Larry Page assured on August 10, 2015 that, “Google is not a conventional company” and they do “not intend to become one.” In his announcement and on the new corporate website, he assured its investors and the public that “we strived to do more, and to do important and meaningful things with the resources we have.”Fig. 1 The new Alphabet is lounged
Many investments of the recent years have created a corporation with US$66 billion revenues in 2014 and they became the second most powerful brand according to various measurements (Interbrand: US$ $100 billion, MillwardBrown: US$ $174 billion).
With these investments they showed the world that they still were looking for revolutionary ideas, which could drive the next big growth areas. But that they also listen to the Investors and want apply the most advanced management practice: brand portfolio management.
Since many years, companies use portfolio strategies to balance their risk. Large conglomerates invested in new ventures to manage product and industry lifecycles or to boost innovation and shareholder value. IBM and GE are excellent examples for sophisticated portfolio management. Consulting companies and professors developed tools and measurements to professionalize the procedures. Well known instruments are the BCG-Matrix or the McKinsey portfolio strategy and resource allocation concept with its various tools.
The brand portfolio management requires from the management to consider an additional dimension. They need to maximize market coverage so that no potential customers are being ignored, and to minimize brand overlap so that brands are not competing among themselves to gain the same customer’s approval. Kevin Lane Keller stated this already in 2002 and David A. Aaker published his Brand Portfolio Strategy book in 2004. Both were developed to help B2C companies like Procter & Gamble, Nestle and Unilever to improve their customer coverage.
In the case of Alphabet, we have a mix of B2B and B2C and even hybrid companies. So far, the new “Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main internet products contained in Alphabet instead”. But in a next step the new holding company Alphabet wants to “… allows us more management scale, as we can run things independently that aren’t very related” (Larry Page).
The new structure and hierarchy is geared to provide a clear structure and allows accountability on all levels.
With some good will, Alphabet has today at least one company for each letter of the alphabet, and this may not be the end of it.
H – Hangouts
J – Jump
K – Keep
O – Offers
Q – [Nexus] Q
U – URL shortener
X – Google X labs
Y – YouTube
This development is not only exciting for Larry, but also for the scientific community, because new measures are needed to analyze and steer the holding and the portfolio companies.
Larry Page also sets the standards high for the future of the new corporation; we can expect improved management practice and theoretical concepts of multi-brand companies.
For him the new company name has also the meaning “alpha‑bet”. Were Alpha stands for investment return above benchmark! In line with brand portfolio strategy the “Alphabet companies should have independence and develop their own brands.”
I am excited to see how Alphabet manages to innovate in bringing more consumer satisfaction by using this form of management.
See recent publication: B2B Brand Portfolio Strategy