Start-ups can learn from Google shake-up

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The tech giant’s creation of Alphabet offers crucial governance lessons for fledgling firms, writes Jimmy McLoughlin

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 oversee Google’s sprawling empire, however, it set newsrooms and investors alight.

Start-ups that 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 such as corporate structure and public policy. Overlooking them can be fatal. But getting them 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, fast-growing companies can often forget about the importance of getting the basics right. Uber, for instance, has recently woken up to the need to harmonise external communications and focus on public policy.

It wasn’t long ago chief executive Travis Kalanick argued his company was in a political campaign, “and the opponent is an asshole named ‘Taxi’.”

Uber soon realised the firm was no longer a scrappy San Francisco start-up 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 2008 campaign manager, and Rachel Whetstone, former head of global communications for Google, show the importance the firm now places on an area that might seem an optional extra for fast-growing start-ups.

Interestingly, Uber still has at least 55 public policy and communication positions up for grabs for seasoned campaigners.

Until 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 markets.

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’s restructure will encourage more start-ups to take issues such as corporate governance seriously from the beginning.

The IoD’s high-growth network of entrepreneurs, the IoD 99, is typical of many new start-ups: hungry for finance and ready to exploit Britain’s fledgling alternative equity markets. However, venture capital firms and investors complain that it can be hard to know exactly what or where they are investing, as the corporate structures of start-ups are hard to decipher.

Fiercely independent start-ups may think it’s old-hat to try to 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.

iod.com/99

 

About author

Jimmy McLoughlin

Jimmy McLoughlin

Jimmy McLoughlin joined the Institute of Directors in 2014 as the deputy head of policy. His policy brief covers the ‘new’ economy – disruptive technologies, the sharing economy and start-ups. His role also covers external affairs and the image of the IoD in the media and Westminster. He helps to run the IoD99, a network of over 500 high growth start-ups, with founders under the age of 40, who meet once a month to receive a master class on how to run their business. Jimmy has written on how and why Britain leads the world in technological adoption, and how Generation Y’s use of technology is changing business.

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