Google's transition to Alphabet can help teach startups their corporate governance ABCs

Jimmy McLoughlin
Follow Jimmy
ABCs... easy as 123 (Source: Getty)
If it isn’t code for job losses, the announcement of a company restructure is normally reserved for the back of the business pages. When Larry Page posted a blog outlining the creation of Alphabet, an umbrella holding company to look over Google’s sprawling empire of businesses, however, it set newsrooms and investors alight.
Startups who like to study Google for tips on how to emulate its success may wonder what all the fuss was about. But companies would do well to look closely at how seriously the tech giant takes vanilla business issues like corporate structure and public policy. Overlooking them can be fatal. But getting it right can be a major point of differentiation and springboard for success.
It’s worth remembering that Google, despite being one of the most valuable companies in the world, is still only 16 years old. No wonder it is pouring resources into developing driverless cars - it wouldn’t be allowed behind the wheel of a real one in the UK until 4 September.
New companies, riding the euphoria of what feels like endless expansion and on a path to world domination can often forget about the importance of getting the basics right. ‘Super-unicorn’ Uber, for instance, has recently woken up to the need of to harmonise external communications and focus on public policy.
Uber soon realised the firm was no longer a scrappy San Francisco startup that can ruffle feathers but little else. Regulators and governments around the world have started to take note. A company less than four years old had to navigate a steep learning curve and build bridges with the public and politicians.
Uber’s hire of David Plouffe, President Obama’s campaign director, and Rachel Whetstone, the former head of global communications for Google, show the importance the firm now places on an area that might seem, at most, an optional extra for fast-growing stat-ups. Interestingly, Uber still has at least 55 public policy and communication positions up for grabs for seasoned campaigners.
Until very recently, human resources was another dry and dusty area of day-to-day business operations, which failed to inspire start-ups and entrepreneurs. Here too, Google has led the field in alerting companies to the massive opportunities of how small companies can shake up.
The famous 80/20 rule, where engineers spend the equivalent of one day a week working on whatever they like is not only heralded as excellent for staff retention, but also product development.
Other innovative employee offerings that were initially dismissed by traditional industries - such as Google’s sleep pods - have since been adopted by corporations such as GlaxoSmithKline.
Hopefully the unprecedented coverage and attention given to Google/Alphabet’s restructure will encourage more start-ups to take issues like corporate governance seriously from the beginning. There is good reason to.
Our high-growth network of entrepreneurs, the IoD 99, is typical of many new startups: hungry for finance and ready to exploit Britain’s fledgling alternative equity markets. However, venture capital firms and investors complain that it can be very hard to know exactly what or where they are investing, as the corporate structures of startups are hard to decipher.
Fiercely independent startups may think it's old-hat to try and learn from the greatest disruptor of all, but there is plenty they can take from Google’s latest announcement.
Sorting out the basics - corporate governance, human resources, external relations, public policy – isn’t an optional extra or something which can be left to the big boys.
Just like everything else, these are areas ripe for disruption, which can set businesses apart from their competitors, and are fundamental when it comes to winning investment.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles