by Adam Hartung | Jul 19, 2012 | Uncategorized
With great public fanfare Yahoo hired a Google executive as CEO this week.
The good news is that by all accounts Ms. Marissa Mayer is very hard working, very smart and deeply knowledgeable about all things internet. Ms. Mayer also was extremely successful at Google, which is a powerful recommendation for her skills. This has pleased a lot of people. Some have practically gushed with excitement, and have already determined this is a pivotal event destined to save Yahoo.
But, before we get carried away with ourselves, there are plenty of sound reasons to remain skeptical. Check out this chart, and I concur completely with originator Jay Yarow of Business Insider – the #1 problem at Yahoo is revenue growth:
Source: BusinessInsider.com reproduced with permission of Jay Yarow
Let's not forget, this problematic slide occurred under the last person who had great tech industry credentials, deep experience and a ton of smarts; Carol Bartz. She was the last Yahoo CEO who was brought in with great fanfare and expectations of better things after being the wildly successful CEO of AutoCad. Only things didn't go so well and she was unceremoniously fired amidst much acrimony.
So, like they say on financial documents, past performance is not necessarily an indicator of future performance.
What Yahoo needs is to become relevant again. It has lost the competition in search, and search ads, to Google. It is not really competitive in banner ads with leader Facebook, and strong competitor Google. It is no longer leads in image sharing which has gone to Pinterest. It has no game in local coupons and marketing which is being driven by GroupOn and Yelp. For a company that pioneered the internet, and once led in so many ways, Yahoo has lost relevancy as new entrants have clobbered it on all fronts.
Because it has fallen so far behind, it is ridiculous to think Yahoo will catch up and surpass the industry leaders in existing markets. No CEO, regarless of their historical success and skills, can pull off that trick. The only hope for Yahoo is to find entirely new markets where it can once again pioneer new solutions that do not go head-to-head with existing leaders. Yahoo must meet emerging, unmet needs in new ways with new, innovative solutions that it can ride to success. Like the turn to mobile that saved the nearly dead Mac-centric Apple in 2000. Or the change to services from hardware that saved IBM in the 1990s.
Ms. Mayer's entire working career was at Google, so it is worth looking into Google's experience to see if that gives us indications of what Ms. Mayer may do.
Unfortunately, Google has been really weak at implementing new solutions which create high revenue, new markets. Google has been a wild success at search, its first product, which still generates 90% of the company's revenue.
- Android is a very important mobile operating system. But unfortunately giving away the product has done nothing to help sales and profits at Google. Yahoo certainly cannot afford to develop something so sophisticated and give it away.
- To try turning around the Android sales and profits Google bought market laggard Motorola Mobility for $12.5B. With a total market cap of only $19.2B Yahoo is in no position to attempt buying its way out of trouble.
- Chrome is a great product that has selectively won several head-to-head battles with other application environments. However, again, it has not created meaningful revenues. Despite a big investment.
- Google+ has its advocates, but it was at least 3 years late to market allowing Facebook to develop a tremendous lead. So far the product is still far behind in its gladiator battle with FB, and produces little revenue despite the enormous development and launch costs – which are still draining resources from Google.
- Google has invested in an exciting, self-driving automobile. But nobody knows when, or if, it will be sold. So far, money spent and no plan for a return.
- Google glasses are cool. But the revenue model? Launch date? Manufacturing and distribution partners for commercialization?
- Google innovated a number of exciting potential product markets, but because it failed at market implementation eventually it simply killed them. Remember Wave? Powermeter? Picnik? Google Checkout? Google answers? Google Buzz? Fast Flip? Google Lively? Squared?
If ever a company proved that there is a difference between innovating new products and launching successfully to create new markets it has to be Google.
So is Yahoo destined to fail? No. As previously mentioned, Apple and IBM both registered incredibly successful turnarounds. Bright people with flexible minds and leadership skills can do incredible things. But it will be up to Ms. Mayer to actually shed some of that Google history – fast.
At Google Ms. Mayer was employee #20 on a veritable rocket ship. The challenge at Google was to keep being better and better at search, and ads associated with search. And developing products, like GMail, that continued to tie people to Google search. It was hard work, but it was all about making Google better at what it had always done, executing sustaining innovations to keep Google ahead in a rapidly growing marketplace.
Yahoo is NOT Google, and has a very different set of needs.
Yahoo is in far worse shape now than when Ms. Bartz came in as the technical wonderkind to turn it around last time. Ms. Mayer takes the reigns of a company going in the wrong direction (losing revenues) with fewer people, fewer resources, weaker market position on its primary products and a weakening brand. Hopefully she's as smart as many people say she is and acts quickly to find those new markets with products fulfilling unmet needs. Or she's likely to end up turning out the lights at the company where Ms. Bartz dimmed them significantly.
by Adam Hartung | Sep 15, 2011 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Innovation, Leadership, Lock-in, Science, Web/Tech, Weblogs
Carol Bartz was unceremoniously fired as CEO by Yahoo’s Board last week. Fearing their decision might leak, the Chairman called Ms. Bartz and fired her over the phone. Expeditious, but not too tactful. Ms. Bartz then informed the company employees of this action via an email from her smartphone – and the next day called the Board of Directors a bunch of doofusses in a media interview. Salacious fodder for the news media, but a distraction from fixing the real problems affecting Yahoo!
Unfortunately, the Yahoo Board seems to have no idea what to do now. A small executive committee is running the company – which assures no bold actions. And a pair of investment banks have been hired to provide advice – which can only lead to recommendations for selling all, or pieces, of the company. Most people seem to think Yahoo’s value is worth more sold off in chunks than it is as an operating company. Wow – what went so wrong? Can Yahoo not be “fixed”?
There was a time, a decade or so back, when Yahoo was the #1 home page for browsers. Yahoo! was the #1 internet location for reading news, and for doing internet searches. And, it pioneered the model of selling internet ads to support the content aggregation and search functions. Yahoo was early in the market, and was a tremendous success.
Like most companies, Yahoo kept doing more of the same as its market shifted. Alta Vista, Microsoft and others made runs at Yahoo’s business, but it was Google primarily that changed the game on Yahoo! Google invested heavily in technology to create superior searches, offered a superior user experience for visitors, gave unique content (Google Maps as an example) and created a tremendously superior engine for advertisers to place their ads on searches – or web pages.
Google was run by technologists who used technology to dramatically improve what Yahoo started – seeing a future which would take advantage of an explosion in users and advertisers as well as web pages and internet use. Yahoo had been run by advertising folks who missed the technology upgrades. Yahoo’s leadership was locked-in to what it new (advertising) and they were slow with new solutions and products, falling further behind Google every year.
In an effort to turn the tide, Yahoo hired what they thought was a technologist in Carol Bartz to run the company. She had previously led AutoCad, which famously ran companies like IBM, Intergraph, DEC (Digital Equipment) and General Electric owned CALMA out of the CAD/CAM (computer aided design and manufacturing) business. She had been the CEO of a big technology winner – so she looked to many like the salvation for Yahoo!
But Ms. Bartz really wasn’t familiar with how to turn an ad agency into a tech company – nor was she particularly skilled at new product development. Her skills were mostly in operations, and developing next generation software. AutoCad was one of the first PC-based CAD products, and over 2 decades AutoCad leveraged the increasing power of PCs to make its products better, faster and relatively cheaper. This constant improvement, and close attention to cost control, made it possible for AutoCad on a PC to come closer and closer to doing what the $250,000 workstations had done. Users switched to the cheaper AutoCad not because it suddenly changed the game, but because PC enhancements made the older, more costly technology obsolete.
Ms. Bartz was stuck on her success formula. Constantly trying to improve. At Yahoo she implemented cost controls, like at AutoCad. But she didn’t create anything significantly new. She didn’t pioneer any new platforms (software or hardware) nor any dramatically new advertising or search products. She tried to do deals, such as with Bing, to somehow partner into better competitiveness, but each year Yahoo fell further behind Google. In a real way, Ms. Bartz fell victim to Google just as DEC had fallen victim to AutoCad. Trying to Defend & Extend Yahoo was insufficient to compete with the game changing Google.
The Board was right to fire Ms. Bartz. She simply did what she knew how to do, and what she had done at AutoCad. But it was not what Yahoo needed – nor what Yahoo needs now. Cost cutting and improvements are not going to catch the ad markets now driven by Google (search and adwords) and Facebook (display ads.) Yahoo is now out of the rapidly growing market – social media – that is driving the next big advertising wave.
Breaking up Yahoo is the easy answer. If the Board can get enough money for the pieces, it fulfills its fiduciary responsibility. The stock has traded near $15/share for 3 years, and the Board can likely obtain the $18B market value for investors. But “another one bites the dust” as the song lyrics go – and Yahoo will follow DEC, Atari, Cray, Compaq, Silicon Graphics and Sun Microsystems into the technology history on Wikipedia. And those Yahoo employees will have to find jobs elsewhere (oh yeah, that pesky jobs problem leading to 9%+ U.S. unemployment comes up again.)
A better answer would be to turn around Yahoo! Yahoo isn’t in any worse condition than Apple was when Steve Jobs took over as CEO. It’s in no worse condition than IBM was when Louis Gerstner took over as its CEO. It can be done. If done, as those examples have shown, the return for shareholders could be far higher than breaking Yahoo apart.
So here’s what Yahoo needs to do now if it really wants to create shareholder value:
- Put in place a CEO that is future oriented. Yahoo doesn’t need a superb cost-cutter. It doesn’t need a hatchet wielder, like the old “Chainsaw Al Dunlap” that tore up Scott Paper. Yahoo needs a leader that can understand trends, develop future scenarios and direct resources into developing new products that people want and need. A CEO who knows that investing in innovation is critical.
- Quit trying to win the last war with Google. That one is lost, and Google isn’t going to give up its position. Specifically, the just announced Yahoo+AOL+Microsoft venture to sell ad remnants is NOT where Yahoo needs to spend its resources. Every one of these 3 companies has its own problems dealing with market shifts (AOL with content management as dial-up revenues die, Microsoft with PC market declines and mobile device growth.) None is good at competing against Google, and together its a bit like asking 3 losers in a 100 meter dash if they think by forming a relay team they could somehow suddenly become a “world class” group. This project is doomed to failure, and a diversion Yahoo cannot afford now.
- In that same vein, quit trying to figure out if AOL or Microsoft will buy Yahoo. Microsoft could probably afford it – but like I said – Microsoft has its hands full trying to deal with the shift from PCs to tablets and smartphones. Buying Yahoo would be a resource sink that could possibly kill Microsoft – and it’s assured Microsoft would end up shutting down the company piecemeal (as it does all acquisitions.) AOL has seen its value plummet because investors are unsure if it will turn the corner before it runs out of cash. While there are new signs of life since buying Huffington Post, ongoing struggles like firing the head of TechCrunch keep AOL fully occupied fighting to find its future. Any deal with either company should send investors quickly to the sell post, and probably escalate the Yahoo demise with the lowest possible value.
- Give business heads the permission to develop markets as they see fit. Ms. Bartz was far too controlling of the business units, and many good ideas were not implemented. Specifically, for example, Right Media should be given permission to really advance its technology base and go after customers unencumbered by the Yahoo brand and organization. Right Media has a chance of being really valuable – that’s why people would ostensibly buy it – so give the leaders the chance to make it successful. Maybe then the revolving door of execs at Right (and other Yahoo business units) would stop and something good would happen.
- Hold existing business units “feet to the fire” on results. Yahoo has notoriously not delivered on new ad platforms and other products – missing development targets and revenue goals. Innovation does not succeed if those in leadership are not compelled to achieve results. Being lax on performance has killed new product development – and those things that aren’t achieving results need to stop. Specifically, it’s probably time to stop the APT platform that is now years behind, and because it’s targeted against Google unlikely to ever succeed.
- Invest in new solutions. Take all that wonderful trend data that Yahoo has (maybe not as much as Google – but a lot more than most companies) and figure out what Yahoo needs to do next. Rip off a page from Apple, which flattened spending on the Mac in order to invest in the iPod. Learn from Amazon, which followed the trends in retail to new storefronts, expanded offerings, a mobile interface and Kindle launch. Yahoo needs to quit trying to gladiator fight with Google – where it can’t win – and identify new markets and solutions where it can. Yahoo must quit being a hostage to its history, and go do the next big thing! Create some white space in the company to invest in new solutions on the trends!
Of course, this is harder than just giving up and selling the company. But the potential returns are much, much higher. Yahoo’s predicament is tough, but it’s been a management failure that got it here. If management changes course, and focuses on the future, Yahoo can once again become a market leading company. Sure would like to see that kind of leadership. It’s how America creates jobs.
by Adam Hartung | Mar 3, 2010 | General, In the Rapids, Leadership, Openness, Web/Tech, Weblogs
Guy Kawasaki contacted me a couple of weeks ago, asking me to write a short piece for him. I was happy to do so, and he published it at the BusinessInsider.com War Room as "10 Ways to Stay Ahead of the Competition." Fortunately for me, the article was also picked up at IBMOpenForum.com with the alternate title "How to Stay Ahead of the Competition." Full explanations of each bullet are at both locations (although the graphics are outstanding at Business Insider so I prefer it.)
- Develop future scenarios
- Obsess about competitors
- Study fringe competitors
- Attack your Lock-ins
- Seek Disruptions
- Don't ask customers for insight
- Avoid Cost Cutting
- Do lots of testing
- Acquire outside input
- Target competitors
Blog followers know that this program has now worked for many companies who want to grow in this recession. The reason it works is because
- You focus on the market, not yourself
- You avoid Lock-in blindness by avoiding an over-focus on existing products, services and customers
- You use outside input, from advisers and competitors to identify market shifts that can really hurt you
- You put a competitive edge into everything you do. Competitors kill your returns, not yourself.
- You use market feedback rather than internal analysis guide resource allocation
Of course this works. How can it not? When you are obsessed about markets and competitors and you let it direct your flow of money and talent you'll constantly be positioned to do what the market values. You'll have your eyes on the horizon, and not the rear view mirror.
The biggest objection is always my comment about "don't ask customers for insight." So many people have been indoctrinated into "always ask the customer" and "the customer is always right" that they can't imagine not asking customers what you ought to do. Even though the evidence is overwhelming that customer feedback is usually wrong, and more likely destructive than beneficial.
Just remember, IBMs best customers (data center managers) told them the PC was a stupid product, and IBM dropped the product line 6 years after inventing the PC business. DEC's customers kept asking for more bells and whistles on their CAD/CAM systems, then dropped DEC altogether for AutoCad ending the company. GM customers kept asking for bigger, faster more comfortable cars – improvements on previous models – then moved to imports with different designs, better gas mileage and better fit/finish. Circuit City customers asked for more in-store assistance, then took the assistance across the street to buy from cheaper Best Buy stores. The stories are legend of failed companies who delivered what the customer wanted, and ended up out of business.
Enjoy the links, and thanks to Guy for publishing this short piece. Follow these 10 steps and any business can stay ahead of the competition.
