You’re probably familiar with Google Maps, YouTube, and Android, all creations of Google the giant search engine. But, have you heard of Verily, Calico, Fiber, and Nest? With mountains of cash on hand, Google is setting out to be something of a next generation conglomerate with ventures farfetched from their core competencies.
The conventional advice for your small business is to look for ways to extend what you do best with new products or new markets or new geography, etc. In spite of what Google is doing that advice holds for you and me. But when you have $73 billion on hand and annual revenue of $74.5 billion there is just so many YouTubes and Androids to be hatched. When Microsoft was in a similar position and couldn’t come up with enough innovative places to invest it decided to start paying a dividend. Investors punished the stock, declaring that the era of rapid growth was over. Google has learned from that mistake and instead is investing in a series of “moonshots”.
The conglomerate business model got a bad name in the 1970’s when many amalgamations proved to be undisciplined and unprofitable. The only real success story was GE, which found consistent profits in a combination of washing machines, jet engines, insurance, and nuclear power. Investors marveled, while proclaiming that GE was an anomaly. Imitators never followed.
Google’s new umbrella holding company, Alphabet, is different. For Google to maintain its pace of innovation the idea is to create autonomous units outside the Google structure. The strategy is to create the physical products that are enabled by the software and information environment Google helped to create – jet packs, Internet balloons, space elevators, self-driving cars, genetic code hacks, smart contact lenses, on and on. If it can be imagined, it will be considered for a new Alphabet venture.
Ironically just as Google is moving its innovation initiatives into the physical world, GE with its Predix cloud platform is moving into the virtual world.
If the ambitious Alphabet bet succeeds, it will transform everyone’s future, not just the future of one of the world’s most valuable companies.
Image credit: By Alvandria – https://commons.wikimedia.org/wiki/File:Alphabet_Chart.png, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=42421525
© 2024 Advantage20 