Google’s Shake Up: Why Now?

Search “Google” today and you will come up with wide-ranging coverage and speculation concerning the Internet giant’s decision to name company co-founder Larry Page as its new CEO, replacing the firm’s current chief executive, Eric Schmidt.

Schmidt, who will become the company’s executive chairman, said in a post on Google’s blog that the decision to restructure is based on the increasingly complex nature of managing the company’s growth. According to an article in The Wall Street Journal, Google said that it aims to “streamline decision making and create clearer lines of responsibility and accountability.”

Official accounts aside, however, observers are speculating about the motives behind what the Journal calls “the biggest management shake-up since the Internet search giant was an obscure California start-up.” While some cite an increasingly tense relationship between Page and Schmidt, others note that recent failed acquisitions — such as Google’s attempt to purchase group buying site Groupon — and growing competition from social networking site Facebook are signs that the company is ripe for change. In fact, Facebook presents a particularly pressing challenge: According to Internet analytics firm Hitwise, the social networking site usurped Google’s position as the most-visited site in the U.S. in 2010.

According to Wharton operations and information management professor Eric Clemons, “there is a perception on the street that Schmidt has been more of a care taker/administrator than a visionary leader.” He notes that this particular assessment is not necessarily “fair,” given the experiments in search the company has undertaken during Schmidt’s tenure, and other advances, including Google’s expansion into Japan and the successful promotion of its Android operating system.

However, he agrees that Google is facing particular threats. “There is some danger that Google’s ‘don’t be evil’ image is going to collapse, some danger that search will be regulated, and some danger that Facebook will be the next player in search.” He adds that although search “will never lose its dominance” on the web, a site like Facebook — or perhaps Facebook combined with Microsoft’s Bing — could make paid search obsolete with “a better form of social search.”

What, then, should Page focus on when he takes over as CEO in April? According to Clemons, “Control the cowboys…. Google’s behavior was cute when it was a tiny company headed by a group of committed techies; it’s now increasingly seen as rapacious and dangerous, defensive and monopolistic. Set some limits on corporate behavior, truly stop accepting evil and do so before regulators in the E.U. and the U.S. come down really hard.”

According to the Journal, Schmidt tweeted the following after the changes in leadership were announced: “Day-to-day adult supervision no longer needed!”

“The boys are back in charge, this time with a much more powerful toy,” Clemons says. “Anything goes. Be afraid, be very afraid.”

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