corporate restructuring

Google’s Alphabet Restructuring

According to Knowledge@Wharton, the school’s online business analysis journal, Google’s move to restructure itself under a new holding company named Alphabet will help protect its core brand. In addition, this reorganization will provide greater independence for its riskier investments, such as driverless cars and human longevity, and it will also bring greater accountability and transparency to those investments.

Google, as an Alphabet subsidiary will retain the Internet products, which represent about 90% of the company’s 2014 revenues. Google’s non-Internet subsidiaries will  include Calico, a research and development biotech company, Google Ventures, a venture capital subsidiary, and Google Capital, a growth equity investment fund.

This new organizational structure will allow Alphabet to build these non-Internet brands, which have high potential but are riskier, without damaging the Google brand.

Additional benefits of the restructuring according to this article:

-Innovation at Google could get a boost.

-Opportunities for greater internal competition, which can benefit all the brands.

-Encouragement of entrepreneurship.

-Retention of top talent.

Wharton management professor David Hsu suggests that in the near term ”the main challenge will be to have the two parts of the organization work well together.” The new Google and the rest of Alphabet may need different staffs, human resource incentives, cultures, etc., which may represent management challenges for the new holding company.

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