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REV: FEBRUARY 26, 2018
JUAN ALCACER
RAFFAELLA SADUN
OLIVIA HULL
KERRY HERMAN
Alphabet Eyes New Frontiers
We’d like to have a bigger impact on the world by doing more things.
— Larry Page, Cofounder and CEO of Alphabet 1
In June 2016, Tony Fadell announced that he was “leaving the nest” after six years at the helm of
Nest Labs, an Alphabet subsidiary that made smart household appliances. “I’m a guy who’s at the
beginning of things,” he told the New York Times. “I don’t like to do maintenance mode. It’s not what
gets me out of bed.” 2 The news followed press reports that revealed turmoil at Nest and raised
questions about Google’s recent decision to restructure into Alphabet, a holding company.
When the reorganization had first been announced in August 2015, experts said Nest would be
among the main beneficiaries. “Nest and the rest gain more freedom to spend money, acquire other
companies, etc. without having to try to explain how such costs are benefiting the core ad business
when they clearly were not,” one analyst noted. 3 “[Alphabet’s] new stand-alone companies will have
more freedom to take risks,” another observer commented. 4 But when internal problems at Nest and
other subsidiaries surfaced in the press, observers began to fault the reorganization. “Google cofounders, now Alphabet honchos, really want to replicate their search engine’s success across a range
of industries with operations run like startups,” one observer wrote. “To do that, though, they have to
face a dilemma inherent in their structure. That is, they must find execs willing to work within
Alphabet’s corporate umbrella, and teams willing to work with their chosen execs.” 5
The makeup and management of Alphabet’s diverse collection of subsidiaries had been in flux since
the restructuring announcement. In August 2015, a day after Google announced that it would
reorganize, gaming subsidiary Niantic, an early “autonomous business unit” under Google, 6 said it
would become an independent company. 7 In December 2015, life sciences subsidiary Verily announced
the creation of a new surgical solutions venture that would also spin off. 8 Also that month, Bloomberg
reported that Alphabet would soon create a separate subsidiary to house the company’s self-driving car
project, which had been the founding project of Google’s X lab. 9 News outlets reported on a growing
culture of fiscal discipline at Alphabet, where subsidiaries were now being asked to pay the parent
company for shared services. 10 And in March 2016, Alphabet’s robotics subsidiary, Boston Dynamics,
was reportedly put up for sale. 11
Professors Juan Alcacer and Raffaella Sadun and Associate Case Researchers Olivia Hull and Associate Director Kerry Herman (Case Research &
Writing Group) prepared this case. This case was developed from published sources. Funding for the development of this case was provided by
Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve
as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2016, 2017, 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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Alphabet Eyes New Frontiers
Against this backdrop of change, long-time Google observers wondered, were Nest’s problems
evidence that the new corporate form was incompatible with the ambitious innovation agenda set out
by Google’s founders, or would it in fact make it easier to deliver breakthrough innovations to market?
And did it make sense to host such a large and diverse set of “moonshots” under a single corporate
owner?
Google’s Rise
Founders Larry Page and Sergey Brin met at Stanford University in 1995. At first, they called their
search engine “BackRub,” but in 1997, they registered the domain Google.com. The name referred to
the number googol, which is equivalent to 1×10^100. In 1998, Google, Inc. filed for incorporation in
California, with headquarters based in a garage in Menlo Park, California. By 2000, Google had become
the largest search engine in the world, with an index of 1 billion pages, 12 and in 2006, “google” became
a verb in the Oxford English Dictionary. 13 In 2015, Google had 64% of the U.S. market share of search;
no other competitor had even 20%. 14 That year, revenues came in just under $75 billion, with total
assets of $147 billion by December 2015. 15 (Exhibits 1a and 1b provide information on Alphabet’s
financials.)
Eric Schmidt came to Google as chairman in March 2001 and became CEO a few months later. He
shared management responsibilities with the two founders. Schmidt had risen to prominence during
his successful tenure at Sun Microsystems and had been running Novell since 1997. Brin and Page were
impressed by Schmidt and felt he would be the right fit to round out the professionalism and
management expertise of their youthful leadership team. Schmidt oversaw the company’s IPO in 2004
and, in his first few years at the company, saw Google through its expansion into several new products
and services, including Google News, Blogger, Google Books, Gmail, Google Earth, Google Maps, and
the acquisitions of YouTube and DoubleClick.
Investor Relations
In August 2004, Google became a publicly traded company in a controversial initial public offering
(IPO) that lagged many investors’ expectations. 16 Both the initial share price of $85 and demand for the
stock were lower than Google expected. 17 The IPO was unusual for two reasons. First, the founders
opted to run the IPO in a rare auction format, which precluded the underwriters from setting an
opening price, marketing the IPO on behalf of Google, and earning high fees on the transaction. 18 In
marketing its own IPO, Google faced criticism for failing to answer investors’ questions, such as how
the company planned to spend the money it raised. 19 Some felt that Google had alienated investors
and investment banks by eschewing the standard Wall Street IPO process. 20 “Their mantra was ‘Trust
us,’” said one hedge fund manager. “That doesn’t work for a company with a high price if you have
no idea what the future will bring.” 21 Also unconventional was Google’s election of a dual stock
structure, in which Class A shares carried one vote each while Class B shares, reserved for Google
insiders, carried 10 votes. 22
In a letter to prospective investors, Page and Brin explained that choice:
[The] standard structure of public ownership may jeopardize the independence and
focused objectivity that have been most important in Google’s past success and that we
consider most fundamental for its future. Therefore, we have implemented a corporate
structure that is designed to protect Google’s ability to innovate and retain its most
2
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distinctive characteristics. We are confident that, in the long run, this will benefit Google
and its shareholders, old and new. 23
On the first day of trading following the auction, Google stock climbed above $100 per share. 24 The
stock jumped 1,294% over the next 10 years, outperforming all but 10 other stocks during the same
period. 25 (See Exhibit 2 for Alphabet share pricing since the IPO.)
By many accounts, Google’s relationship with investors had two sore spots: its approach to
corporate governance and its large, opaque research budget. Shortly after Google’s IPO, the
Institutional Shareholder Services, which advised institutional investors, gave the company a lower
corporate governance rating than all the Fortune 500 firms. 26 Corporate governance experts said the
dual class structure was “problematic” and amounted to “benevolent despotism.” 27 In the 2004
prospectus, Google itself admitted that the structure “will make it harder for outside parties to take
over or influence Google.” 28 The structure made it difficult if not impossible for activist investors to
gain traction. 29 “The attitude Google has toward outside investors is worth watching,” one analyst said.
“But in the end, you are basically buying management. You either think they are capable or you don’t.
If Sergey and Page don’t make it here, there won’t be anything left.” 30
In early 2011, Schmidt brought Page back as CEO of Google after a 10-year hiatus, announcing via
Twitter, “Day-to-day adult supervision no longer needed!” 31 Schmidt became executive chairman,
announcing he would focus “externally on deals, partnerships, customers and broader business
relationships.” 32 That April, Page moved to increase capital expenditures and significantly expand
Google’s workforce. 33 Some predicted that these investments would make shareholders impatient.
“Having a Google that’s a little more willing to invest in what they have, in order to build out beyond
search, will ultimately create shareholder value,” 34 one analyst commented. “But that’s not going to
make the next few quarters look how they’d like.” 35
In March 2014, Google introduced a new share class, Class C, which carried no voting power. 36
Shareholders tried to prevent the change with a resolution that would have ensured equal voting
rights, but a resolution introduced by Brin and Page defeated it. 37 Some thought the shift would create
future problems for shareholders. “What comes out of Google ten years from now is probably
dysfunctional,” one technology investor said. 38
Unlike other technology companies, Google did not pay dividends to shareholders. 39
Innovation at Google
Google embraced unconventional human resources practices in the interest of fueling innovation.
One of its most famous employee perks was known as “20% time.” In their 2004 letter, the founders
explained, “We encourage our employees, in addition to their regular projects, to spend 20% of their
time working on what they think will most benefit Google.” 40 Several successful Google products had
been invented during 20% time, including Google’s autocomplete system, AdSense, 41 the advertising
technology behind Gmail (Ad Sense); Google News; Gmail; and even the buses that transported
Googlers to work. 42 Ad Sense alone brought in about one-fourth of Google’s annual revenues. 43
There was no shortage of ideas at Google; projects born during 20% time numbered in the
thousands. 44 In 2011, Page began an annual campaign to offload the projects that had failed to catch on
or had been made redundant by other products on the market. 45 “There were so many interesting
projects going on that almost nothing had enough investment to be truly great,” said CEO of People
Operations Laszlo Bock. 46
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Alphabet Eyes New Frontiers
In addition to 20% time, Googlers were offered five-month maternity leave, on-site laundry, free
meals, and even death benefits. 47 “At times Google’s largesse can sound excessive—noble but wasteful
from a bottom-line perspective,” an observer noted. 48
Work spaces at the “Googleplex” in Mountain View were designed to promote what Bock termed
“casual collisions” between coworkers. 49 The inspiration for this choice came from Bell Labs, the
historic research arm of AT&T. Bock explained:
When they built the buildings that Bell Labs were in, they set up the buildings where
there’s a long corridor down this long building, and all the offices were off to the sides.
And the thesis was people would kind of stumble out of their offices and bump into each
other and have interesting conversations. There’s a direct line from that to the way, for
example, at Google we run our cafes, where we have these round tables and long tables
where you end up sitting next to strangers and bumping into them. And we try to
manufacture these moments of serendipity in much the way Bell Labs did. 50
To encourage risk-taking, Google leadership embraced failure. One of the company’s public failures
was Google Wave, a live messaging platform that allowed users to collaborate on documents in real
time. Less than six months after introducing the service in March 2010, Google pulled the project due
to low user adoption. 51 Bock explained, “The team . . . took a massive, calculated risk. And failed. So
we rewarded them,” with bonuses. 52 He added, “The biggest lesson was that rewarding smart failure
was vital to support a culture of risk-taking.” 53
Page gave one project manager some advice when he was hired: “It’s O.K. if you fail, I just want
you to fail quickly.” 54 In March 2015, the Wall Street Journal reported that Google was investing more
resources in Advanced Technology and Projects (ATAP), the research lab that limited projects to two
years, while scaling back support for other innovative projects. 55 “One week of their time is one percent
of their entire duration in ATAP,” said ATAP’s founder. “That makes them impatient with bureaucracy
and process. And with a small enough group, you can start to strip away those things and go really
fast.” 56 Investors were pleased. “If Google can make research projects shorter and with less investment,
that’s positive,” one analyst said. “It’s going to be less worrying if projects fail.” 57
Loving the Googleplex Each year more than 2 million people applied to work for Google. 58 A
2015 survey found that Google was the preferred employer of both engineering students and business
students. 59 “Millennials want to truly understand a company’s purpose, align with it, and work with
others to propel the organization’s performance,” the study’s authors commented. “Millennials are
highly attracted to entrepreneurial energy in the workplace.” 60 About 89% of Googlers gave their
employer a high satisfaction rating in 2015, according to PayScale. 61 “Google works from the bottom
up,” explained one Google engineer. “If you have a great technical idea, you don’t have your V.P. send
out a memo telling everybody to use it. Instead, you take it to your fellow engineers and convince them
that it’s good.” 62 Google leadership sought to establish a culture where employees felt comfortable
speaking up. 63 “People with vision were given the opportunity to create their own Google,” Bock wrote
in his 2015 book, Work Rules! 64
Leaving the Googleplex Despite an effort to create what one spokesman called “the happiest,
most productive workplace in the world,” 65 large numbers of Googlers left after short tenures. Between
July 2012 and July 2013, Google was ranked fourth in a list of Fortune 500 firms with highest employee
turnover. 66 Though employees enjoyed a median pay of $107,000, they only stuck around for a median
of 1.1 years. 67 Part of this, experts explained, was a function of Google’s exponential growth; between
2007 and 2013, Google added 19,000 employees. 68
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One engineer who left the company in 2012 said the former “innovation factory” had become
preoccupied with beating rival Facebook in advertising. 69 “The Google I was passionate about was a
technology company that empowered its employees to innovate,” he wrote. “The Google I left was an
advertising company with a single, corporate-mandated focus.” 70 Another cited “creeping
bureaucracy” as the reason she left Google. 71 A third said she wanted to run her own show: “Google is
a great training ground for how to build an amazing culture and an amazing product. But Google is
not that good at teaching you how to build a business.” 72 An eight-year Google veteran felt too
sheltered from failure at Google: “Google teaches you so much, but it also buffers and protects you.” 73
Some executives left to start their own firms, many of which Google funded through its venture
capital department, Google Ventures (GV). 74 One ex-Googler who went on to start a company
commented, “Google has always wanted to have a major impact on the world. Having us go to other
companies is an extension of that.” 75
Investing Outside the Core
From the beginning, Google’s founders vowed to take the long-term view. “Despite the quickly
changing business and technology landscape, we try to look at three to five year scenarios in order to
decide what to do now,” the founders wrote in 2004. 76 They warned investors that the company would
“place major bets on promising new opportunities,” incurring substantial risk. 77 “We will not shy away
from high-risk, high-reward projects because of short term earnings pressure,” they wrote. 78
And, although online advertising accounted for the vast majority of Google’s total revenues (95%
in 2012), the company also showed a strong interest for the pursuit of new opportunities beyond search.
Page appeared to believe that Google had a significant margin for expansion. “You know, we always
have these debates: We have all this money, we have all these people, why aren’t we doing more stuff?”
he said in 2013. 79 “You may say that Apple only does a very, very small number of things, and that’s
working pretty well for them. But I find that unsatisfying. I feel like there are all these opportunities in
the world to use technology to make people’s lives better.” 80 He pointed to a tension between investors
and taking risks: “Investors always worry, ‘Oh, you guys are going to spend too much money on these
crazy things.’ But those are now the things they are most excited about . . . .” 81
Some argued that Google had no choice but to diversify to ensure future growth. “If you think
historically, go back 30 or 35 years, the organizations with big R&D [Research and Development]
divisions were AT&T, IBM, and Xerox,” said one academic. 82 “Notice that each of those companies had
a de facto monopoly.” 83 But others noted that these very companies had poured large sums of money
into R&D, but often failed to profit directly from new discoveries. 84 (Exhibits 3a and 3b show
innovations at Bell Labs and PARC.)
Early Investments
In a 2005 discrete transaction, Google acquired Android, a small software company, at an estimated
price of up to $50 million. 85 “The bet that Larry, Sergey, and Eric made at the time was that smartphones
are going to be a thing, there’s going to be Internet on it, so let’s make sure there’s a great smartphone
platform out there that people can use to, among other things, access Google services,” said Hiroshi
Lockheimer, Google’s Vice President for Engineering at Android. 86 By 2015, Android had become the
most popular mobile operating system in the world. 87 Increasingly, however, cell phone makers were
altering the operating system to disengage Google’s apps. “About 30 percent of Android smartphones
shipped in the last quarter of 2014 were actually modified, or forked, versions of the OS that may not
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Alphabet Eyes New Frontiers
be very hospitable to Google’s services, according to the firm ABI Research,” the New York Times
reported. 88
In October 2006, Google agreed to buy the popular online video site YouTube for $1.65 billion in
stock. (Eric) Schmidt called it “the beginning of an Internet video revolution.” 89 At the time, there was
significant doubt as to whether user-generated content sites would attract top advertisers. YouTube
was considered an unproven entity, and many were perplexed by the high price Google paid for a
company with a string of losses and no clear path to profitability. 90 In 2016, this acquisition was
generally viewed as successful, with YouTube’s annual ad revenues estimated at several times the 2006
purchase price and growing. However, the unit’s overall contribution to Alphabet remained unclear.
Less than a year later, in April 2007, Google announced that it would acquire the online advertising
company DoubleClick for $3.1 billion in cash. This purchase price, over 20 times revenue, was even
more perplexing. 91 Wall Street analysts viewed it as a sign that Google was willing to spend anything
to keep Microsoft off its online advertising turf. 92 Schmidt said the purchase would improve the enduser experience, but the press and shareholders felt his explanation was light and his rationale was
vague.
Moonshots
In 2010, Google X became the home of Google’s riskiest projects, called “moonshots.” 93 The secretive
lab pursued futuristic ideas like driverless cars, Wi-Fi balloons, and smart eyeglasses. 94 Google X
projects were chosen if they had potential to affect millions of lives and employed existing
technologies. 95 Research activities at Google X were closed off from the rest of Google; other Google
employees were denied entry to the building. 96 The “X” was originally just a stand-in for a better
name, 97 but some Googlers said it indicated that X was willing to invest in projects that were 10 years
away from large-scale implementation. 98
Within Google X, projects could fail as long as the group was commercially viable. 99 “The portfolio
has to make money,” said Obi Felten, whose title at Google was “Head of Getting Moonshots Ready
for Contact with the Real World.” She added, “Some of these will be better businesses than others, if
you want to measure in terms of dollars. Others might make a huge impact on the world, but it’s not a
massive market.” 100 In February 2016, Astro Teller, the head of X, gave a speech titled “The Unexpected
Benefit of Celebrating Failure,” in which he described several X projects that had been discontinued in
recent years, including a project to automate vertical farming that failed to grow staple crops and a
lightweight cargo ship that would have cost $200 million to prototype. 101 “We work hard at X to make
it safe to fail,” Teller said. “Teams kill their ideas as soon as the evidence is on the table because they’re
rewarded for it. They get applause from their peers. Hugs and high fives from their manager, me in
particular. They get promoted for it. We have bonused every single person on teams that ended their
projects, from teams as small as two to teams of more than 30.” 102
Also in 2010, Page began secretly funding a startup based near Google’s Mountain View, California,
campus that was working to invent the flying car. 103 “Page is using his personal fortune to build the
future of his childhood dreams,” Bloomberg reported. 104
Some said Google’s ambitious research activities made it easy to recruit talent. “These fantastical
ideas create a growing halo around the company, fostering the perception that Alphabet [Google] is a
place where magic happens, where the most innovative minds from iPod creator Tony Fadell to life
sciences’ chief Andy Conrad, come to tinker,” a Fast Company contributor wrote. 105 For every 100 ideas
that fail at Google’s X division, “an army of new fans gets minted.” 106
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Alphabet Eyes New Frontiers
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But investors continued to voice concerns about the reporting of internal investments. 107 “There are
some investors who have been looking at Google and saying, ‘They spend like crazy and I have zero
recourse to change the direction, so I don’t want to be involved with them,’” said one analyst. 108
In September 2013, Page introduced Calico, a lab probing human longevity. He assured investors
that the project was in line with the company’s mission, stating:
You’re probably thinking wow! That’s a lot different from what Google does today.
And you’re right. But as we explained in our first letter to shareholders, there’s
tremendous potential for technology more generally to improve people’s lives. So don’t
be surprised if we invest in projects that seem strange or speculative compared with our
existing Internet businesses. And please remember that new investments like this are very
small by comparison to our core business. 109
In June 2014, analysts called for greater transparency in Google’s expense line, noting that while
revenues went up 22-fold between 2004 and 2014, expenses increased 23-fold. 110 Pointing to a decline
in capital expenditure efficiency, the analysts contrasted investments like Android, DoubleClick (the
advertising subsidiary), and YouTube with the company’s new investments like the self-driving car
and the smart home, projects with less “transparent monetization potential.” 111
Google’s then-CFO emphasized a conservative approach to research spending. “I just want to kind
of reaffirm to you that we do it in a smart way and a disciplined manner,” he said in a call with
investors. “We’re driving forward to make sure we don’t waste our shareholders’ money.” 112 The thenhead of Google X defended his division. He compared expectations for X to those of a venture capitalist
who invests in a young company. “Because risk abounds, we owe a very strong return,” he said. 113
In 2014, Google spent 12% of its revenues on research and development, the highest percentage
since the company’s 2004 IPO. 114 In all, the company spent $9.8 billion on R&D, up 38% from 2013. 115
Meanwhile, online advertising continued to dominate, generating nearly 90% of total revenues in
2015. 116 Some of those profits had been funding the company’s moonshots, but consolidated reporting
made it difficult for investors to evaluate the performance of these riskier endeavors.
Other Moonshot Factories
Though perhaps less extravagant than Google’s big bets, other technology companies had their own
moonshot factories. In addition to its core business, an online retail store, Amazon contained several
other ventures, including drone, data storage, video streaming, publishing, and tablet units under its
umbrella. 117 “Most large organizations embrace the idea of invention, but are not willing to suffer the
string of failed experiments necessary to get there,” noted CEO Jeff Bezos. 118
Similarly, Facebook operated WhatsApp, virtual reality company Oculus Rift, Instagram, drone
company Ascenta, and an artificial intelligence initiative, in addition to its core social media platform
and ad tech businesses, all of which furthered Facebook’s business goals. 119 “We like problems that
have very low business risk and very high technical risk,” said CTO Mike Schroepfer. “Meaning, we
know what we will use this for, but we have no idea whether you can actually get it done.” 120
Apple, the largest public corporation in the world by market value, spent less on R&D than other
top technology firms as a portion of revenue. In fiscal year 2015, Apple spent only 3.5% of its revenue
on R&D, compared with Facebook’s 21% and Alphabet’s 15%. 121 In 1998, Apple founder Steve Jobs
said, “Innovation has nothing to do with how many R&D dollars you have.” 122 Still, Apple was
reportedly pursuing some ambitious projects, including a self-driving car and a pay TV project. 123
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Trends in Technology
In 2015, McKinsey consultants counted 146 private tech companies worth $1 billion or more (known
as “unicorns”), 14 of which were valued above $10 billion. 124 (See Exhibit 8a for a graph showing U.S.listed tech IPOs, 1995–2015, and Exhibit 8b for all U.S. IPOs since 1980.) Meanwhile, an estimated 40%
of such firms saw their valuations drop between 2011 and 2015. 125 “There is demand, too—just not at
the valuations VCs have given the startups,” said one analyst. 126 Said another, “Many of the jazzier
companies found they could raise virtually infinite amounts of money while staying private. Had
Google and Facebook had the option, they probably would have stayed private longer.” 127
Ruth Porat
In March 2015, Google hired Wall Street banker Ruth Porat to serve as CFO. “We’re tremendously
fortunate to have found such a creative, experienced and operationally strong executive,” Page said. “I
look forward to learning from Ruth as we continue to innovate in our core from search and ads, to
Android, Chrome and YouTube as well as invest in a thoughtful, disciplined way in our next
generation of big bets.” 128 Porat came to Google from financial-services firm Morgan Stanley, where
she was CFO and had advised technology clients like Amazon and eBay. 129 Analysts interpreted the
hire as a shift in priorities toward expense reduction. “The perception has long been that they throw
money at things,” one analyst said. “That’s not going to change because of one earnings report, but
with her there and showing a serious commitment to some discipline, it becomes part of a story line.
People are saying there’s probably a lot more that could be cut. If so, Google could be a very strongperforming stock.” 130 On her first call with investors as Google CFO, she presented the second-quarter
earnings report, indicating she would in fact move to keep expenses in check. “A key focus is on the
levers within our control to manage the pace of expenses while still ensuring and supporting our
growth,” Porat said. 131 Investors responded enthusiastically to the earnings report, which exceeded
their expectations, 132 and Porat’s commitment to fiscal discipline; the next day Google stock climbed
16.3%, boosting the company’s market value by nearly $65 billion. 133 “She gave a lot more qualitative
and directional information than her predecessors and she seems to be more in-tune with the investor
community,” one analyst noted. 134
Google Announces Restructuring
On August 10, 2015, Google announced that it would restructure and create a new holding company
named Alphabet. Page, the CEO of Google since 2011, announced that he would become the CEO of
Alphabet, 135 and would promote Sundar Pichai, former Senior Vice President of Google-branded
products, 136 to CEO of Google. 137 Page and Brin would run Alphabet, along with Porat. Schmidt would
remain executive chairman. The Google subsidiary included its Internet-related businesses, such as
search, advertising, maps, YouTube, and Android phones. The non-Google subsidiaries included
DeepMind, an artificial intelligence company; 138 Nest, a smart home thermostat system; Fiber, an
Internet service; Calico, a longevity research lab; X, the moonshot incubator; Sidewalk, an urban
technology project; and two investment arms, GV and Google Capital. 139 (Exhibits 5 and 6 provide a
selection of Google and non-Google subsidiaries, with brief descriptions of each.)
Under the restructuring, existing shares of Google would convert to Alphabet shares and trade
under the same stock tickers as before, GOOG and GOOGL. 140 The change had implications for the
way Google reported earnings to investors; Google planned to introduce segment reporting so that
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Google earnings could be viewed separately from the other business segments at Alphabet. 141 In
August 2015, Page and Brin held more than 50% of the voting stock in the company. 142
Larry “Warren Buffett” Page?
“In general, our model is to have a strong CEO who runs each business, with Sergey and me in
service to them as needed,” Page wrote in a public post on the Alphabet website (abc.xyz). 143
Reorganization would allow the company more management scale, Page wrote, adding, “We can run
things independently that aren’t very related.” 144
Google’s founders had long drawn inspiration from businessman Warren Buffett, the CEO of
Nebraska-based holding company Berkshire Hathaway Inc. Page and Brin cited Buffett’s writing as a
major influence for their Google’s 2004 Founders’ IPO Letter, 145 and often praised him publicly. 146 In
creating Alphabet, Page said Google leadership borrowed “aspects” 147 of the Berkshire Hathaway
model. “I think there’s things that they do really well,” he said. 148 In 2015, Berkshire Hathaway was
the 14th-largest company in the world by revenue. 149 Since Buffett bought failing textile company
Berkshire Hathaway in 1965, the stock price had increased 1,826,163%, growing 21.6% on average each
year. 150
Google’s move to restructure inspired further comparison between the two companies. Like
Alphabet, Berkshire Hathaway had a diverse array of subsidiaries, including Geico insurance, See’s
Candies, Helzberg Diamonds, and Heinz Ketchup, which were all run independently. 151 “Google’s
Alphabet sounds like a 21st century Berkshire Hathaway,” LinkedIn CEO Jeff Weiner wrote on Twitter
when Google’s plans to restructure were announced. 152 Though Buffett controlled a large portion of
Berkshire Hathaway shares, his companies operated more or less independently. 153 “We will continue
to operate with extreme—indeed, almost unheard of—decentralization at Berkshire,” Buffett wrote in
his 2016 letter to shareholders. 154 Like Alphabet, Buffett’s holding company had a dual share class
structure, with B shares trading at lower prices. 155 In 2014, when Buffett held a 20% stake in his
company, shareholders rejected a dividend proposal. 156 “Now, you may think that I stuffed the ballot
box,” Buffett said at the time. “I did.” 157
Porat said the Google founders shared Buffett’s commitment to “long-term value creation” 158 and
“backing great leaders.” 159 Some observers were less convinced. They pointed out that unlike
Alphabet’s founders, Buffett had not historically invested in technology. 160 In addition, Berkshire
Hathaway’s subsidiaries were generally added to the portfolio via acquisition, while Alphabet’s
ventures were commonly developed internally. 161
Investors Relations
Investors cheered the new structure. When the news broke on August 10, Google’s shares—which
lagged during the first two quarters of 2015—climbed 6.2% in late trading. 162 Analysts viewed the new
corporate structure as evidence that Google’s attitude toward investors had improved. “We continue
to think an era of more disclosure and cost consciousness . . . is positive for Google,” said one analyst. 163
Another analyst called it a “positive surprise” 164 from Porat, a “Wall Street veteran known for complex
financial engineering.” 165 On October 2, 2015, Alphabet, Inc. became officially incorporated in the state
of Delaware. 166 That day, Alphabet shares surged 2.3% to $657 apiece. 167 (Exhibit 4 shows the Google
(Alphabet) stock price between August 2015 and June 2016.)
During the fourth quarter of 2015, Alphabet had a higher percentage of institutional fund ownership
(31%) than any other stock. 168 “Alphabet has a best-possible 99 IBD Composite Rating, meaning it’s
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outperformed 99% of all stocks on key metrics such as sales and profit growth in recent quarters,” one
observer commented. 169
In October 2015, Porat announced Alphabet’s first-ever share buyback (a $5.1 billion purchase). 170
By February 2016, Alphabet stock was nearly 50% above share prices in summer of 2015. 171 (See
Exhibit 7 for a chart showing the major institutional investors in March 2016.)
Innovation
Following the restructuring announcement, Alphabet leadership also reiterated a commitment to
nurturing long-term projects. In November 2015, Page indicated that the incubation period for a
moonshot was generally longer than a venture capitalist’s investment. “I think a lot of the things we
are doing we have a lot of conviction about them working over time, but I think a lot of them have the
characteristic of taking longer than an average venture capital bet,” Page said. 172 In October 2015, Porat
described Alphabet’s approach of monitoring spending while optimizing value: “[The restructuring]
wasn’t about cost cutting our way to greatness, it was about ensuring that we have the same very
detailed, disciplined approach to looking at the growth and expenses, making choices in order to
optimize while still supporting revenue growth.” 173
Porat went on to outline Alphabet’s “70:20:10 system” in which 70% of the company’s resources
were spent on the core, 20% on adjacent projects, and 10% on research. 174 For some, the creation of
Alphabet marked a cultural shift. “It is such a large company now and with all large companies, politics
and bureaucracy gets [sic] in the way of moving fast, from being able to launch an idea and set up a TV
campaign it became layers and layers of management,” said one ex-Googler. 175 Others noted that the
“bet” companies a now controlled more of their own business, adopting hiring and marketing
functions. “It gets a little faster, more efficient and a little more independent,” said Andy Conrad, CEO
of Verily (formerly Google Life Sciences). “I act as a CEO of an independent company instead of a
senior executive within a large company.” 176 He added, “Sundar [Pichai] will act in the best interests
of Google Inc. I will act in the best interests of Google Life Sciences.” 177
In support of this view, Porat said the new structure would enable the company to be “an
accelerant” for entrepreneurship. 178 She added:
A lot of that is about giving them the autonomy to operate within this larger family of
Alphabet. So what’s been very valuable is creating a structure that allows us on the one
hand to have maniacal focuses within businesses and at the same time, to continue to
plant the seeds and really nurture in a smart way those next engines of growth so that
we’re not dealing with this question of incrementalism leading to irrelevance. 179
Google insiders commented that the creation of separate bet companies would reduce competition for
talent and funds between units. 180 In November 2015, the Wall Street Journal reported that Alphabet
would charge Other Bets subsidiaries for corporation-wide services such as computing, recruiting, and
marketing. “The people familiar with the matter said executives hope to make the bet companies more
accountable for their costs, which may lead to more caution on spending,” the newspaper reported. 181
The Economist offered a summary: “Alphabet is grappling with a problem that has already troubled
many other big tech firms: how much freedom, money and time to give internal startups.” 182
a “Bet” companies, also called Other Bets, were subsidiaries of Alphabet.
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Alphabet Spells a New Google
Q4 Earnings Released
Alphabet’s 2015 fourth-quarter earnings were strong. Total revenue was $21.3 billion, an increase
of 18% over the previous year and 14% above the previous quarter (refer to Exhibit 1a). 183 Porat
credited mobile search, YouTube, and programmatic advertising for revenue gains. “The primary
driver was the increased use of Mobile Search by consumers, benefiting from our ongoing efforts to
enhance the efficiency of Mobile Search, as well as from the holiday season,” she said. 184 Alphabet was
now reporting along two segments: Google and Other Bets, which included “an aggregation of
businesses, many of which operate in distinct sectors with different business models,” Porat said. Due
to certain “idiosyncrasies with respect to the timing of revenue, expenses and CapEx resulting from
milestones, partnerships, and other factors,” Porat said it would likely be more instructive to evaluate
the performance of the Other Bets segment on a 12-month basis. 185 In the Google segment, revenues
were $21.2 billion, up 18% over 2014. 186 Other Bets, which were grouped together, reported revenues
of $448 million, 37% higher than in 2014. 187 Porat noted that Nest, Fiber, and Verily generated the
majority of Other Bets revenues, adding, “The majority of efforts within Other Bets are pre-revenue.” 188
As a whole, Other Bets revenues, sourced from Nest hardware sales, Internet and TV services, and
revenues from licensing and R&D services, made up 0.6% of Alphabet’s consolidated revenues. 189
Alphabet reported an operating loss of $3.6 billion in the Other Bets segment for 2015, excluding
stock-based compensation, which, Porat said, reflected “the impact of project milestones established
several years ago.” 190 Looking ahead, she expected Alphabet to continue to pursue “longer-term
opportunities both within Google and Other Bets, consistent with our emphasis on pushing the frontier
to adjacent areas and moonshots.” 191
Nest
Nest Labs made Internet-connected thermostats and smoke alarms for what Fadell called “the
conscious home.” 192 Founded in 2010 by Fadell, a former Apple executive who helped design the iPod,
and Matt Rogers, another Apple engineer, Nest released its first smart thermostat in October 2011. 193
The device was an “innovative reimagining of a product category,” the New York Times quipped, “a
stylish piece of hardware, a circle of brushed stainless steel, reflective polymer and a crystal-sharp color
display.” 194 In late 2013, Fadell said the thermostat hung in “almost 1% of U.S. homes.” 195
In January 2014, Google acquired Nest for $3.2 billion in the second-largest purchase in the
company’s history. 196 Fadell said Google would provide Nest financial, legal, and administrative
resources that would help them grow. 197 “I was spending so much time in my days just worrying about
infrastructure and not worrying about product,” Fadell said when the deal was announced. 198 “This
allows us to concentrate on the stuff that differentiates us.” 199 Roughly six months later, Nest bought
Dropcam, a security-camera startup, for $555 million. 200 Between 2011 and 2015, annual revenue
growth at Nest surpassed 50%. 201
When Alphabet announced plans to restructure, Nest was seen as a beneficiary. As a subsidiary
separate from Google, observers said the business would enjoy independence and financial support. 202
During 2015, Nest’s revenues totaled $340 million, lagging expectations, according to reports from
Recode. 203 By 2016, Nest had 1,100 employees and offered a smart thermostat, a smoke detector, and a
security camera. 204
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But in March 2016, Fadell told tech news outlet The Information that Alphabet was pressuring noncore divisions to tighten their belts. 205 In his words, Alphabet leadership told its Other Bets
subsidiaries, “Show us your business plan for the year. We’re going to hold you to those numbers.” 206
The Information also reported that 70 employees had left Nest between spring and fall of 2015. 207
Current and former employees complained about Fadell’s strict management style and blamed him for
product delays. 208 Later that month, Dropcam founder Greg Duffy, who left the company in 2015,
expressed his frustration in a public blog post, declaring that it was a “mistake to sell” his startup,
which was in the “middle of a record year of sales” when Google acquired it. 209 He faulted Nest for
moving slowly. “All of us have worked at big companies before, where it is harder to move fast. But
this is something different, as evidenced by the continued lack of output from the currently 1,200person team and its virtually unlimited budget,” Duffy wrote. 210
In April, news outlets reported that Nest would be closing Revolv, a company it acquired in 2014. 211
Revolv made devices that could control several smart appliances. 212 “Unfortunately, that means we
can’t allocate resources to Revolv anymore and we have to shut down the service,” Revolv’s founders
wrote in a blog post. “As of May 15, 2016, your Revolv hub and app will no longer work.” 213 Nest said
it bought Revolv for the talent, not the products. “We are not fans of yet another hub that people should
have to worry about,” Rogers said. 214
On June 3, 2016, Alphabet said Fadell would leave Nest and move into an advisory role at Google. 215
Observers speculated that Fadell was being let go in light of the complaints lodged against him, but he
said the departure had been planned since late 2015. 216 “I don’t know of any regrets that I have,” he
said. “To do what we do at the level we do it, no one’s done it before. So you’re bound to make
mistakes.” 217 One observer said a cultural mismatch had ended Fadell’s reign. “Nest, with its Apple
DNA, was very much a top-down company, where only one person was in charge—Fadell,” he wrote.
“Google, on the other hand, has an engineer-driven, bottom-up culture.” 218
Alphabet chose Marwan Fawaz to replace Fadell. A former Motorola executive, Fawaz was known
for his people skills and team-oriented approach. Page said Fawaz would “deepen Nest’s partnerships,
expand within enterprise channels, and bring Nest products to even more homes.” 219
Other Moonshots
The creation of Alphabet preceded widespread change also among other divisions formerly
operated by Google, including Nest.
On August 12, 2015, Google startup Niantic Labs, a game company, announced its independence
from Google: “We’ll be taking our unique blend of exploration and fun to even bigger audiences with
some amazing new partners joining Google as collaborators and backers.” 220 In October, Niantic, best
known for video game Ingress, announced that it had raised $20 million in backing from Pokémon,
Nintendo, and Google. “That’s kind of a theme at Google, to take businesses that are not search and
give them more independence,” said Niantic’s founder. “We’re kind of at the vanguard of that.” 221
In December 2015, Bloomberg reported on Alphabet’s plans to turn its self-driving cars unit, which
had been contained in X, into a standalone business. 222
In the same month, Verily announced it would create a new company, Verb Surgical Inc., reportedly
backed by Johnson & Johnson and Ethicon, to pursue advances in surgical technology. 223 STAT
reported that a dozen senior staff members had left Verily since 2014 amid complaints about the CEO,
Andy Conrad. “They said he exaggerates what Verily can deliver, launches big projects on a whim,
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Alphabet Eyes New Frontiers
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and rashly diverts resources from prior commitments to the next hot idea that might bring in revenue,”
STAT reported. “This has led to what they describe as difficult meetings with business partners, and
resignations by demoralized engineers and scientists in the face of seemingly impossible demands.” 224
Technology analyst Rob Enderle said the premature timing of the employees’ departures suggested
staffers “are losing confidence in the leadership.” 225
In March 2016, Google put robotics firm Boston Dynamics, a 2013 acquisition, up for sale. 226 News
reports, citing project insiders, said Google had decided the robots were not close enough to generating
revenue. 227 Insiders also cited growing friction between engineers at Boston Dynamics and their
Tokyo- and California-based counterparts. 228 According to internal memos, Google executives had
become impatient with the slow pace of Boston Dynamics’ projects. 229 “We as a startup of our size
cannot spend 30-plus percent of our resources on things that take ten years,” said one executive during
a November 2015 meeting. “There’s some time frame that we need to be generating an amount of
revenue that covers expenses and [that] needs to be a few years.” 230 News outlets also reported that
robotics group Replicant was no longer a standalone unit; its employees had been folded into X. 231 The
moonshot group said it was “defining some specific real world problems in which robotics could
help.” 232
Looking Ahead
As June 2016 came to a close, the future of Nest and other Alphabet moonshots remained uncertain.
And despite a concerted effort to diversify, the search engine and its advertising service remained the
firm’s biggest revenue driver, accounting for nearly 90% of revenues. “In six months, you can say
whether the structure has made things better—it has either made them worse or hasn’t change [sic]
things at all,” one analyst concluded. 233 “Being liberated from Google, the moonshots were supposed
to thrive under the Alphabet umbrella. Have they? The early results are not good,” The Guardian wrote
in early June 2016. 234
Others read the departure differently. One observer said leadership change at Nest meant the
Alphabet structure was in fact succeeding. She predicted that Nest and Google Home, a Google
subsidiary developing a virtual assistant for the home, would succeed:
Google’s whole motivation for creating the Alphabet holding structure in the first
place was to force more financial discipline at its various “moonshots” and other
businesses, like Nest, that didn’t fit neatly into Google’s core focus. It’s likely that
Alphabet’s chief enforcer, CFO Ruth Porat, had a say in deciding that such an important
product for the company [home automation] should be fledged elsewhere [within Google
Home, a Google subsidiary]—so that it could earn its wings free of the division’s drama,
financial or otherwise. 235
As the campaign to expand Alphabet’s product line continued, Page and Brin had some critical
decisions to make about the non-Google subsidiaries. Was it important to give the companies
independence or would that strategy empower divisive leadership? How long should Other Bets be
allowed to experiment before producing a viable, profitable product? Was Alphabet providing the
resources startup ventures desperately needed to succeed, or would the conglomerate structure stifle
innovation?
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Alphabet Eyes New Frontiers
Exhibit 1a
Alphabet Selected Income Data, Q3 & Q4 2015 (in millions US$)
Q3 2015
Q4 2015
18,675
21,329
Cost of revenues
7,037
8,188
Research and development
3,230
3,510
Sales and marketing
2,223
2,679
General and administrative
1,477
1,572
13,967
15,949
4,708
5,380
Revenues
Costs and expenses
Total costs and expenses
Income from operations
Other Income (expense), net
183
Income from continuing operations before income taxes
Provision for income taxes
Net income
Source:
(180)
4,891
5,200
912
277
3,979
4,923
Alphabet, Inc., 2015 Annual Report, https://abc.xyz/investor/pdf/20151231_alphabet_10K.pdf,
accessed February 2015.
Exhibit 1b
Alphabet Selected Segment Information, 2013–2015
Revenues
Google
Other Bets
Total revenues
2013
2014
2015
55,507
65,674
74,541
12
327
448
55,519
66,001
74,989
16,260
19,011
23,425
(527)
(1,942)
(3,567)
Segment operating income (loss)
Google
Other Bets
Administrative costs and other miscellaneous items
Total income from operations
(330)
(573)
(498)
15,403
16,496
19,360
7,006
11,173
8,849
Capital expenditures
Google
Other Bets
187
501
869
Reconciling Items
165
(715)
197
7,358
10,959
9,915
Total capital expenditures
Source:
Alphabet, Inc., 2015 Annual Report, https://abc.xyz/investor/pdf/20151231_alphabet_10K.pdf,
accessed February 2015.
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Alphabet Eyes New Frontiers
Exhibit 2
Source:
717-418
Alphabet, Inc. Share Pricing, Relative to the S&P 500 Index, August 2004 to June 2016
Alphabet Share Pricing, August 2004 to June 2016, Capital IQ, Inc., a division of Standard & Poor’s.
Exhibit 3a
A Selection of Top Innovations at Bell Labs
Innovation
Applications
Data networking, late 1940s
Digital Subscriber Line (DSL)
Transistor, 1947
Computers, radios, stereos
Cellular network, suggested in 1947, installed 1980
Mobile phones
Silicon solar cells, 1954
Solar power
First patented laser, 1958
Medicine, electronics, communications
Communications satellites, 1962
Long distance phone calls, television, and radio
Touch tone dialing, 1963
Replaced rotary dialing on telephones
Unix C, C++, 1969-1972
The Internet, computer programming

Source:
Alcatel-Lucent, “Bell Labs Top 10 Innovations,” from the University of Texas website, http://www.cs.utexas.edu/
~cannata/networking/Class%20Notes/02%20Bell%20Labs%20Top%2010%20Innovations.pdf, accessed June 2016.
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Alphabet Eyes New Frontiers
Exhibit 3b
A Selection of Top Innovations at Xerox PARC
Innovation
Applications
Laser printing, 1972
Xerox Alto personal computer, 1973
Ethernet networking, 1973
Cut-and-paste and text editor, 1974
Graphical User Interface, 1975
Multi-beam lasers, 1986
16-bit coding system, 1989
Photocopiers
Apple’s Macintosh Computer
Local Area Network (LAN)
Microsoft Word
Computer user interfaces, popularized by Apple
Advanced printers
Unicode standard, allows computers to communicate
across languages
Source:
Todd R. Weiss, “Timeline: PARC Milestones,” Computerworld, September 20, 2010, http://www.computerworld.com/
article/2515874/computer-hardware/timeline–parc-milestones.html, accessed June 2016; and Dan Farber, “Tracing
the Origins of the Macintosh,” CNet, January 21, 2014, http://www.cnet.com/news/tracing-the-origins-of-themacintosh/, accessed June 2016.
Exhibit 4
Alphabet Inc. Share Pricing, Relative to the S&P 500 Index, August 2015 to June 2016
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%
-20.00%
Alphabet Inc. (NasdaqGS:GOOGL) – Share Pricing
S&P 500 Index (^SPX) – Index Value
Source:
Alphabet Share Pricing, August 2015 to June 2016, Capital IQ, Inc., a division of Standard & Poor’s.
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Alphabet Eyes New Frontiers
Exhibit 5
Source:
717-418
Alphabet’s New Corporate Structure, 2016
Rob Price and Mike Nudelman, “Google’s Parent Company Explained in One Chart,” Business Insider, January 12,
2016, http://www.businessinsider.com/chart-of-alphabet-google-parent-company-infographic-x-gv-2016-1,
accessed February 2016.
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Alphabet Eyes New Frontiers
Exhibit 6
Alphabet’s “Other Bets” Companies, 2016
Company
Function
Location
Access/Google Fiber
Provides TV and Internet service in 9 U.S. cities
through fiber-optic networks
Various
Calico
Conducts research into human longevity with the
goal of increasing the human lifespan
San Francisco, CA
Nest
Makes smart thermostats and other remotemonitoring devices for residential use, founded in
2010 and acquired by Google in 2014
Palo Alto, CA
Verily
Conducts life science research mission: “To bring
together technology and life sciences to uncover new
truths about health and disease”
Mountain View, CA
GV (formerly Google Ventures)
Venture capital firm investing in life science,
healthcare, artificial intelligence, robotics,
transportation, cyber security, and agriculture
Mountain View, CA
Google Capital
Growth equity fund investing in tech entrepreneurs,
founded in 2013
San Francisco, CA
X (formerly Google X)
Conducts research on moonshots like robots, selfdriving cars, and drones, pursuing breakthrough
technologies
Mountain View, CA
Sidewalk Labs
Consults with cities on innovation and problemsolving.
New York, NY
Deep Mind
Conducts research into artificial intelligence, founded
in 2010 and acquired by Google in 2014
London, England
Source:
Compiled by casewriter from the company websites: calicolabs.com, solveforx.com, nest.com, gv.com,
googlecapital.com, verily.com, sidewalklabs.com, fiber.google.com, and deepmind.com, all accessed February 2016.
Note:
This is not an exhaustive list of Other Bets ventures.
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Alphabet Eyes New Frontiers
Exhibit 7
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Top Five Institutional Shareholders (GOOGL), March 2016
Owner Name
Shares Held
Value (in $1,000s)
FMR LLC (Fidelity)
18,588,835
$12,661,599
Vanguard Group, Inc.
17,822,708
$12,139,759
State Street Corp.
11,181,006
$7,615,830
T. Rowe Price Associates, Inc.
8,076,641
$5,501,323
Blackrock Institutional Trust Company
7,618,239
$5,189,087
Source:
Adapted by casewriter from “Alphabet Inc. Institutional Ownership,” from the Nasdaq, Inc.
website, http://www.nasdaq.com/symbol/googl/institutional-holdings, accessed June 2016.
Exhibit 8a
Source:
U.S.-listed Technology IPOs, 1995–2015
Dealogic data via Nicole Bullock, “Technology Unicorns Stay Shy of IPOs,” Financial Times, February 9, 2016,
http://www.ft.com/intl/cms/s/0/85bd0034-cb2b-11e5-a8ef-ea66e967dd44.html#axzz4BrLFhyjY, accessed
June 2016.
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Alphabet Eyes New Frontiers
Exhibit 8b
Source:
U.S.-listed IPOs since 1980
Jay Ritter, University of Florida.
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Alphabet Eyes New Frontiers
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Endnotes
1 Miguel Heft, “Google’s Larry Page: The Most Ambitious CEO in the Universe,” Fortune, November 13, 2014,
http://fortune.com/2014/11/13/googles-larry-page-the-most-ambitious-ceo-in-the-universe/, accessed June 2016.
2 Steve Lohr, “Tony Fadell Steps Down Amid Tumult at Nest, a Google Acquisition,” The New York Times, June 3, 2016,
http://www.nytimes.com/2016/06/04/technology/tony-fadell-nest-google-alphabet.html?_r=0, accessed June 2016.
3 Mark Sullivan, “Nest May Benefit More from Alphabet than any Other Company in the Group, Save Google,” VentureBeat,
August 11, 2015, http://venturebeat.com/2015/08/11/nest-may-benefit-more-from-alphabet-than-any-other-company-in-thegroup-save-google/, accessed June 2016.
4 Heather Kelly, “Meet Google Alphabet—Google’s New Parent Company,” CNN Money, August 11, 2015,
http://money.cnn.com/2015/08/10/technology/alphabet-google/, accessed July 2016.
5 Mark Bergen, “Google’s Alphabet Has a CEO Problem,” Recode, March 29, 2016,
http://www.recode.net/2016/3/29/11587320/googles-alphabet-nest-verily-ceo-problem, accessed July 2016.
6 Mark Bergen, “Why Did Google Get Rid Of The Company Behind Pokémon Go?” Recode, July 12, 2016,
http://www.recode.net/2016/7/12/12153722/google-niantic-pokemon-go-spin-out, accessed July 2016.
7 Nick Wingfield, “Game Maker Niantic Adds Nintendo, Pokémon as Investors After Google Spinout,” Bits (blog), The New
York Times, October 15, 2015, http://bits.blogs.nytimes.com/2015/10/15/game-maker-niantic-adds-nintendo-pokemon-asinvestors-after-google-spinout/?_r=1, accessed February 2016.
8 “Johnson & Johnson Announces Formation of Verb Surgical Inc., In Collaboration with Verily,” PR Newswire, December 10,
2015, http://www.prnewswire.com/news-releases/johnson–johnson-announces-formation-of-verb-surgical-inc-incollaboration-with-verily-300191210.html, accessed February 2016.
9 John Lippert and Jack Clark, “Google to Make Driverless Cars an Alphabet Company,” Bloomberg, December 16, 2015,
http://www.bloomberg.com/news/articles/2015-12-16/google-said-to-make-driverless-cars-an-alphabet-company-in-2016,
accessed April 2016.
10 Alistair Barr, “Google Parent to Ask Subsidiaries to Pay for Corporate Services,” The Wall Street Journal, November 23, 2015,
http://www.wsj.com/articles/google-parent-to-ask-subsidiaries-to-pay-for-corporate-services-1448325619, accessed February
2016.
11 Will Knight, “Why Google is Selling Off Some of the Coolest Robots Ever Built,” MIT Technology Review, March 17, 2016,
https://www.technologyreview.com/s/601068/why-google-is-selling-off-some-of-the-coolest-robots-ever-built/, accessed
March 2016.
12 James Titcomb, “Google and Alphabet: What Does This All Mean?” The Telegraph, August 12, 2015, via Factiva, accessed
February 2016.
13 Dominic Rushe and Sam Thielman, “Inside Alphabet: Why Google Rebranded Itself and What Happens Next,” The
Guardian, August 18, 2015, via Factiva, accessed February 2016.
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4. Identify the relevant cast of characters (often called stakeholders).
a. Acknowledge to yourself whether you like some of these stakeholders better than others. Have you
tended to jump to conclusions about what kind of people they are (e.g. he can’t be trusted; she’s the
perfect boss; that procurement department is full of obstructionists)? b. Look carefully for evidence
that might contradict, in any way, your first impressions.
5. Describe each stakeholder’s problems, goals (or demands), and concerns.
a. For each stakeholder, look for evidence that something has happened in the case that the
stakeholder finds troublesome and seems to consider a problem.
b. Identify the assumptions being made by each stakeholder, and any apparent biases of each
stakeholder.
c. Identify the goals (sometimes stated as explicit demands) of each stakeholder.
d. Then, as best you can, identify the concerns underlying these demands. In other words, what does
the behavior (words, actions) of the stakeholder suggest to you about why that person (or group)
wants what he/she seems to want?
6. Evaluate the quantitative information that you have available in the case.
a. Identify assumptions underlying the data.
b. Examine consistency among units.
c. Determine the quality of data, e.g. completeness, accuracy, possible biases, consistency among
multiple sources.
d. Use estimation to gauge whether results “seem right.”
e. Identify ways in which the data may oversimplify an issue or situation.
f. Summarize the quantitative information.
g. Be prepared to express the summary in a variety of forms: in words, in visual/graphical displays,
in tables of numerical results, in analytical formulations.
h. Look for patterns among the results that help you gain insight into the issues of the case.

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