On the one hand, Larry Page and Sergey Brin say Sundar Pichai can run Alphabet and Google at the same time. And a lot of people that have doubted these two along the way have been proven wrong. On the other hand, four years ago they said having the same leadership of both organizations was a bad idea. And a lot of people that have doubted these two along the way have been proven wrong. Were they wrong then? Now? Or has the worldnged enough to make the right answer different? No. Yes. No. This move is a mistake that they will fix soon.
Recall, in 2015, they created Alphabet. They said, in the Alphabet founding letter that they were doing this to “keep tremendous focus on the extraordinary opportunities we have inside of Google” through “strong leaders and independence.”
The fundamental premise was exactly what Meg Whitman (then CEO of EBay), Ideo’s Tim Brown, Jim Hacket (then CEO of Steelcase and now of Ford) and Procter & Gamble’s AG Lafley said about innovation at a Procter & Gamble alumni reunion over a decade ago,
“Larger organizations often struggle with revolutionary innovations because they require different capabilities, mindsets and cultures than the ones that made them successful. Unlike smaller companies, large, successful corporations have much more to lose.”
The point is that larger organizations are better at evolutionary innovation. They have the resources to solve known problems. Smaller organizations are better at revolutionary innovation. They have the flexibility, culture and attitude to bet the ranch because the ranch is smaller. They have less to lose.
Alphabet was formed to give strong leaders the independence they needed to bet the ranch. Larry and Sergey are adept at starting things and encouraging independent leaders. They ran Alphabet.
At the same time, they elevated Sundar Pichai to CEO of Google. He had proved himself as head of product and engineering and was expected to keep “focused on innovation—continuing to stretch boundaries.”
Pichai has kept Larry and Sergey’s confidence. He’s run the main business well, “making Google even better through greater focus.” He has stretched boundaries, but not broken them.
Larry and Sergey said in yesterday’s founder’s letter that it was time to, “simplify our management structure” with Pichai running both Alphabet and Google.
That can’t be the right objective.
Way back in the last century, Coca-Cola’s CEO Doug Ivester kept us focused on improving shareholder equity. It was his equivalent of 2000 Olympic rowing champion, Ben Hunt-Davis’ “Will it make the boat go faster?” We had to tie everything back to improving shareholder equity.
Someone came to him with a proposal for an IT expenditure.
“Why do we need this?”
“It will simplify things.”
He reacted badly, explaining that he didn’t care about simplifying things. If a more complicated approach would create more value, that was the right approach.
Alphabet and Google’s mission is not to simplify management. It’s to “organize the world’s information and make it universally accessible and useful.” If a more complex management structure is required to do that, that’s what they should have.
This brings us back to the original question, “Can Sundar Pichai both operate and innovate at Alphabet and Google?” The evidence suggests Larry and Sergey were right in 2015 and wrong now. Expect Pichai to find a new way to protect Alphabet’s start-ups from the gravitational pull of the Google mothership.
Implications for you
Keep people focused on making their own boats go faster. This is not about titles and prestige. It’s not about the whole alphabet. It’s about the ABCs – Antecedent, Behavior, Consequence. Show me how people are paid and I’ll tell you what they do.
If you want people to drive revolutionary innovation, prompt that behavior and then reward them for taking big bets. Protect them when they bet the ranch and lose. Reward them when they win.
If you want people to keep things safe and drive evolutionary innovation, prompt that behavior and reward them for taking small steps. Punish them severely if they bet the ranch.
Organizations driving revolutionary and evolutionary innovation have to have different cultures. This means they have to have different leaders. Follow Larry and Sergey’s 2015 path to create Alphabet. Do not follow their current path. It won’t work for them. And it won’t work for you.