Google’s recent decision to restructure its business under the Alphabet banner caught many observers by surprise. They wondered why one of the world’s most successful digital services companies needs to make such big changes.

Perhaps, more surprising was Google’s acknowledgement that it considered itself a “legacy” business. For many people Google is the epitome of the new generation of digital companies that are smart, swift and highly successful. In just 17 years it has built a US$66 billion business. Yet, it is this success that has prompted the major restructure. Google’s core operations, its internet search business and related services such as email, maps and, of course, advertising and aggregating, dominate the company. They account for around 90 percent of its revenues.

Google recognizes that to ensure its long-term future it needs to keep innovating and developing new businesses. But it doesn’t want to mess with its highly successful core operations. So it’s spun off its technology innovation unit, GoogleX, as a separate company. It now reports alongside Google and some of its other specialist firms into the Alphabet holding company. Each is separately funded and resourced.

Google’s strategy provides some important lessons for legacy businesses in other industries. Insurance providers, many of which have strong revenue flows from long-established business models, can learn much from its example. Balancing the needs of lucrative legacy businesses with the demands of new digital operations is far from easy.

Here are some pointers from Google’s playbook.

  • Think far and wide – GoogleX’s mission is to develop radical solutions to some of the world’s “big hairy” problems and bring them to market within five to ten years. It encourages broad thinking and experimentation. The company expects to jettison 95 percent of the ideas it evaluates. The remaining ideas become “foundry projects” and only if they show further potential do they become “independent projects” under the direction of a GM.
  • Focus intensively on users and customers – GoogleX’s new business opportunities emerge from innovative thinking about helping users and customers. Not from iterations to existing product lines.
  • Partner far and wide – Partnerships are vital in new digital economy. It’s important to look beyond alliances with other insurers or even businesses currently associated with the industry. GoogleX is working with academics, community experts and a wide variety of specialist businesses to help create solutions to big problems.
  • Seek and secure technology – As well as applying its own extensive resources to tackle technical and business challenges GoogleX enters into strategic partnerships to access the technology and infrastructure it needs.
  • Buy talent – Developing exceptional skills and talent across a diverse range of applications is difficult and time-consuming. GoogleX pursues a bold acquisition strategy to secure the top-level human resources it requires.

Google’s bold and innovative thinking provides useful insight for insurers venturing into new digital markets. Sustaining core business operations while developing new business opportunities will be one of the main challenges in the migration to digital ecosystems.

In my next blog I’ll discuss how the Internet of Things is fuelling the growth of digital ecosystems. Until then, have a look at this link. I think you’ll find it helpful.

Digital transformation in the age of the customer

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