Tuesday, January 13, 2009

Best Yahoo news in years

Yahoo’s long search for a new CEO is over, and for once, I think they got it right. Yahoo today hired Carol Bartz, the chairman of the board (and former CEO) of Autodesk.

Bartz has real management skills and experience — unlike the Yahoo (or Google) founders. She knows something about a Silicon Valley company and managing technology development, unlike Terry Semel. In addition to competence and abilities, according to those who know her, she’s someone of unquestioned personal integrity.

There are two common criticisms of her. One is that it’s not clear how much she deserves for Autodesk’ success. It’s true, that it often hard (if not impossible) to separate the CEO from the hand that he/she has been dealt: achieving scucess as CEO of GM is undenaibly harder than being CEO of Toyota or Honda.

For every Steve Jobs or Lou Gerstner — CEOs who clearly turned a losing hand into a winning hand — there are plenty who were in the right place at the right time, and thus it’s hard to establish whether they added value or just avoided subtracting value. A good example might be Eric Schmidt, at least when he was CEO during the go-go Google years of 2001-2007. (We’ll see how he handles the next few years).

The second rap is that running a CAD software company doesn’t prepare Bartz for running Yahoo. Take this Wall Street Journal quote by stock analyst Martin Peers, whose only praise is that she’d sell the company in a heartbeat:

At first glance, Yahoo's choice of Carol Bartz isn't exactly inspiring.

The former Autodesk CEO is a capable Silicon Valley executive with solid management experience who should restore some order to Yahoo. That is crucial as the Internet company copes with what's shaping up to the worst recession in decades.

But there is a world of difference between the computer-aided design industry inhabited by Autodesk – Ms. Bartz's professional home for 14 years or so – and the ad-supported Web media business occupied by Yahoo.
This is a laughable criticism. Yahoo tried a media executive, that certainly didn’t work.

What was Schmidt’s qualification to be Google CEO? He was #2 man at an enterprise computer systems company, and then #1 man at a dying PC networking software company. That makes him more qualified than the CEO of a successful Bay Area software company? (We won’t talk about Lou Gerstner, a credit card salesman).

In addition to Autodesk, Bartz is also also a director of Cisco and Intel — a front row seat on the web. Yes, she hasn’t done been an Internet CEO before, but who has? Do you want to hire the head of Microsoft’s Live.com, which has been unable to take Microsoft’s billions of dollars and customers and catch Yahoo, let alone Google? Short of a Schmidt or Steve Jobs, is there another tech executive who’s got a stellar record of running a recent tech company (and is available)?

It’s tough to be CEO of a large established tech company: you have to find a way to balance control and process against decentralized initiative and innovation. Too much of the former, and you’re an HP or pre-Gerstner IBM; too much of the latter, and you’re Apple of the Jobs I and then Sculley eras (“What’s the difference between Apple and a Boy Scout troop? The scouts have adult supervision.”)

The truth is, she gets tech, she gets the tech culture, she understands how to manage an innovative software-based company — something Yahoo once was and hopes to be again. Her discussion of “fail-fast-forward” shows that she knows how to both encourage and manage innovation and risk-taking in a large established tech company.

She’s got the job, so what does she do next? I’ll assume she’s not just prettying things up to sell the company in 2009, but create value long term.

She’s not asking for my advice, but if she did, here is what would I recommend:
  • In the long term, the success of Yahoo (like Google’s) is tied to leveraging economies of scope — continuing related diversification to build the Internet equivalent of a systems company, where the whole is greater than the sum of the parts. That will take 2-5 years to really show results.
  • In the short term, Yahoo needs to size up the point products; that’s what’s suffered most (particularly in terms of business buyer confidence) from the recent turmoil. Of the various offerings, see which ones were/still are winners and what resources they need to succeed over the next 18 months. Until Yahoo has a new strategy, it needs to protect and strengthen winners Yahoo mail, Messenger and Flickr to keep marketshare and mindshare among its customers.
  • Reach out — to employees, to customers, to the ecosystem of complementors, perhaps even to individual website authors who embed a Yahoo widget. Meet in person, post a video, send an email. The message should be “Yahoo has done great things and will do so again, but we need your ideas, suggestions, assistance — and patience.” Hire key aides in the office of the CEO to be a conduit and advocate for each of the major class of external stakeholders.
  • Do a better job of monetizing search: if not the deal with Google or being acquired by Microsoft, how else can it raise its yield to approach Google’s?
  • Find new areas to innovate (or buy successful startups). Yahoo lacks the revenues to go head to head with Google in search, but that doesn’t mean it can’t gain advantage over Google in mobile (where it once led), social networking, or other opportunities that are ripening right now.
I don’t know if she’ll succeed. Perhaps she has a personality quirk none of us know about. Perhaps her middle managers hide the truth until too late. Perhaps the company can’t be saved. But if anyone can make it work, I believe Carol Bartz can.

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