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Google's Alphabet Has a CEO Problem

What we can learn from three recent tales out of Alphabet's top ranks.

Asa Mathat

The Alphabet companies not named Google make up just 6 percent of the entire tech conglomeration’s workforce, but they account for a growing share of its headaches. Those frustrations are less about the technical hurdles of these lofty moonshots than a concern commonplace with startups: A crisis of leadership.

Google co-founders, now Alphabet honchos, really want to replicate their search engine’s success across a range of industries with operations run like startups. 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.

A trio of developments has emerged in the last two weeks underscoring this tension. First, there was the Bloomberg report that Google is selling Boston Dynamics, its unit that builds dexterous, humanoid robots. Then there was a damning tale of the struggles inside Nest, Alphabet’s connected device company, and its mercurial CEO, Tony Fadell. Finally, the bio-tech trade publication STAT released another damning story on Monday about Verily, Alphabet’s life sciences company, accusing its chief exec of alienating employees and business partners.

With the first two cases, Alphabet’s newfound financial strictness was named as a key factor. Bloomberg cited internal emails from a Google exec voicing concern over the unit’s lack of a short-term revenue plan. Similarly, Fadell pointed to the parent company’s prudence to defend troubles at his own. “The fiscal discipline era has now descended upon everything,” Fadell told The Information.

(Google and its Alphabets all declined to comment.)

It’s true that, with Google’s new structure, the company is attempting to manage costs and revenue roadmaps for its most ambitious endeavors. But that’s only half the story. Consider the other grandiose projects within Alphabet — self-driving cars, Internet balloons and the longevity-research lab Calico — that don’t appear to face pressure to generate cash immediately. (Aside from Nest, Verily and Google Fiber, the broadband business, no other non-Google company produces any revenue now.)

According to these three reports and multiple sources, the root of these particular corporate hiccups is with leadership squabbles, namely with the exec at the top.

For Nest, some of the business’s difficulties stemmed from internal clashes, primarily around the acquisition of security-camera startup Dropcam, which soured dramatically. Several former employees accuse Fadell of a micromanagement that stifles product releases. Fadell openly belittled Dropcam’s staff to The Information, calling them “not as good as [he] had hoped.” Others familiar with Nest spoke of a mismatch of expectations internally and a rift between Fadell’s assertive style and the more experimental, laissez-faire culture at Google.

While Nest suffers from executive turmoil, Alphabet’s robotics struggle has the opposite problem: A leadership vacuum.

Boston Dynamics came to Google with its slew of robotics acquisitions in 2013, orchestrated by former Android chief Andy Rubin. The robot makers operated fairly independently from the others, which were primarily software focused, but remained integral to Rubin’s vision of a formidable artificial intelligence operation, according to a source familiar with the deal. But Rubin left a year after. And until recently, the entire division was essentially homeless inside Google, draining talent steadily; James Kuffner, who filled Rubin’s spot, left for Toyota in January.

Likewise, the STAT story reveals a steady exodus of top-level medical talent from Alphabet’s Verily, reportedly over discontent with its CEO, Andy Conrad. Our earlier reporting on Verily, which has eked out some revenue in pharmaceutical partnerships, has developed a reputation in the biotech industry for a lack of focus.

Michael Luther, a former research partner with Conrad, gave the publication this blistering quote: “We used to joke and call [Conrad] the ‘seagull of science.’ He used to fly in, squawk, crap over everything, and fly away.”

Earlier this month, at a conference in San Diego, Conrad said he was planning to add a thousand staffers in the coming months.

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