In a sure sign of the times, Google announced its new holding company, Alphabet, yesterday. Alphabet will now be parent of the search business as well as all of the other businesses like drones, android, self-driving cars, wearables, and so much more. The switch helps Google become more transparent for Wall Street while setting up the company as a first class innovation conglomerate. An article in the New York Times makes the point (several times) that by setting up Alphabet, Google is emulating General Electric or even Berkshire Hathaway, Warren Buffet’s outfit that is into everything from tighty whities (Fruit of the Loom) to manufacturing, retail companies and a lot more.
Emulating either company is not a bad way to go. Since its founding in 1892 by Thomas Edison, GE has been a powerhouse of innovation in such far flung areas as medicine and healthcare, locomotives, jet engines, and a host of smaller goods that influence the lives of nearly all Americans. What GE has been (and this in no way writes off GE as a future innovator) in all of these areas, Alphabet has a chance to be in new fields during the century ahead.
Unlike Microsoft, which has remained a single entity, Alphabet will spin-up and spin-off wholly owned entities with a singular purpose that enables Google’s founders to engage in their interests in creating new companies, products, and business models while more or less insulating the cash cow from the vicissitudes of a large and possibly chaotic single company. The single company model sets up all kinds of political rivalries for resources and it saps the strength of even the best leaders.
What links GE, Alphabet, Berkshire Hathaway and many others is a Blue Ocean strategy. This approach enables leaders to be bold speculators about the future and the make products and services that fit their visions. Since many or even most bets on the future fall short, there’s a high amount of risk associated with attempting to sail on the blue sea, but when an idea works it is often game changing and paradigm building. If you think about it, Google Glass and self-driving cars define the spectrum.
All this brings to mind Salesforce.com, another company that I have said many times has a blue ocean orientation. Salesforce is tiny compared to GE or Berkshire Hathaway but those companies were small once too. So far, Salesforce has stuck relatively to its knitting building software for business. But if you look at what it is involved in from its verticals to its partners to wearables to its platform-based approach, you can see the potential makings of another GE or Alphabet, though one that is solidly focused on software, at least for the time being.
The rise of Alphabet and the emerging prevalence of blue ocean thinking suggests to me that we are at a transition point. We’re shifting from an economic paradigm focused on information and ramping up a new one that applies digital technology to many more challenges than how to rapidly store and retrieve data.
Humanity faces a long list of challenges today that will benefit from a more aggressive and engineering based approach to problem solving. Engineering is not a panacea but it is amazing how many challenges can be addressed when we start with engineering based approaches. With GE as a model, it will be interesting to see what Alphabet does next.
(Cross-posted @ Beagle Research Group)