Editor’s Note: This article first appeared on Robocars.com
Everybody has heard about Google‘s restructuring. In the restructuring, Google X, which includes the self-driving car division, will be a subsidiary of the new Alphabet holding company, and no longer part of Google.
Having been a consultant on that team, I have some perspective to offer on how the restructuring might affect the companies that become Alphabet subsidiaries and leave the Google umbrella.
The biggest positive is that Google has become a large corporation, and as a large corporation, it suffers from many of the problems that large companies have. Google is perhaps one of the most unusual large companies, so it suffers most of them less, but it is not immune.
As small subsidiaries of Alphabet, the various companies will be able to escape this and act a bit more like startups. They won’t get to be entirely like startups – they will have a rich sugar daddy and not have to raise money in the venture funding world, and it’s yet to be seen if they will get any resources from their cousin at Google. Even so, this change can’t be understated. There are just ways of thinking at big companies that seem entirely rational when looked at up close, but which doom so many projects inside big companies.
Here let me list some of the factors that will be positives:
1. While Alphabet has said nothing about the structure of the Google X companies, it seems likely that they will be able to give options and equity to their employees; options that might have a big upside. Google stock options have lost the big upside. Due to the structure, however, the equity packages will probably be smaller, with nobody getting the large chunks founders get -and nobody taking the risks founders do.
2. It will be easier, of course, for Alphabet to sell off these subsidiaries, or even take them public or do other unusual things normally not done with corporate divisions. (It’s not impossible with corporate divisions, but it’s rare and it rarely is a bonanza for the staff.)
3. The subsidiaries will be freed from the matrix management of large companies. They will get their own legal departments, be able to set their own benefit structures and culture to some extent. Don’t underestimate the value of not having to work within a corporate legal or HR department when you’re trying to be a startup.
4. The companies can take risks that Google can’t take. For example, consider Uber, which simply violated local laws in some area to kickstart ride service. It’s much harder for a division of a large company to even try a stunt like that. For Uber, it worked – but it doesn’t always work.
5. The companies can also do things that would otherwise tarnish the Google brand. Huge as it is, the public has a natural distrust of Google, particularly on issues like privacy. While I think all robocar companies should work hard to protect privacy, being inside Google creates a whole new amount of scrutiny and established principles. In the case of making robocars, they might one day injure somebody, and that is a scary thing for the big brands. If you live in fear of that all the time, you won’t win the race, either.
6. The CEOs of the new companies should have a lot more autonomy than they had before.
7. They still will have access to vast financial resources. If the new car company needs ten billion dollars to build a fleet of 400,000 taxis, or even needs to buy an existing car company, it’s not out of the question.
8. Being inside Google conveys a certain arrogance to people because it’s one of the world’s leading companies in many different ways. But sometimes it’s good not to be so cocky.
9. Out of fear, there are companies that won’t do business with Google. I once asked the folks at WAZE if we might get their data on accidents. I was told, “The one company we would be afraid to sell our data to is Google.” Of course, Google got WAZE’s data, but at a much higher price!
Of course there are some negatives:
1. Google brings with it vast, vast resources, not just in money. Google is also the world’s #1 mapping company, and in fact many of the early members of the Chauffeur team were people who worked on maps and streetview. Google’s world-leading computing resources also are useful for the big data projects and simulation a robocar team has to do.