In December, Alphabet will officially become the parent company of Google. The creation of an umbrella company will help to separate Google’s core business units from the companies and patents it acquires and new projects it pursues.

 

Google founders Larry Page and Sergey Brin will transition from Google into new positions as CEO and president of Alphabet. The current head of Android, Sundar Pichai, will take over as CEO of Google.

 

Google is famous for pushing the limits of innovation by both encouraging its employees to pursue their passions and investing in startups and new technologies. While these characteristics have helped build Google into one of the most successful companies in the world, it is a cause for concern for investors. Google invests significant time, money, and manpower in projects which may never develop into consistent revenue streams.

 

The new business structure will ensure that the staples of Google’s business — including its search functions, Android, and YouTube — will not be affected by the successes or failures of Google’s (soon to be Alphabet’s) experimental projects.

 

According to the Wall Street Journal, each subsidiary of Alphabet will have its own CEO.  This will create a more flat structure and allow for more managerial freedom for project managers.

 

 

The new format represents an important transition for Google. They are now more similar to General Electric of Berkshire Hathaway than they are to other tech companies. The transition of roles for founders Larry Page and Sergey Brin sheds more light into the direction they want to take the company. Instead of being focused on Google’s traditional functions, they will act more like investors as they look for new companies and technologies to bring into Alphabet and monitor the performance of their current subsidiaries.

 

Owners of Google’s stock will receive one share of Alphabet for each share of Google they own. The restructuring and creation of Alphabet will provide greater insight into the actual performance of Google’s different units. Each of the subsidiary companies under parent company Alphabet will need to report their own financial information. Stock owners will now have detailed information into how Alphabet allocates their resources and will be able to see the monetary implications of the risks taken on experimental projects.

 

How will the change in structure affect investment into Google’s new projects? Will removing some of Google’s best minds from its core business units affect their performance and growth? Feel free to leave a comment or find me on Twitter @Andrew_Morse4