that much more talent. On the other hand, however, it now makes Alphabet a much larger organizational culture construction site, with much more complexity and a whole new level of competition for internal resources than before. Google has never taken the easiest or most straight-forward path into the future in the past, and we should celebrate this new adventure as the ultimate innovation of the entire workplace of the organization. What could be more daring?

Bill Fischer is a Professor of Innovation Management at IMD. He co-founded and co-directs the Driving Strategic Innovation program in cooperation with the Sloan School of Management at MIT.

This article was originally published on Bill Fischer's blog on Forbes.

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