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Why the Canadian once in charge of Google's finances thinks the tech giant should be broken up

FILE PHOTO: The logo for Google LLC is seen at the Google Store Chelsea in Manhattan, New York City
FILE PHOTO: The logo for Google LLC is seen at the Google Store Chelsea in Manhattan, New York City

The U.S. Justice Department filed a second antitrust lawsuit against Alphabet Inc.’s Google Tuesday. This one criticizes the company’s methods for maintaining dominance in digital advertising. (The first accused the tech giant of illegally maintaining dominance of internet search.)

When the first suit was filed in 2020, it led advocates such as Sarah Miller, executive director of the American Economic Liberties project, to argue that the company should be broken up. “It’s about protecting democracy itself against concentrated private power,” she wrote.

Patrick Pichette, the Canadian who served as Google’s chief financial officer between 2008 and 2015, agrees with Miller, but for different reasons. While critics worry about what Google’s dominance is doing to competition, Pichette thinks his former employer should break itself up for its own good.

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“My criticism of Google and Facebook and all these big giants is that they should be broken up into 10 companies,” Pichette said. “The opportunity for these companies to stay nimble is to stay small… As they get big, they slow down.”

Bigger companies are slower to change and innovate, Pichette said in a wide-ranging interview earlier this month. The opinion is surprising, but is based on observations over a 30-year career that featured leadership positions at major companies such as global consultancy McKinsey & Co., where he was a lead member of its North America telecommunications practice, BCE Inc.’s Bell Canada, where he was CFO and head of operations, and Twitter Inc., where he served as chair of the board of directors — and negotiated the company’s sale to Elon Musk.

 Patrick Pichette at Google’s Montreal office in 2010.
Patrick Pichette at Google’s Montreal office in 2010.

These days, Pichette is a partner at Montreal-based venture capital firm Inovia Capital Inc. The role keeps him in the thick of the transition to a digital economy by advising Inovia portfolio companies such as Hopper Inc. and Lightspeed Commerce Inc., and scouting for the next Google or Facebook. People care about what Pichette thinks, and during a far-reaching phone interview earlier this month, he had a lot to say about Google and the state of Big Tech in general.

“My question is: What has Google launched in the last three years? Name me three things,” he asked. When his interviewer couldn’t name any, he said: “Exactly.”

‘A whole new way of search’

With an excess of $1 trillion in market value and billions of worldwide users, Google is the world’s fourth largest company in the world by market cap, according to Investopedia. In Canada, the website is part of the fabric of daily life; Canadians ask the search engine roughly three million questions every hour.

But some observers say the company’s bloated bureaucracy, paired with the entry of new artificial intelligence competitors, means that some other company could take over Google’s top spot as “homepage of the internet.”

ChatGPT, an artificial intelligence tool, is forcing Google to innovate. The “chat bot,” developed by the privately traded San Francisco, Calif.-based OpenAI LP, is similar to Google in that it answers your questions, but the key difference lies in the format; instead of presenting you with a list of search results like Google, ChatGPT summarizes them in a few concise paragraphs.

 Screens displaying the logos of OpenAI and ChatGPT.
Screens displaying the logos of OpenAI and ChatGPT.

The tool has rattled Silicon Valley’s giants. Microsoft Corp. sunk US$10 billion into its creator, Open AI. Alphabet chief executive Sundar Pichai, who also runs Google, declared a “code red” and brought back Google founders Larry Page and Sergey Brin to assist in the AI fight.

“Right now, Google is struggling with all this AI,” said Pichette. “There’s a whole new way of search and answers and discovery that’s coming out of the woodwork, everywhere. They are obviously going to shape Google’s position.”

ChatGPT has created a “whole universe of possibilities,” said Julian Birkinshaw, vice dean and professor of strategy at London Business School. “It is absolutely a credible threat. But it’s not yet clear how this plays out. The most likely scenario is that Google paid search and chat bots will co-exist for many years.”

Google is slimming down in preparation for the fight. The executive team laid off 12,000 people on Jan. 20. Back in September, Pichai said the company was moving “slower” after hiring thousands during the pandemic and needed to become 20 per cent more productive, fast.

While several former and current Google executives agree that the company has decelerated, they disagree on how to speed things up again.

Products left to ‘wither on the vine’

Google wasn’t always like this. In its youth, it was spry, said Pichette.

In the early days, when the company was smaller, Google “bought YouTube. Launched Android. Launched Gmail. Launched Apps. Launched Maps. Street view,” Pichette said. “It had a lot of financial resources and it could take big bets. And it was courageous.”

Now, many of the products Google does launch, it neglects. “They have a longstanding tradition of launching lots of products and letting them wither on the vine,” said Laszlo Bock, former senior vice-president of people operations at Google.

Pichette and Bock overlapped at Google from 2008 to 2015. Since leaving the company, Bock has founded Humu Inc., which uses small nudges to optimize workers’ productivity, and Gretel.ai, which uses artificial intelligence to generate synthetic data.

“Google launches a lot of products, then they’re not deep, deep priorities,” Bock said.

 The YouTube logo.
The YouTube logo.

It has to do with too much cash, said Bock. “What’s difficult about a situation like Google or Microsoft or Meta is that the profits are so extreme that they don’t face the same pressure to be efficient internally and make difficult decisions on what should be done internally or externally.”

Conversely, companies with greater financial constraints will introduce products and cull those that don’t work. “Google tends not to cut those things,” said Bock.

The never-ending stream of profits therefore constitutes the company’s greatest strength — and weakness.

“You have the benefits and the disadvantages of a conglomerate,” said Pichette. “The benefit is that, of course, you have scale. The downside is in order to make a decision in this department now you need to talk to six other departments. It slows everything down.”

Pichette said he’d like YouTube, Google Maps, Google search, Android, and Chrome OS, all currently under the Google umbrella, to each be separate companies.

 Attendees take pictures of a large Android logo head at Alphabet’s Google Android plaza booth during the Consumer Electronics Show (CES) in Las Vegas, Nev., in January.
Attendees take pictures of a large Android logo head at Alphabet’s Google Android plaza booth during the Consumer Electronics Show (CES) in Las Vegas, Nev., in January.

But Bock argued that breaking up the company could actually make it more difficult to innovate, not easier. “It certainly would be harder to make all that technology work together,” he said. “Because the more integrated you are on the back end, in theory, the more service you can provide to your consumer.”

It could be useful, for example, to have information not just about your meeting, but where that meeting will take place, Bock said, a feature which might require seamless integration across Google Calendar and Google Maps.

“People have been saying (Google is) too big for a long time. They probably are,” Bock said. “But there’s not really another option. Absent intervention, they’re not going to break up, or split, or spit out Maps or YouTube. That’s just never going to happen.”

An ‘adhocratic’ solution

Google doesn’t need to be torn down and rebuilt from scratch to become more innovative, said Amy Edmondson, professor of leadership and management at Harvard Business School. Once “you recognize a strategically important issue or challenge, you can create a small and effective cross-functional team that is given permission and protection to go after it,” she said. “You don’t have to have a whole re-org to create that kind of team.”

Birkinshaw concurred. “If you want to have quick action against, for example, a new chatbot, sometimes creating a little team, set apart… is often quite a good way of dramatically accelerating how you do things.”

You give a bureaucrat a job to do, and they will hire more bureaucrats to work with them

Laszlo Bock

Companies can use bureaucracy to their advantage, said Edmondson. Contrary to popular belief, bureaucracy is not a “bad word.” Originally, the formal systems and processes that make up a bureaucracy were meant to ensure fairness and reliability. If a large organization with thousands of staff tried to function like a small team, “it would be chaos,” she said.

However, companies need to balance bureaucracy with its antonym, adhocracy, said Birkinshaw. When a bureaucrat encounters a problem, the first thing they would consider is the correct procedural approach. An “adhocrat,” on the other hand, is driven by action, and would take the simplest, most efficient path to solve the problem, involving the fewest number of people possible, he said.

A longstanding issue

Employees began to sound warning bells about Google’s bureaucracy as early as 2009. Shortly after Pichette joined, Googlers, as workers are known, said in an annual survey that the company was getting so big that it was “becoming harder to get things done,” according to Bock’s book, Work Rules!: Insights from Inside Google That Will Transform How You Live and Lead.

“Bureaucracy is self-regenerating,” said Birkinshaw. “You give a bureaucrat a job to do, and they will hire more bureaucrats to work with them… (Companies have) got to continuously prune back the bureaucracy.”

Google executives have made multiple attempts. Pichette launched Bureaucracy Busters, an annual program where Google employees could voice their complaints about the small, everyday frustrations slowing down operations at the company. “Think of it as spring cleaning,” said Pichette.

In July 2022, Pichai implemented a two-week “Simplicity Sprint” where employees could share their ideas for streamlining processes and reducing complexity, reported Fast Company, an American business magazine.

But issues at Google persist. When Google acquired navigation software company Waze in June 2013, the company was absorbed into Google, and all Waze staff became Google employees. Chief executive Noam Bardin said that under Google, it became difficult to run his business. For example, it was hard to fire staff and replace them with “people who (did) have the right skills,” he wrote in a Linkedin blog post in 2021.

“The innovation challenges,” Bardin wrote, “will only get worse as the risk tolerance will go down.”

The problem is system-wide, and might be too engrained to be solved by a two-week sprint alone.

The idea of splitting up the company is “very powerful,” said Birkinshaw. “That is a good way of refocusing the various different businesses and taking out entire layers of management to make each business more agile. The only downside is, of course, that most top executives don’t want to do that.”

Pichette is not one of them. “Think of all the benefits Google (has given) us. What you don’t want is the bureaucracy of Google,” he said. “That slows it down.”

Correction: An earlier version of this story included a comment from Patrick Pichette that implied he was at Google when the company bought YouTube and launched Android, Gmail, Apps, Maps and Street View. Pichette’s tenure as CFO ran from 2008 to 2015. Google created Gmail in 2004, Maps in 2005, Apps in 2006, Street View in 2007, Android in 2008 and purchased YouTube in 2006. The article has been revised accordingly. 

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