From Google to Alphabet: the fight against isomorphism
The first thing that came to my mind when I read about Google’s rethink that has led to Alphabet was that this was a decisive step in the struggle against isomorphism, the bête noir of all innovative organizations.
The recently created holding begins a process aimed at giving greater autonomy to the companies therein, with the goal of allowing them to maintain or set up their own processes: if Google’s hiring procedures don’t convince Tony Fadell, for example, then he can abandon corporate orthodoxy and do his own thing, based on his own strategy of attracting talent, in the same way that he can keep his servers at Amazon, sign contracts, define his own marketing campaign, or take any other decision within the limits of the reasonable that he thinks will serve his company.
In a company growing as fast as Google, being able to give the holding’s components greater freedom to manage their own affairs reduces the complexity of the decision-making process considerably, albeit in return for slightly less efficiency. But this can also be seen as a trade off for maintaining an environment that offers greater innovation and creative thought. Within Google’s structure prior to Alphabet, getting time from some directors in the run up to a decision could be a limiting factor, potentially delaying making that decision.
This has led to a much-needed reflection on the nature of its corporate structures, on the search for efficiency at any cost, on the search for the right size that balances efficiency and coordination costs, and in environments that require innovation and rapid change, the problem that could end up meaning that bureaucracy and established procedures end up being written in stone, compromising the freedom needed to innovate fully.
Remember Ronald Coase and all that stuff on the transaction costs and the Nature of the Firm? Time to rethink all that. Is your company too big? Is your corporate structure limiting your ability to innovate?
(En español, aquí)
