Yahoo and Its Five Mistakes Mom Insists You Must Not Make
August 18, 2016
I love parental inputs to commercial enterprises run by real professional managers, mavens, accountants, and lawyers. The advice is fascinating and almost as amusing as a 1946 episode of “The Jack Benny Show.”
Navigate to “5 Things Entrepreneurs and MBAs Should Learn from Yahoo’s Fall.” Let’s look at each of the admonitions. Mom, I promise that I am listening to you.
The first point is that Yahoo mixed up “being in the right place at the right time” as being smart. Okay, Yahoo was one of the first directories for the Internet. Since folks were struggling to get a sense of what the Internet was, Yahoo’s directory was a good place to start. The company followed its nose and ended up with a big valuation in those early Internet years almost a quarter century ago. The write up points out:
[Yahoo] should have built strong engineering foundation instead focusing on sales and revenue.
My thought is that Yahoo, like many other outfits at that time was trying to figure out how to keep the site online, cope with bandwidth issues, and pay for stuff. Looking back, mom, it is easy to do the shoulda woulda coulda. Yahoo is amazing for surviving as long as it did. Money, mom, is important. May I have my allowance now?
The second point in the write up is tough for me to figure out: “Yahoo forgot what had taken them there.” I am not sure Yahoo knew where the company was at any one point in time. The growth, the engineering challenges, the successes and the failures were one crazy blur. Yahoo in its hay day was like Google now but without the online advertising revenue. Sure, Yahoo had GoTo.com, Overture.com, and its own systems, but lacked the ability to do what Google did. In case you forgot, mom, Google focused on using online advertising to generate revenue from search. That’s it. The rest of Google did not exist. Yahoo had the disadvantage of being in the midst of a cyclone of opportunities. Yahoo, even today, cannot contain the environmental effects of being blindsided by success in its formative years. Mom, I don’t know what happened after the punch I drank.
The third point seems to be that Yahoo killed its “golden goose.” For Yahoo, selling its share of Alibaba was a bad idea. I am not sure that Yahoo management at any point in time could identify a goose, let alone a golden one. Mom, I don’t know why I jumped naked into the Wilson’s swimming pool last night. Honest. Yahoo was and remains a consequence of its formative experiences. Companies have cultural momentum. Change is not particularly effective. Mom, yes, I will pick up my room.
The fourth point is that Yahoo hired professional managers to fix up the company. See point three. Change is hard. Mom, yes, I will take out the garbage as soon as I get home from Jim’s house.
The fifth point is sort of an MBA diagram. Like many great MBA diagrams, the arrows offer several subtle management insights. Here’s the diagram:
Yahoo did not see opportunities. Yahoo ran into icebergs just like the Titanic. Mom, I promise I will enjoy my time in juvie detention. It will be okay. I have learned my lesson.
What the write up says, in my opinion, is that an entrepreneur riding a hugely successful, little understood roller coaster should:
- Understand that luck is not intelligence or, even better, wisdom
- Nosce Te Ipsum. Figure out what made one successful: Luck, lots of cash, inept competitors, users who came from the woodwork, etc.
- Do not kill sources of money
- Do not hire MBAs
- Recognize the next big thing and make it a huge success.
Easy. Just like growing up. Mom, you really helped me after I was arrested. I promise I won’t get in trouble again. Parental inputs were, are, and will be the type of information that often makes zero sense. Entrepreneurs, listen to your mother.
Stephen E Arnold, August 18, 2016
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