By the middle of 2010, it was clear that something was broken at Google.
Investors, analysts and members of the media who once touted the company’s fast growth started to wonder if Google was just a “one-trick pony” that cleaned up Internet searches and made a nice advertising business out of it.
Inside Google, teams had begun moving forward with a wide range of groundbreaking and potentially lucrative projects to dominate the smartphone market, scan millions of print books, map every street in the world and even build cars that would drive themselves.
Google’s problem wasn’t a lack of ambition, but rather a fundamentally flawed decision-making process at the very top of the company that kept slowing things down, according those in the C-suite at the time.
For nearly a decade, Google’s two brilliant youthful founders, Larry Page and Sergey Brin, made all major business decisions together with the seasoned executive they had selected as CEO, Eric Schmidt.
“They were so close at the beginning of the company and they made so many great decisions together. It was very powerful,” Patrick Pichette, Google’s former chief financial officer, said in an interview this week with Mashable. “But as the company grew and grew in complexity and momentum, that became an issue.”
The vexing issue, and Google’s eventual fix for it, set in motion a more “mature” management strategy that helped it move faster, eventually influenced its move to create a new holding company called Alphabet and arguably propelled it (however briefly) to overtake Apple this year as the most valuable business in the world.
Looking back, Google’s flaw was obvious, but serves as a case study for the need to consistently re-think the leadership structure of businesses as they grow and adjust their goals.
2.5 hour long debates
As CFO, Pichette enjoyed a rare birds-eye view into Google’s exclusive and influential executive suite from 2008 until he left last year to travel the world and find better work/life balance.
From that perch, Pichette watched as this triumvirate at Google unintentionally created a massive bottleneck simply because they believed all three men needed to be in the same place at the same time deciding on the same things.
On multiple occasions, Pichette says, product teams would wait eagerly for the executives to emerge with a decision after some “2.5 hour” long debate — all three are prone to intellectual sparring — only to be crestfallen to learn that no decision had been made because Page or Brin or Schmidt happened to be somewhere else at the time, necessitating yet another debate.
“No decision was made without the three of them being in the room and all nodding,” Pichette recalls. “I can tell you at some point this created such a slowdown in momentum.”
Without necessarily realizing it, those outside the executive suite caught occasional glimpses of this dysfunction and relentless debating.
During one joint public appearance in 2008 (starting at the 3:20 mark in the video above) for which the three men have flown in from three different parts of the world, they are asked a question about the impact of Microsoft potentially acquiring Yahoo.
Brin admits not having had time to catch up on the news. Schmidt takes the lead in offering a corporate response, then asks a quiet Page if he agrees. The latter says yes.
“Great,” Schmidt jokes. “With us you never quite know.”
After a “dozen” or so frustrating decision-making roadblocks, Pichette says Google’s management team recognized “there’s something broken.”
The fix was announced several months later, at the very beginning of 2011.
Google shocked the technology world by revealing that Page would take over as Google’s CEO, bumping Schmidt to the sometimes ceremonial position of executive chairman. Brin would remain “cofounder.”
Their roles became more clearly defined as a result: Page would oversee key technology and business-related decisions. Brin would focus on “new products” like Google Glass and the self-driving car.
Schmidt, in turn, would function as an advisor to both with more of a focus on “broader business relationships, government outreach and technology thought leadership.”
“As Google has grown, managing the business has become more complicated,” Schmidt wrote in a blog post at the time, hinting at the troublesome management arrangement that had plagued Google. “So Larry, Sergey and I have been talking for a long time about how best to simplify our management structure and speed up decision making.”
Even now, the sense of relief from this arrangement is audible in Pichette’s voice.
“To hear Sergey say, ‘On this issue, it’s Larry’s call,’ that was a transformative moment for the company,” he says. “It gave us a ton of momentum.”
The beginning of the Alphabet
For Page, that significant leadership restructuring was only the beginning.
From the moment he took over as CEO again in 2011, Page was interested in finding a new business structure that would help Google be more ambitious — and bring its ambitious projects to market — while also freeing him up from humdrum day-to-day management responsibilities.
“He talked about a million things he wanted to do, but he spent 100% of his time managing and trying to get his executives to work together,” one former Google executive told Mashable in an earlier interview.
The solution came in two parts.
First, Page groomed a quasi-successor, Sundar Pichai, to assume more operational roles inside Google, while simultaneously empowering executives of other key divisions, freeing him up to focus more on the big picture.
Then, last year, Page once again shocked the technology world by announcing plans to create a new holding company called Alphabet. Google would be just one of its many subsidiary companies, along with Nest, Google Ventures and others.
Page, Brin and Schmidt remained the top execs at Alphabet, but more executives would potentially earn CEO titles and the autonomy to make crucial decisions on their own — without always waiting for the triumvirate to come together and finish a long debate.
“Alphabet is about businesses prospering through strong leaders and independence,” Page wrote in his note announcing Alphabet. “In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed.”
Pichette, who played a role in preparing for Alphabet before leaving, sees this decision as a continuation of the growing maturity on the leadership team that prompted the first big change back in 2011.
“You see that same maturity coming up with Alphabet,” Pichette says. “Larry saw there is great management in place so he doesn’t need to run day-to-day Google.”
“They are amazingly good at adapting to where they are and thinking ahead,” he continues. After all, the one thing that hasn’t changed: “These are three crazy ambitious people.”
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