Who’s CEO of the Year? Bezo’s (Amazon) or Page (Google)?

by | Jan 22, 2012 | Defend & Extend, In the Rapids, Innovation, Leadership, Lock-in, Transparency, Web/Tech

Turning over a new year inevitably leads to selections for "CEO of the Year."  Investor Business Daily selected Larry Page of Google 3 weeks ago, and last week Marketwatch.com selected Jeff Bezos of Amazon.  Comparing the two is worthwhile, because there is almost nothing similar about what the two have done – and one is almost sure to dramatically outperform the other.

Focusing on the Future

What both share is a willingness to focus their companies on the future.  Both have introduced major new products, targeted at developing new markets and entirely new revenue streams for their companies.  Both have significantly sacrificed short-term profits seeking long-term strategic positioning for sustainable, higher future returns.  Both have, and continue to, spend vast sums of money in search of competitive advantage for their organizations.

And both have seen their stock value clobbered.  In 2011 Amazon rose from $150/share low to almost $250 before collapsing at year's end to about $175 – actually lower than it started the calendar year.  Google's stock dropped from $625/share to below $475 before recovering all the way to $670 – only to crater all the way to $585 last week.  Clearly the analysts awarding these CEOs were looking way beyond short-term investor returns when making their selections.  So it is more important than ever we understand what both have done, and are planning to do in the future, if we are to support either, or both, as award winners.  Or buy their stock.

Google participates in great growth markets

The good news for Google is its participation in high growth markets.  Search ads continue growing, supplying the bulk of revenues and profits for the company.  Its Android product gives Google great position in mobile devices, and supporting Chrome applications help clients move from traditional architectures and applications to cloud-based solutions at lower cost and frequently higher user satisfaction.  Additionally, Google is growing internet display ad sales, a fast growing market, by increasing participation in social networks. 

Because Google is in high growth markets, its revenues keep growing healthily.  But CEO Page's "focus" leadership has led to the killing of several products, retrenching from several markets, and remarkably huge bets in 2 markets where Google's revenues and profits lag dramatically – mobile devices and search.

Because Android produces no revenue Google bought near-bankrupt Motorola to enter the hardware and applications business becoming similar to Apple – a big bet using some old technology against what is the #1 technology company on the planet.  Whether this will be a market share winner for Google, and whether it will make or lose money, is far from certain. 

Simultaneously, the Google+ launch is an attempt to take on the King Kong of social – Facebook – which has 800million users and remarkable success.  The Google+ effort has been (and will continue to be) very expensive and far from convincing.  Its product efforts have even angered some people as Google tried steering social networkers rather heavy-handidly toward Google products – as it did with "Search plus Your World" recently.

Mr. Page has positioned Google as a gladiator in some serious "battles to the death" that are investment intensive.  Google must keep fighting the wounded, hurting and desperate Microsoft in search against Bing+Yahoo.  While Google is the clear winner, desperate but well funded competitors are known to behave suicidally, and Google will find the competition intensive.  Meanwhile, its offerings in mobile and social are not unique.  Google is going toe-to-toe with Apple and Facebook with products which show no great superiority.  And the market leaders are wildly profitable while continuously introducing new innovations.  It will be tough fighting in these markets, consuming lots of resources. 

Entering 3 gladiator battles simultaneously is ambitious, to say the least.  Whether Google can afford the cost, and can win, is debatable.  As a result it only takes a small miss, comparing actual results to analyst expectations, for investors to run – as they did last week.

 Amazon redefines competition in its markets

CEO Bezos' leadership at Amazon is very different.  Rather than gladiator wars, Amazon brings out products that are very different and avoids head-to-head competition.  Amazon expands new markets by meeting under- or unserved needs with products that change the way customers behave – and keeps competitors from attacking Amazon head-on:

  • Amazon moved from simply selling books to selling a vast array of products on the web.  It changed retail buying not by competing directly with traditional retailers, but by offering better (and different) on-line solutions which traditional retailers ignored or adopted far too slowly.  Amazon was very early to offer web solutions for independent retailers to use the Amazon site, and was very early to offer a mobile interface making shopping from smartphones fast and easy.  Because it wasn't trying to defend and extend a traditional brick-and-mortar retail model, like Wal-Mart, Amazon has redefined retail and dramatically expanded shopping on-line.
  • Amazon changed the book market with Kindle.  It utilized new technology to do what publishers, locked into traditional mindsets (and business models) would not do.  As the print market struggled, Amazon moved fast to take the lead in digital publishing and media sales, something nobody else was doing, producing fast revenue growth with higher margins.
  • When retailers were loath to adopt tablets as a primary interface for shoppers, Amazon brought out Kindle Fire.  Cleverly the Kindle Fire is not directly positioned against the king of all tablets – iPad – but rather as a product that does less, but does things like published media and retail very well — and at a significantly lower price.  It brings the new user on-line fast, if they've been an Amazon customer, and makes life simple and easy for them.  Perhaps even easier than the famously easy Apple products.

In all markets Amazon moves early and deftly to fulfill unmet needs at a very good price.  And then it captures more and more customers as the solution becomes more powerful.  Amazon finds ways to compete with giants, but not head-on, and thus rapidly grow revenues and market position while positioning itself as the long term winner.  Amazon has destroyed all the big booksellers – with the exception of Barnes & Noble which doesn't look too great – and one can only wonder what its impact in 5 years will be on traditional retailers like Kohl's, Penney's and even Wal-Mart.  Amazon doesn't have to "win" a battle with Apple's iPad to have a wildly successful, and profitable, Kindle offering.

The successful CEO's role is different than many expect

A recent RHR International poll of 83 mid-tier company CEOs (reported at Business Insider) discovered that while most felt prepared for the job, most simultaneously discovered the requirements were not what they expected.  In the past we used to think of a CEO as a steward, someone to be very careful with investor money.  And someone expected to know the business' core strengths, then be very selective to constantly reinforce those strengths without venturing into unknown businesses.

But today markets shift quickly.  Technology and global competition means all businesses are subject to market changes, with big moves in pricing, costs and customer expectations, very fast.  Caretaker CEOs are being crushed – look at Kodak, Hostess and Sears.  Successful CEOs have to guide their businesses away from investing in money-losing businesses, even if they are part of the company's history, and toward rapidly growing opportunities created by being part of the shift.  Disruptors are now leading the success curve, while followers are often sucking up a lot of profit-killing dust.

Amazon bears similarities to the Apple of a decade ago.  Introducing new products that are very different, and changing markets.  It is competing against traditional giants, but with very untraditional solutions.  It finds unmet needs, and fills them in unique ways to capture new customers – and creates market shifts.

Google, on the other hand, looks a lot like the lumbering Microsoft.  It has a near monopoly in a growing market, but its investments in new markets come late, and don't offer a lot of innovation.  Google's products end up competing directly, somewhat like xBox did with other game consoles, in very, very expensive – usually money-losing – competition that can go on for years. Google looks like a company trying to use money rather than innovation to topple an existing market leader, and killing a lot of good product ideas to keep pouring money into markets where it is late and not terribly creative.

Which CEO do you think will be the winner in 2015?  Into which company are you prepared to invest?  Both are in high growth markets, but they are being led very, very differently.  And their strategies could not be more different.  Which one you choose to own – as a product customer or investor – will have significant consequences for you (and them) in 3 years. 

It's worth taking the time to decide which you think is the right leadership today.  And be sure you know what leadership principles you are adopting, and following in your organization.

Letting the Bogeyman hurt your business – Facebook, Twitter, Linked-in, Plaxo

by | Oct 8, 2009 | Current Affairs, General, Innovation, Leadership, Lock-in, Web/Tech, Weblogs

"Companies Say No to Friending or Tweeting at Work" is the headline in The National Law Journal.  According to the article, somewhere between 54% (according to a Robert Half survey) and 76% (according to a ScanSafe survey) of companies block employees from connecting to social networking sites like Facebook, Twitter, Linked-In, Plaxo, etc.  The reasons sound so traditional – starting with lost productivity and moving on to fear of data theft.

And of course, there's the bogeyman to worry about too.

In the 1940s and 1950s success was all about mass production.  Show up for work on time, don't be late, don't be absent, and do your job.  We had assembly lines to operate.  Making stuff meant we needed to get people into the plant, and have them do their job.  The more efficient people were, the more things a plant could make – be it cars or washers or televisions.  So control everything the employee did on the job to make sure each minute is spent welding, typing, adding, inspecting or whatever their task.  Fredrick Taylor became a business guru, running around with stopwatches calculating how to get more work out the door by controlling everything workers did.

Have people noticed that its 2009?  Today, there are places where such focus on task implementation is important.  But most of those places aren't in the USA.  Those kinds of jobs have moved elsewhere.  Even in America's manufacturing plants (and in most plants in the developed world) it is more important that an employee be thinking about their work.  More gains are made by intelligent application – new ideas for processes or activities – than from Tayler-ist style efforts to whip people into working harder and more efficiently.  Would you rather have a drone employee (a human robot) or a smart employee thinking about how to be more productive and successful?  Sweat shop behavior doesn't make more money in a world where intelligence and insight are worth a lot more than hours in the chair.

Yet Lock-in to old efficiency notions still remain.  In the 1930s there was a movement to ban adding machines for fear the tapes (the old white tape that ran out the top) would be stolen by employees.  Better to stick with humans doing the adding – less risky.  When PCs came along practically all IT departments wanted to ban them – saying that they posed an inherent risk to productivity (people might use them for things besides work) and employees would capture data on them and leak it to competitors.  When the internet emerged in the 1990s huge numbers of employers banned access because they didn't know what people would do on the web and they feared everyone would be shopping all day, or emailing their friends.  And who knew what kind of information they would leak about the company!  In each instance, a tool that dramatically improved business performance was met with "this will hurt productivity.  And don't you think this poses a serious risk?"

For those who aren't looking for the bogeyman, this presents an opportunity.  Those who first adopted adding machines quickly improved performance – and those who adopted PCs improved productivity (spreadsheets and word processing gave early adopters huge advantages) – and those who adopted the internet rapidly sold more to new customers while finding more low cost suppliers and automated lots of business processes in their supply chain taking down operating costs.  These innovations created Challenges to old ways of doing things, but they also created huge opportunities for those willing to Disrupt old patterns and use White Space to see how they could improve their business.

Every day millions of people are starting to use – and millions more are increasing their use of – social networks. You can get an incredible sense of the pulse of many communities.  You find out what's going on with customers, potential customers and colleagues incredibly fast.  These networks help sift through billions of megabytes of data and bring critical items of importance to you (and your business) remarkably fast.  They act as a new distribution system for information – think of them as a water cooler on steroids taken to the "nth" power.  These are not on-line solitaire environments, these are places where people exchange information and learn.  Really fast.

Today, having informed employees who can take action separates winners from losers.  Those who want to be in the forefront of competition are already thinking about how these environments connect them with critical information.  Help them connect to customer and vendor communities.  Help them improve productivity by increasing the pace of information exchange.  If you aren't afraid of the bogeyman then you have an opportunity to get a leg up on the fearful by not only accepting, but encouraging the use of social networks.  The faster you "get it" the better off you'll be.  It's likely to introduce ideas for Disrupting your business during this downturn and opening White Space to get you growing again!

Postscript –

An article in the recent New Yorker Magazine "Not So Fast" takes a deep look at Fredrick Taylor and the history of "scientific management."  According to the article, Taylor and his colleagues often made up their data, and their conclusions, and the results they promised were almost never achieved.  Interesting reading on how the myth was created, and became legend.  Perhaps sending most of what was taught for decades as "business best practice" at leading business schools in a seriously misguided direction.  Well worth a read for those with time to pick up a little history – and some insights to how business myths are developed and promulgated.