Tech

Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

Google transformed itself into Alphabet last year to keep the ambitions of a wild and crazy startup even as the company matured into an increasingly prudent adult. As any millennial can tell you, the shift into adulthood isn't easy. 

The inherent tensions between teenager Google and grown-up Alphabet contributed to the company's decision to seek a possible buyer for its Boston Dynamics robotics business, as my Bloomberg News colleagues Brad Stone and Jack Clark reported on Thursday.

Google bought Boston Dynamics in late 2013 as part of a robotics acquisition spree. Robots are one of the far-out ideas that Larry and Sergey's company are exploring for computers that think and act like people so they can drive cars and assist in caring for the elderly. The Massachusetts-based company generated huge buzz for its online videos like ones showing its "Terminator"-esque robots pulling Santa's sleigh and running faster than Usain Bolt

The Bill for Moonshots
Google's spending on research and development has grown faster than the company's revenue in recent years. The dynamic has pushed up the share of company revenue devoted to R&D.
Source: Alphabet

It's easy to see Boston Dynamics as a relatively minor foray by Google that didn't work out. No harm done. But the internal discussion about Boston Dynamics shows how tough it can be to reconcile Alphabet's dual missions: Pursue big and risky dreams but make sure there's a clear road map for proven and financially sustainable products.

In short: We want "moonshots," but with spreadsheets. 

Boston Dynamics didn't seem to find the right balance inside of the Alphabet corporate agenda. One Google executive in a November meeting discussed frustration with the "messaging around all this 'gotta make a product right now,'" according to minutes of the meeting cited in Stone and Clark's article.

Officials also grappled with the trade-offs of letting new ideas flourish -- but within limits. One model described with some envy was a Google research group led by Regina Dugan, who gives most fledgling projects two years to prove themselves or else they're put out to pasture. 

The Alphabet Bump
Investors loved Google's transformation into Alphabet -- and the financial discipline promised as part of the new corporate agenda.
Source: Bloomberg

Only a handful of companies in the world -- Google, Amazon, Facebook, Apple, perhaps Uber -- have both the resources and long leash from investors to pursue wacky ideas that may take years and billions of dollars to pan out. But all successful tech companies -- actually, all successful companies regardless of industry -- have to find a way to chase risky ideas to find their next big thing but not commit suicide with ill-advised, expensive and distracting projects. 

Google's founders have been obsessed with making sure Google stays on the cutting edge. "Over time many companies get comfortable doing what they have always done, with a few incremental changes. This kind of incrementalism leads to irrelevance over time, especially in technology," Larry Page wrote in 2014. 

Yet that way of thinking also bogged the company down with pricey, sometimes conflicting agendas. Spending on research and development, new hires and capital projects ballooned at Google in recent years and caused grumbling among investors. 

That's why investors loved Alphabet, which seemed like the same old Google, just with a bit more business common sense and discipline. Alphabet was a bet that a holding company structure -- think Berkshire Hathaway for technology -- could make Google both a financially disciplined, profit-rich Web-advertising machine and a broadly ambitious innovation machine. It's like a business school case study playing out in the real world. 

The new company rigorously stress-tests its biggest ideas at the X "moonshot factory" to ensure they are important and promising enough to get access to Alphabet's full attention and money. But there's no magic ingredient that separates outlandish and expensive projects that turned into world-changing technologies -- AWS at Amazon, the Android mobile phone software at Google -- and outlandish and expensive projects that turned into flops, like Amazon's Fire smartphones and the Google Glass computerized eyeglasses.

Google's founders were smart to try radical reinvention in an effort to keep their company on top into tech middle age. As they and their robotic minions are finding, however, crazy dreams and prudence sometimes fit awkwardly under the same corporate umbrella. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. To steal from Monty Python, Google Glass isn't dead yet. It's being reinvented with (for now) narrower ambitions in the corporate market.

To contact the author of this story:
Shira Ovide in New York at sovide@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net