With this, they join the ranks of other big "family" companies. Their new peers do okay, but IMHO no one's figured out how to do the conglomerate thing very well, especially when it comes to things like:
COMMONALITIES: What makes them all part of the parent company other than ownership? What should remain consistent with every subsidiary no matter what? Will they be bound by a common mission? (As of yet, Alphabet has not announced a new mission statement)
EFFICIENCIES: There tends to be an inverse relationship between size and efficiency. Work, resources, and money are wasted on multiplying the same thing over and over again. Other parent corporations have attempted to manage this by establishing Centers of Excellence (COEs) and sharing overhead functions like finance, IT, and HR--all with mixed results. These efforts at efficiency tend to decrease effectiveness and add bureaucracy.
CULTURE: Whether the subsidiaries will cultivate their own distinct cultures or share one large one is still TBD. Right or wrong, the reputation of the entire family of companies rides on its worst subsidiary culture. Culture impacts everything from employee morale to company performance. One large mistake in one place ( a poor decision, safety/compliance issues, etc.) could harm the business and reputation of the others. The ability to recruit top talent for future business needs can be impacted as well.
Even writing about these feels daunting. Alphabet's got some big challenges ahead, but...they can also be great opportunities. There's no shortage of opinions out there, but hopefully this unsolicited advice proves helpful:
- Develop your strategies first and have them determine operations, and not the other way around. The pressure will be there to get things going (or continuing) ASAP. Things can't stay the same when the structure is different. If you let things evolve on their own, corrective action will almost always be required, so be smart about what you do.
- Use the affiliation among the subsidiaries to your advantage: share intelligence, talent, communication, etc. Form collaborative relationships between the disparate organizations, formal and informal. Just because they are independently managed doesn't mean they can't talk to one another or help each other out.
- Be purposeful about what needs to be efficient and be selective about which inefficiencies will be acceptable. Balance between governance and independence.
- Given that each subsidiary will have a different context (based on their market, business, leadership, etc.), allow each to develop and manage their distinct culture in alignment with Alphabet's shared, common values.
- Utilize talent cross Alphabet. Becoming a conglomerate creates new leadership opportunities and eventually a great talent pool to cultivate and draw from.
It is my hope that Alphabet won't be just another conglomerate created simply because Google got too big. Rather, this is an opportunity for them to change the status quo once again and lead the way. Goodness knows the conglomerate model needs disruption. If anyone can do it, they can.