Google Alphabet: I Stands for Innovation
By Jim Lundy
Google announced a major restructuring this week when it folded Google into a new parent company called Alphabet, which can be found at the domain name abc.xyz.
There has been a lot of media hype over the change, particularly around the claim that Google had not done its homework on the domain name. As you can see, they did think about it and they simply bypassed the current approach of using .com based domains.
So ends the news stories about Larry and Sergey not doing their homework. The thinking behind this goes further than people think. This blog is about how Google is changing so they can continue to innovate.
I Stands for Innovation
With just under $70 billion in cash, Alphabet has plenty that it can do to invest in new endeavors. The approach Google is taking isn’t new; it has been used in venture capital and investment firms for many years. Japanese firms have used keiretsu, a different way of trying to manage their holding companies and the markets they participate in. Google has always been about innovating and sometimes, products hit the mark and sometimes they miss.
With the new corporate structure, they are free to invest in new ventures, while at the same time allowing newly announced Google CEO Sundar Pichai to run the core Google Business. More on Google below.
It is clear to us that Google has been planning this for a while. Many of its acquisitions were not core to its search business. When you step back and look at all the things Google has done just since 2013, it is clear that Google has some big plans for embedding technology into many things. They plan to do this by leveraging their deep learning skills and their increasing understanding of both robotics and machine vision.
G Stands for Google
More than anything, Google stands for search. It also increasingly stands for work, as the newly branded business focus has been branded as Android for Work (see the Aragon First Cut). Google has successfully become an alternative to Microsoft for business collaboration and over the last three years, we have seen a give-and-take as the cloud office suite battlegrounds shift.
Besides a significant lead in public-facing search, Google has done very well in mobile and today, Google Android has the largest share in mobile operating systems. Today in mobile, it is an Apple versus Google conversation. Outside of the Surface, Microsoft has been relegated to building apps that run on iOS or Android.
Finally, Google has been quietly building a successful business with Chromebooks and last week (August 13th, 2015), they announced newer business editions of Chromebooks (with Dell) that make it easier to access and run legacy applications.
All in all, there is a lot for Sundar to work with given the current products. Google is the cash cow for Alphabet and all signs point to that continuing.
C Stands for Car and Capital
The Google Car project is one of the more organic developments that has been underway for some time. Google has been testing self-driving cars for years and now it is making one—that is more of a proof of concept than anything. We see Google licensing its technology here more than anything else. We see Alphabet as being an automotive supplier long-term, not a hardware manufacturer.
Google Capital is Google’s late-stage investment arm that is officially now part of Alphabet. So far, they have invested in 15 companies with the goal of making profit versus the strategic venture investing that is done by Google Ventures.
D Stands for Drones
Google has been working on Project Wing in Australia for a few years now. Its first attempt was compelling, but it appears the team is working to come up with an even better design.
We would also note that Google has an airport—it recently leased Moffet Field from Nasa.
F Stands for Fiber
Google Fiber is their high-speed networking business which features speeds of up to 1,000 Mbps (1 GB), which is about ten times faster than mainstream providers such as Xfinity (Comcast). Google Fiber is currently in nine cities. Businesses have been attracted to the very high speed (list) of Google Fiber and for states that have Google Fiber, it could be looked at as a competitive differentiation for businesses to be incubated and developed.
So far, the states that have more than two cities that offer Google Fiber include Texas and Utah.
R Stands for Robots
Google bought Boston Dynamics in 2013 and they have continued to push the envelope on two and four-legged robots that can traverse different kinds of terrain.
Google’s Machine Vision is being deployed on these robots (there are nine different models), just as it is with cars. Note that Google has expressed a willingness to license its Machine Vision technology.
N Stands for Nest
Nest. Google bought Nest, which now offers home thermostats, home video surveillance cameras, and smoke alarms. Ironically, Nest is based at the Hillview campus in Palo Alto, a beautiful facility that I helped to open when I was with Xerox (it is down the hill from Xerox Parc).
Nest is the consumer part of Alphabet’s Internet of Things (IoT) Initiative. They have made significant advancements with their DropCam video cameras, and they are monetizing by offering a cloud storage subscription option.
V Stands for Venture Capital
Google has backed nearly 300 firms via its Google Venture Capital Business Unit. They invest up to $300 million per year in promising firms, and like other VC firms, they help their portfolio companies get off the ground.
Google has been shrewd in its investments, which include Uber, Nest, and Slack.
X Stands for Research
Google X is the research unit of Google. It is unclear if this unit—one of the key incubation divisions at Google—will remain part of Google or be part of the parent company Alphabet. Since it reports to Sergey Brin, we suspect that it will now become Alphabet X.
This Isn’t Your Father’s Google
Google is now Alphabet, but Google lives on. This isn’t the complete list of Alphabet’s holdings, but you get the idea of where they are headed. The bottom line is that Alphabet sees a fully digital world ahead, one that it wants to play a major role in. With their new corporate structure, Alphabet is positioned to innovate and bring the right level of focus to existing and future business endeavors.