Is Alphabet disinvesting from X a signal for other innovation labs?
Alphabet Inc.'s avant-garde technology lab/innovation center X is trimming its team/ Most importantly, Alphabet is seeking to externalize risk, pivoting towards a structure that allows its moonshot projects to emerge as independent startups, with financial backing from both Alphabet and external partners.
Julia Love
The idea of a moonshot lab
The move comes as X faces the usual reality check that, despite tackling grand challenges like climate change and global social connectivity, it hasn't birthed many commercially successful ventures. Born from the visionary minds of Google co-founders Larry Page and Sergey Brin, X has captured imaginations with ventures ranging from self-driving cars to internet-connecting high-altitude balloons. Despite the intrigue surrounding its speculative projects, X has been under mounting pressure to demonstrate the ability to turn innovation into profitable businesses.
X has also been, for quite some time, the poster child for tech companies inventing the future in-house and trying to break the curse of the innovator's dilemma. Las, it seems that having invented the commercial and social internet in the nineties and having the smartest people on the planet working for you is not enough... I often repeat that for innovation–and even more disruptions–'smart' just buys you in.
And to be fair, Alphabet, as a conglomerate, is on a cost-cutting spree, adding to the urgency for X to showcase tangible results. Which they can't really. For more traditional industrials running innovation labs, this kind of reality check appears about every three to five years in any case, when someone from the executive committee starts asking 'Oh, and by the way, what are you doing back there?" A polite question that spells dread for Innovation Directions...
Kyle Wiggers
Another innovation lab in the crosshair at Google...
But there might be another structural issue in play.
The struggle to land back on Earth
See, as big as Alphabet is, their attempts to integrate moonshot projects from X into their traditional pipeline faced a bottleneck, limiting the ventures ready to transition to independent status. X restructuring seems to address this challenge by allowing projects to spin out more easily as standalone entities fuelled by market-based capital. This marks a departure from the previous model, where startups within X faced the dilemma of either waiting for a spot to open up or venturing on their own.
From my perspective, it seems quite surprising that this structural issue was never identified sooner and that Alphabet only started to see value in extubating projects rather than solely incubating them.
Another point to remember is that Alphabet has been failing to deliver, or more precisely, sustain many new products at the other of the innovation treadmill. In this 2022 article, I was trying to explain the "Dutch disease" Google is a victim of and why this was leading to cultural attrition:
Philippe MEDA
Lastly, the difficulties in securing scalable outcomes from speculative technology ventures (now prompting X to seek external funding) acknowledge the inherent risks in technology exploration, even for one of the wealthiest companies globally. The fear of unjustifiable expenses looms large when groundbreaking projects fail to deliver tangible results on time. No matter who you are.
Are moonshots worth it?
No matter what, X's misadventures signal how frail and unproven the big idea of having a big lab tackling big challenges for your big market is. If Alphabet can't do it, should you even try? Mostly, my answer is that it's just a matter of granularity and reading out strategically your bets in a) different directions at b) different levels of risk. And if you read me, you know I'll go back to what an innovation portfolio is.
What is never easily understood when discussing portfolio is that it's not only a different form of pipeline with high-, medium- and low-risk projects. This is only the b) axis. The most important one is certainly the a) axis: different directions, some of them deeply and inherently technological, other ones strictly social or demographics, or challenging your business model. Where was X's exploration of social moonshot?
In all this, Alphabet's cardinal (and cultural) sin might be only to be interested in transformational technologies. A narrow corridor for innovation, provenly insufficient times and times over.
Philippe MEDA
