Yahoo – Another Disappearing Giant Has Nowhere To Hide

Yahoo – Another Disappearing Giant Has Nowhere To Hide

This week Yahoo announced it is spinning off the last of its Alibaba holdings.  This is a big deal, because it might well signal the end of Yahoo.

Yahoo created internet advertising.  Yahoo was once the #1 home page for browsers across America.  But the company has floundered for years, riddled with CEO problems, a contentious Board of Directors and no strategy for dealing with Google which overtook it in all markets.

mayer-yahoo

To much fanfare the Board hired Marissa Mayer, a Google wunderkind we were told, in July, 2012 to mount a serious turnaround. And during her leadership the company’s stock value has tripled – from about $14.50/share to about $43.50.  You would think investors would be thrilled and the company would be on the right track.

Only almost all that value creation was due to a stock investment made in 2005 – when Jerry Yang invested $1B to buy 40% of Alibaba.  And Alibaba in 2014 became the most valuable IPO in history.

Yahoo today is valued at about $46B.  The Alibaba shares being spun out are valued at between $40B and $44B.  Which means that after adjusting for the ownership in Yahoo Japan (valued at $2.3B) the core Yahoo ad and portal business is worth between $2B and $4.7B.  With just over $1B shares outstanding, that puts a value on Yahoo’s core business of between $2.00-$4.70/share – or about 1/6 to 1/3 the value when Ms. Mayer became CEO.

A highest value of $4.7B for the operating business of Yahoo puts it on par with Groupon.  And worth far less than competitors Google ($347B) and Facebook ($212B).  Even upstart, and often maligned, social media companies Twitter ($24B) and LinkedIn ($27B) have valuations 5 times Yahoo.

Unfortunately, this latest leader and her team haven’t been any more effective at improving the company’s business than previous regimes.  Under CEO Mayer Yahoo used gains from Alibaba’s valuation to invest about $2.1B in 49 outside companies – with $2B of that being acquisitions of technology companies Flurry ($200M), BrightRoll ($640M) and Tumblr ($1.1).  Under the most optimistic view of Yahoo, leadership spent 40% of the company’s value in acquisitions that have made no difference to ad revenues or profits.

In fact, Yahoo’s business revenues, and profits, have declined for 6 consecutive quarters.  Despite the CEO’s mandate that employees could no longer work from home.  A kerfuffle that proved yet another management distraction, and apparently an effort to cut staff without it looking like a layoff.

Meanwhile there have been big efforts to boost people going to the Yahoo portal. Such as hiring broadcaster Katie Couric to beef up the news section, and former New York Times tech columnist David Pogue to deepen tech coverage and New York Times Magazine political writer Matt Bai to draw in more readers.  But these have done nothing to move the needle.

Consistently declining display advertising has left search ads a bigger, and more profitable, business.  And while Yahoo’s CEO has been teasing ad agencies that she might begin another big brand campaign, including TV, to bring Yahoo more attention – and hopefully more advertisers – there is no evidence anyone cares as more and more dollars flow to “programmatic” ad buying where Google is king.  In the digital ad marketplace Google has 31% share, Facebook 7.75% share and Yahoo a meager 2.36% share.

Soon there will be little left of the once mighty Yahoo.  It has pretty much lost relevancy.  Large investors are crying for a merger with AOL, whose inability to grow its portal, ad and media businesses has left its market cap at a mere $3.7B.  But combining two companies that are market irrelevant, and declining, will probably have the same outcome as happened when merging KMart and Sears.  The Yahoo growth stall remains intact, and revenues will decline along with profits as the market continues shifting to powerful and growing competitors Google, Facebook and other social media companies.  Only now Yahoo’s leaders won’t have the Alibaba value mountain to hide behind

Why Groupon Needs a New CEO

Forbes magazine labeled Groupon the world's fastest growing corporation.  And that didn't hurt the company's valuation when it went public in November, 2011. 

But after trading up for a couple of months, at the beginning of March Groupon turned down and has since lost 75% of its market capitalization.  Groupon is now valued at about $3.6B – approaching half of what Google offered to pay for the company in 2011 before leadership decided to go public. 

And nobody, absolutely nobody, can be happy about that.

Groupon pioneered the use of digital coupons in a way that created an explosive new market for local business.  Paper coupon use had been declining for years.  But when Groupon made it possible for on-line individuals to achieve deep discounts on products in local stores using emailed coupons masses of people started buying. From nothing in June, 2009, by June, 2010 revenues grew to an astonishing $100M. Then, between June, 2010 and June, 2011 revenues exploded 10-fold, reaching the magical $1B.  Forbes was not wrong – as this was an astonishing growth accomplishment.

Google, Yahoo, Amazon and other suitors quickly recognized that this was not a fad – but a true growth market:

  • People like deals, and coupons could be successful when updated to modern technology
  • Local programs were extremely hard for internet-wide companies like Google, and Groupon had "cracked the code" for acquiring local-market customers
  • Some Groupon programs had simply astounding results – far exceeding the offerer's expectations.  The downside was the businessess complained about how much the discounts cost them as success exceeded expectations.  The upside was it demonstrated the business had remarkable reach and success.
  • As mobile use grows Groupon can interact with location apps like Foursquare to allow local merchants to target local customers for rapid sales.  Combine that with Twitter distribution and you could have extremely effective local store targeted marketing programs – previously unavailable on the web.
  • Groupon reached a scale allowing it to potentially work with national consumer goods companies like PepsiCo or P&G and their local retailers on new product launches or market specific sales programs, something not previously done via digital networks.

Ah, but problems have emerged at Groupon.  Although none of them really change the above items:

Groupon Gross billings drop Aug 2012
Source:  Business Insider August 13, 2012 Permission to reproduce: Jay Yarrow, Silicon Alley Insider Editor

This last point is extremely deadly.  Groupon's growth rate has fallen from 1,000% to about 35%!  Further, Groupon is dangerously close to a growth stall, which is 2 consecutive quarters of declining revenue.  Only 7% of companies that incur a growth stall maintain a consistent growth rate of even 2%!! Groupon's value is completely based upon maintaining high growth.  So regardless of anything else – including profitability – unless Groupon can find its growth mojo then investors are screwed!

Has the market for daily deals declined?  Not according to Yelp and Amazon, which continue growing their markets.  Consumers are still smarting from a bad economy, and love digital coupons.  The problems at Groupon do not appear to be that the market is disappearing – but rather that management simply does not know what to do next.

Groupon was a rocket ship of growth, and founding CEO Andrew Mason deserves a lot of credit for building the sales machine that outperformed everyone else – including Google and Amazon.  But the other side of his performance was complete inexperience in how to manage finances, operations or any other part of a large publicly traded corporation.  Unprofessional analyst presentations, executive turnover, disrespectful comments to investors and chronic unprofitability all were acceptable if – and only if – he kept up that torrid growth pace.  If he can't drive sales, what's the benefit of keeping him in the top job?

Groupon is a remarkable company, in a remarkable market.  But it has incredibly tough competition.  Seasoned tech investors know that as fast as Groupon sales went up, they can go down.  With smart, well managed competitors in their markets there is no room for error – and no time.  Groupon has to keep the growth going, or it will quickly be overwhelmed by bigger, smarter companies – remember Palm? RIM?

It's not too late for Groupon. It is #1 in its market.  Groupon has the most users, the most customers and by far the most salespeople.  Groupon has other products in the pipeline which solve new needs and can extend sales into other emerging market opportunities.  But Groupon will not survive if it does not recapture growth – and it's time for a CEO with the experience to do just that.  Mr. Mason does not appear to be the next Jeff Bezos or Steve Jobs, so Groupon's Board better go find one!

The Good, Bad and Ugly – Apple, Google and Dell

The Good – Apple

Apple's latest news to start paying a big dividend, and buying back shares, is a boon for investors.  And it signals the company's future strength.  Often dividends and share buybacks indicate a company has run out of growth projects, so it desires to manipulate the stock price as it slowly pays out the company's assets.  But, in Apple's (rare) case the company is making so much profit from existing businesses that they are running out of places to invest it – thus returning to shareholders!

With a $100B cash hoard, Apple anticipates generating at least another $150B of free cash flow, over and above needs for ongoing operations and future growth projects, the next 3 years.  With so much cash flowing the company is going to return money to investors so they can invest in other growth projects beyond those Apple is developing.  Exactly what investors want! 

I've called Apple the lowest risk, highest return stock for investors (the stock to own if you can only own one stock) for several years.  And Apple has not disappointed.  At $600/share the stock is up some 75% over the last year (from about $350,) and up 600% over the last 5 years (from about $100.)  And now the company is going to return investors $10.60/year, currently 1.8% – or about 4 times your money market yield, or about 75% of what you'd get for a 10 year Treasury bond. Yet investors still have a tremendous growth in capital opportunity, because Apple is still priced at only 14x this year's projected earnings, and 12 times next year's projected earnings!

Apple keeps winning.  It's leadership in smart phones continues, as the market converts from traditional cell phones to smart phones.  And its lead in tablets remains secure as it sells 3 million units of the iPad 3 over the weekend.  In every area, for several years, Apple has outperformed expectations as it leads the market shift away from traditional PCs and servers to mobile devices and using the "cloud." 

The Bad – Google

Google was once THE company to emulate.  At the end of 2008 its stock peaked at nearly $750/share, as everyone thought Google would accomplish nothing short of world domination (OK, a bit extreme) via its clear leadership in search and the way it dominated internet usage.  But that is no longer the case, as Google is being eclipsed by upstarts such as Facebook and Groupon.

What happened?  Even though it had a vaunted policy of allowing employees to spend 20% of their time on anything they desired, Google never capitalized on the great innovations created.  Products like Google Wave and Google Powermeter were created, launched – and then subsequently left without sponsors, management attention, resources or even much interest.  Just as recently happened with GoogleTV.

They floundered, despite identifying very good solutions for pretty impressive market needs, largely because management chose to spend almost all its attention, and resources, defending and extending its on-line ad sales created around search. 

  • YouTube is a big user environment, and one of the most popular sites on the web.  But Google still hasn't really figured out how to generate revenue, or profit, from the site.  Despite all the user activity it produces a meager $1.6B annual revenue – and nearly no profit.
  • Android may have share rivaling Apple in smartphones, but it is nowhere in tablets and thus lags significantly in the ovarall market with share only about half iOS.  Worse, Android smartphones are not nearly as profitable as iPhones, and now Google has made an enormous, multi-billion investment in Motorola to enter this business – and compete with its existing smartphone manufacturers (customers.)  To date Android has been a product designed to defend Google's historical search business as people go mobile – and it has produced practically no revenue, or profit.
  • Chrome browsers came on the scene and quickly grew share beyond Firefox.  But, again, Google has not really developed the product to reach a dominant position.  While it has good reviews, there has been no major effort to make it a profitable product.  Possibly Google fears fighting IE will create a "money pit" like Bing has become for Microsoft in search?
  • Chromebooks were a flop as Google failed to invest in robust solutions allowing users to link printers, MP3 players, etc. – or utilize a wide suite of thin cloud-based apps.  Great idea, that works well, they are a potential alternative to PCs, and some tablet applications, but Google has not invested to make the product commercially viable.
  • Google tried to buy GroupOn to enter the "local" ad marketplace, but backed out as the price accelerated.  While investors may be happy Google didn't overpay, the company missed a significant opportunity as it then faltered on creating a desirable competitive product.  Now Google is losing the race to capture local market ads that once went to newspapers.

While Google chose to innovate, but not invest in market development, it missed several market opportunities.  And in the meantime Google allowed Facebook to sneak up and overtake its "domination" position. 

Facebook has led people to switch from using the internet as a giant library, navigated by search, to a social medium where referrals, discussions and links are driving more behavior.  The result has advertisers shifting their money toward where "eyeballs" are spending most of their time, and placing a big threat on Google's ability to maintain its historical growth.

Thus Google is now dumping billions into Google+, which is a very risky proposition.  Late to market, and with no clear advantage, it is extremely unclear if Google+ has any hope of catching Facebook.  Or even creating a platform with enough use to bring in a solid, and growing, advertiser base. 

The result is that today, despite the innovation, the well-known (and often good) products, and even all the users to its sites Google has the most concentrated revenue base among large technology companies.  95% of its revenues still come from ad dollars – mostly search.  And with that base under attack on all fronts, it's little wonder analysts and investors have become skeptical.  Google WAS a great company – but it's decisions since 2008 to lock-in on defending and extending its "core" search business has made the company extremely vulnerable to market shifts. A bad thing in fast moving tech markets.

Google investors haven't fared well either.  The company has never paid a dividend, and with its big investments (past and future planned) in search and handsets it won't for many years (if ever.)  At $635/share the stock is still down over 15% from its 2008 high.  Albeit the stock is up about 8.5% the last 12 months, it has been extremely volatile, and long term investors that bought 5 years ago, before the high, have made only about 7%/year (compounded.)

Google looks very much like a company that has fallen victim to its old success formula, and is far too late adjusting to market shifts.  Worse, its investments appear to be a company spending huge sums to defend its historical business, taking on massive gladiator battles against Apple and Facebook – two companies far ahead in their markets and with enormous leads and war chests. 

The Ugly – Dell

Go back to the 1990s and Dell looked like the company that could do no wrong.  It went head-to-head with competitors to be the leader in selling, assembling and delivering WinTel (Windows + Intel) PCs.  Michael Dell was a modern day hero to other leaders hoping to match the company's ability to focus on core markets, minimize investments in anything else, and be a world-class supply chain manager.  Dell had no technology or market innovation, but it was the best at beating down cost – and lowering prices for customers.  Dell clearly won the race to the bottom.

But the market for PCs matured.  And Dell has found itself one of the last bachelors at the dance, with few prospects.  Dell has no products in leading growth markets, like smartphones or tablets.  Nor even other mobile products like music or video.  And it has no software products, or technology innovation. Today, Dell is locked in gladiator battles with companies that can match its cost, and price, and make similarly slim (to nonexistent) margins in the generic business called PCs (like HP and Lenovo.)

Dell has announced it intends to challenge Apple with a tablet launch later in 2012.  This is dependent upon Microsoft having Windows 8 ready to go by October, in time for the holidays.  And dependent upon the hope that a swarm of developers will emerge to build the app base for things that already exist on the iPad and Android tablets.  The advantage of this product is as yet undefined, so the market is yet undefined.  The HOPE is that somehow, for some reason, there is a waiting world of people that have delayed purchase waiting on a Windows device – and will find the new Dell product superior to a $299 Apple 2 already available and with that 500,000 app store.

Clearly, Dell has waited way, way too long to deal with changing its business.  As its PC business flattens (and soon shrinks) Dell still has no smartphone products, and is remarkably late to the tablet business.  And it offers no clear advantage over whatever other products come from Windows 8 licensees.  Dell is in a brutal world of ever lower prices, shrinking markets and devastating competition from far better innovators creating much higher, and growing, profits (Apple and Amazon.)

For investors, the ride from a fast moving boat in the rapids into the swamp of no growth – and soon the whirlpool of decline – has been dismal.  Dell has never paid a dividend, has no free cash flow to start paying one now, and clearly no market growth from which to pay one in the future.  Dell's shares, at $17, are about the same as a year ago, and down about 20% over the last 5 years. 

Leaders in all businesses have a lot to learn from looking at the Good, Bad and Ugly.  The company that has invested in innovation, and then invested in taking that innovation to market in order to meet emerging needs has done extremely well.  By focusing on needs, rather than business optimization, Apple has been able to shift with markets – and even enhance the market shift to position itself for rapid, profitable growth.

Meanwhile, companies that have focused on their core markets and products are doing nowhere near as well.  They have missed market shifts, and watched their fortunes decline precipitously.  They were once very profitable, but despite intense focus on defending their historical strengths profits have struggled to grow as customers moved to alternative solutions.  By spending insufficient time looking outward, at markets and shifts, and too much time inward, on defending and extending past successes, they now face future jeopardy.

Leadership Matters – Ballmer vs. Bezos


Not far from each other, in the area around Seattle, are two striking contrasts in leadership.  They provide significant insight to what creates success today.

Steve Ballmer leads Microsoft, America's largest software company.  Unfortunately, the value of Microsoft has gone nowhere for 10 years.  Steve Ballmer has steadfastly defended the Windows and Office products, telling anyone who will listen that he is confident Windows will be part of computing's future landscape.  Looking backward, he reminds people that Windows has had a 20 year run, and because of that past he is certain it will continue to dominate.

Unfortunately, far too many investors see things differently.  They recognize that nearly all areas of Microsoft are struggling to maintain sales.  It is quite clear that the shift to mobile devices and cloud architectures are reducing the need, and desire, for PCs in homes, offices and data centers.  Microsoft appears years late recognizing the market shift, and too often CEO Ballmer seems in denial it is happening – or at least that it is happening so quickly.  His fixation on past success appears to blind him to how people will use technology in 2014, and investors are seriously concerned that Microsoft could topple as quickly DEC., Sun, Palm and RIM. 

Comparatively, across town, Mr. Bezos leads the largest on-line retailer Amazon.  That company's value has skyrocketed to a near 90 times earnings!  Over the last decade, investors have captured an astounding 10x capital gain!  Contrary to Mr. Ballmer, Mr. Bezos talks rarely about the past, and almost almost exclusively about the future.  He regularly discusses how markets are shifting, and how Amazon is going to change the way people do things. 

Mr. Bezos' fixation on the future has created incredible growth for Amazon.  In its "core" book business, when publishers did not move quickly toward trends for digitization Amazon created and launched Kindle, forever altering publishing.  When large retailers did not address the trend toward on-line shopping Amazon expanded its retail presence far beyond books, including more products  and a small armyt of supplier/partners.  When large PC manufacturers did not capitalize on the trend toward mobility with tablets for daily use Amazon launched Kindle Fire, which is projected to sell as many as 12 million units next year (AllThingsD.com)

Where Mr. Ballmer remains fixated on the past, constantly reinvesting  in defending and extending what worked 20 years ago for Microsoft, Mr. Bezos is investing heavily in the future.  Where Mr. Ballmer increasingly looks like a CEO in denial about market shift, Mr. Bezos has embraced the shifts and is pushing them forward. 

Clearly, the latter is much better at producing revenue growth and higher valuation than the former.

As we look around, a number of companies need to heed the insight of this Seattle comparison:

  • At AOL it is unclear that Mr. Armstrong has a clear view of how AOL will change markets to become a content powerhouse.  AOL's various investments are incoherent, and managers struggle to see a strong future for AOL.  On the other hand, Ms. Huffington does have a clear sense of the future, and the insight for an entirely different business model at AOL.  The Board would be well advised to consider handing the reigns to Ms. Huffington, and pushing AOL much more rapidly toward a different, and more competitive future.
  • Dell's chronic inability to identify new products and markets has left it, at best, uninteresting.  It's supply chain focused strategy has been copied, leaving the company with practically no cost/price advantage.  Mr. Dell remains fixated on what worked for his initial launch 30 years ago, and offers no exciting description of how Dell will remain viable as PC sales diminish.  Unless new leadership takes the helm at Dell, the company's future  5 years hence looks bleak.
  • HP's new CEO Meg Whitman is less than reassuring as she projects a terrible 2012 for HP, and a commitment to remaining in PCs – but with some amorphous pledge toward more internal innovation.  Lacking a clear sense of what Ms. Whitman thinks the world will look like in 2017, and how HP will be impactful, it's hard for investors, managers or customers to become excited about the company.  HP needs rapid acceleration toward shifting customer needs, not a relaxed, lethargic year of internal analysis while competitors continue moving demand further away from HP offerings.
  • Groupon has had an explosive start.  But the company is attacked on all fronts by the media.  There is consistent questioning of how leadership will maintain growth as reports emerge about founders cashing out their shares, highly uneconomic deals offered by customers, lack of operating scale leverage, and increasing competition from more established management teams like Google and Amazon.  After having its IPO challenged by the press, the stock has performed poorly and now sells for less than the offering price.  Groupon desperately needs leadership that can explain what the markets of 2015 will look like, and how Groupon will remain successful.

What investors, customers, suppliers and employees want from leadership is clarity around what leaders see as the future markets and competition.  They want to know how the company is going to be successful in 2 or 5 years.  In today's rapidly shifting, global markets it is not enough to talk about historical results, and to exhibit confidence that what brought the company to this point will propel it forward successfully. And everyone recognizes that managing quarter to quarter will not create long term success.

Leaders must  demonstrate a keen eye for market shifts, and invest in opportunities to participate in game changers.  Leaders must recognize trends, be clear about how those trends are shaping future markets and competitors, and align investments with those trends.  Leadership is not about what the company did before, but is entirely about what their organization is going to do next. 

Update 30 Nov, 2011

In the latest defend & extend action at Microsoft Ballmer has decided to port Office onto the iPad (TheDaily.com).  Short term likely to increase revenue.  But clearly at the expense of long-term competitiveness in tablet platforms.  And, it misses the fact that people are already switching to cloud-based apps which obviate the need for Office.  This will extend the dying period for Office, but does not come close to being an innovative solution which will propel revenues over the next decade.

How “Best Practices” kill productivity, innovation and growth – Start using Facebook, Twitter, Linked-in!


How much access do your employees have to Facebook, Twitter, Linked-in, GroupOn, FourSquare, and texting in their daily work, on their daily technology devices?  Do you encourage use, or do you in fact block access, in the search for greater security, and on the belief that you achieve higher productivity by killing access to these “work cycle stealers?”  Do you implement policies keeping employees from using their own technology tools (smartphone or tablet) on the job?

In 1984 the PC revolution was still quite young.  Pizza Hut was then a division of PepsiCo (now part of Yum Brands,) and the company was fully committed to a set of mainframe applications from IBM.  Mainframe applications, accessed via a “green screen” terminal were used for all document creation, financial analysis, and even all printing.  The CIO was very proud of his IBM mainframe data center, and his tight control over the application base and users. 

In what seemed like an almost overnight series of events, headquarters employees started bringing small PC’s to work in order to build spreadsheets, create documents and print miscellaneous memos.  They found the new technology so much easier to use, and purchase cost so cheap, that their productivity soared and they were able to please their bosses while leaving work on time.  A good trade-off.

The CIO went ballistic.  “These PCs are popping up like popcorn around here – and we have to kill this trend before it gains any additional momentum!” he decried in an executive meeting.  PCs were “toys” that lacked the “robustness” of his mainframe applications.  If users wanted higher productivity, then they simply needed to spend more time in training. 

Additionally, if he didn’t control access to computing cycles, and activities like printing, employees would go berserk using unnecessary resources on projects they probably should never undertake.  He was servicing the corporation by keeping people on a narrow tool set – and it gave the company control over what employees could do as well as how they could do it making sure nothing frivolous was happening.  For all these reasons, plus the fact that he could assure security on his mainframe, he felt it important that the CEO and executive team commit with him that PCs would not be allowed in Pizza Hut.

Retrospectively, he looks foolish (and his efforts were unsuccessful.)  PCs unleashed a wave of personal productivity that benefitted all early adopters.  They not only let employees do their work faster, but it allowed employees to develop innovative solutions to problems – often dramatically lowering overhead costs for many management tasks.  PCs, of course, swept through the workplace and in only a decade most mainframes, and their high cost, air conditioned data centers, were gone. 

Yet, to this day companies continue to use “best practices” as a tool to stop technology, and productivity improvement, adoption.  Managers will say:

  1. We need to control employee access to information
  2. We need to keep employees focused on their job, without distractions
  3. We must control how employees do their jobs so we minimize errors and improve quality
  4. We need to control employee access externally for security reasons
  5. We need consistency in our tool set and how it is used
  6. We made a big investment in how we do things, and we need to leverage that [sunk cost] by forcing greater use
  7. We need to remember that management are the experts, and it is our job to tell people how to do their jobs.  We don’t want the patients running the hospital!

It all sounds quite logical, and good management practice.  Yet, it is exactly the road to productivity reduction, innovation assassination and limited growth!  Only by allowing employees to apply their skills and best thinking can any company hope to continuously improve its productivity and competitiveness.

But, moving from history and theoretical to today’s behavior, what is happening in your company?  Do you have a clunky, hard to use, expensive ERP, CRM, accounting, HR, production, billing, vendor management, procurement or other system (or factory, distribution center or headquarters site) that you still expect people to use?  Do you demand people use it – largely for some selection of the 7 items above? Do you require they carry a company PC or Blackberry to access company systems, even as the employee carries their own Android smartphone or iPad with them 24×7?

Recently, technology provider IFS Corporation did a survey on ERP users (Does ERP Mean Excel Runs Production?) Their surprising results showed that new employees (especially under age 40) were very unlikely to take a job with a company if they had to use a complex (usually vendor supplied) interface to a legacy application.  In fact, 75% of today’s users are actively seeking – and using – cloud based apps or home grown spreadsheets to manage the business rather than the expensive applications the corporation supplied!  Additionally, between 1/3 and 2/3 of employees (depending upon age) were actively seeking to quit and take another job simply because they found the technology of their company hard to use! (CIO Magazine: Employees Refusing to Use Clunky Enterprise Software.)

Unlike managers invested in historical decisions, and legacy assets, employees understand that without productivity their long-term employment is at risk.  They recognize that constantly shifting markets, with global competitors, requires the flexibility to apply novel thinking and test new solutions constantly.  To succeed, the workforce – all the workforce – needs to be informed, interacting with potential new solutions, thinking and applying their best thoughts to creating new solutions that advance the company’s competitiveness.

That’s why Fast Company recently published something all younger managers know, yet shocks older ones: “Half of Young Professionals Value Facebook Access, Smartphone Options Over Salary.” It surprised a lot of people to learn that employees would actually select access over more pay!

While most older leaders and managers think this is likely because employees want to screw off on the job, and ignore company policies, the article cites a Cisco Connected World Technology Report which describs how these employees value productivity, and realize that in today’s world you can’t really be productive, innovative and generate growth if you don’t have access – and the ability to use – modern tools. 

Today’s young workers aren’t any less diligent about work than the previous generation, they are simply better informed and more technology savvy!  They think even more long-term about the company’s survivability, as well as their ability to make a difference in the company’s success.

In other words, in 2011 tools like Linked-in, Facebook, Twitter et. al. accessed via a tablet or smartphone are the equivalent of the PC 30 years ago.  They give rapid access to what customers, competitors and others in the world are doing.  They allow employees to quickly answer questions about current problems, and find new solutions.  As well as find people who have tried various options, and learn from those experiences.  And they allow the employee to connect with a company problem fast – whether at work or away – and start to solve it!  They can access those within their company, vendors, customers – anyone – rapidly in order to solve problems as quickly as possible.

At a recent conference I asked IT leaders for several major airlines if they allowed employees to access these tools.  Uniformly, the answer was no.  That may be the reason we all struggle with the behavior of airlines, I bemoaned.  It might explain why the vast majority of customers were highly sympathetic with the flight attendant that jettisoned a plane through the emergency exit with a beer in hand!   At the very least, it is a symptom of the internal focus that has kept the major airlines from pleasing 85% of their customers, while struggling to be profitable.  If nobody has external access, how can anybody make anything better?

The best practices of 1975 don’t cut it in 2012.  The world has changed.  It is more important now than ever that employees have the access to modern tools, and the freedom to use them.  Good management today is not about telling people how to do their job, but rather letting them figure out how to do the job best.  Implement that practice and productivity and innovation will show themselves, and you’re highly likely to find more growth!