Over the last few decades I�ve either covered closely or participated in a number of corporate turn arounds. IBM, Apple, Dell and Oracle were generally successful; Sun, Novell, 3Com and Palm weren�t. Hewlett-Packard has been more of a ping-pong ball going from recovery, to problem, and back to recovery again, showcasing examples of both excellence and catastrophe (and more than its fair share of drama). Yahoo has been drifting to the �failed� side for the last several years � largely because Yahoo�s board repeated the mistakes of these other failed companies. Let�s talk about what makes the difference between success and failure and use it to showcase early which path Yahoo is now on.
Skill Match
A turnaround requires two things: deep skills in the business the company is in or can be changed to (more on that last later), and some actual experience turning around a company. In IBM�s case, the turnaround skill came from Jeremy York, the CFO that was first selected. In Oracle�s case it was Ray Lane. The company skills came from Steve Jobs at Apple, and Michael Dell at Dell. You�ll notice that in all cases both attributes didn�t seem to exist in the same person, but that it generally turned out that an expertise in either area worked successfully.
Sun, Novell and 3Com all lacked experience in both areas. Sun was a hardware company lead by a software executive who had never done a turn around, Novell was a software company run by a series of hardware executives that hadn�t done turn around. I could argue that Palm failed because it was being run by folks who evidently didn�t even know how to run a company, let alone do a turn around.
So ideally, you�d like to see Yahoo run by something either with strong skills to apply to Yahoo�s core business or strong turnaround skills. Newly appointed CEO Scott Thompson has neither.
The Apple Example
There is a unique possibility that exists for Scott Thompson and we get there by looking at how Steve Jobs turned around Apple. When Steve took back the reins at Apple, the company in even worse shape than Yahoo is now. It had printers, digital cameras, hand held computers, corporate and consumer products, a clone business and really no part of the company was running well.
Jobs cut the company down to the parts he knew and then built from there. Carol Bartz, who had a packaged software background at Autodesk, couldn�t change Yahoo into something she knew. Yahoo was never going to be a packaged software vendor. It was simply a bridge too far for her. Thompson is an expert in online banking, which is closely related to online, and Yahoo has a shopping site, an automotive site, and a finance site that may be close enough to that competence to form the foundation of a company Thompson would know how to manage well.
The key indicator will be how he does his initial cuts. If he cuts broadly with no visible focus on any of these areas he isn�t following this script and will likely fail at a turnaround, although he could be successful packaging the company for a sale. I would argue the merger route will be more likely to fail because this approach makes the firm less viable even while it makes the financials more attractive (kind of like drilling holes arbitrarily in a too heavy race car; you would drop the weight but increase the chance it would fail on the track).
Building a Team
Something else to look for, which is what you had at IBM, Apple, Oracle and eventually Dell, was the building of a new executive team to run the firm with balanced skills. This is often one of the most critical steps in a successful turnaround because a failing company typically has a number of executives that are poorly matched to their jobs and/or not loyal to the new executive management. The successful CEO will bring in a team of folks they have either worked with or have unique skills that this executive needs. Steve Jobs did both with his team bringing in top folks from NeXT and some of the best in channel management and retail to fill out his requirements. Virtually none of the executive team that he was initially given remained at Apple for long, this was generally not done at the companies that failed. So we are also looking for Thompson�s initial hires, their skill sets, and whether they have either the right background or demonstrated loyalty to Thompson.
The Vision Thing
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