A Mid-life Crisis for Yahoo! - and a wake-up call for the world of Business!

Serious lessons for everyone with an interest in how businesses are run.

One of the more sensational developments in the world of technology and business last week has been the leaking of the internal memo in which Yahoo Senior VP Brad Garlinghouse accuses the company, among other things, of spreading its talent too thin and trying to follow every innovation on the Web, rather than focusing on its strengths.

Yahoo, on it's part, must be commended for promptly acknowledging and responding very appropriately: CEO Terry Semel said that the company is narrowing its focus on boosting search and graphical ad sales and on prioritizing social media, video and mobile.

My first reaction to reading about this memo was, Gosh, How on earth did such an explosive memo leak to the outside world? I think that's a question Yahoo should ask as part of the soul-searching that has clearly been initiated by this event.

My second thought was, Welcome to the real world! To understand what I mean, just read the excerpts I've taken from the memo below and ask, how many of these could apply to companies anywhere - in any industry, in any country,..?

"We want to do everything and be everything -- to everyone. We...talk about it incessantly, but do nothing to fundamentally address it. We are scared to be left out. We are reactive. We are separated into silos that don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics".

"Massive redundancy that exists throughout the organization. We now operate in an organizational structure -- admittedly created with the best of intentions -- that has become overly bureaucratic".

"Product, marketing, engineering, corporate strategy, financial operations... there are so many people in charge (or believe that they are in charge) that it's not clear if anyone is in charge".

"We are held hostage by our analysis paralysis".

"Our compensation systems don't align to our overall success. Weak performers that have been around for years are rewarded. And many of our top performers aren't adequately recognized for their efforts".

In all the rash of comment this memo has generated, I didn't see anyone picking up on this thread - that we must resist the temptation to lambast Yahoo for suffering these problems, and instead ask, why does such apparently dysfunctional behavior exist in most companies?

I am not for a moment saying that Yahoo mustn't take this situation seriously. They must do their soul-searching. What I am saying is that, the rest of us should see the wider issues this memo has brought out: namely, do businesses have to be this way, and what can the rest of the world of business learn from these revelations about how to run companies better?

Disquiet on the Economic Front

We know less and less about what's driving the world economy. (And technology is in part responsible for that...)

A not-too-heartening corollary of the fact that the US no longer pulls the reins that drive the world economy is that nobody really seems to be in charge. Central bankers and such other venerable economic boffins are finding to their dismay that their ability to influence economic events is limited by their poor understanding of the forces at work in the global economy.

What's happening in the US is pretty much emblematic - the degree of control that the Fed exercises over the US economy is in decline. Business Week asks in a recent cover story, Can anyone steeer this economy?, and opines that the US govt's policy interventions are no longer able to influence the course of the economy as they did in the past - they are swamped by global forces that are pretty much out of anybody's control.

On a similar note, Fed Vice Chairman Donald L. Kohn said recently that "our understanding of the inflation process is limited".

By the way, technology has no mean role to play in this sequence of events: Fed Chairman Ben Bernanke recently told a conference of central bankers in Frankfurt that financial and technological innovations have altered the traditional relationships between money supply, economic activity and inflation, hobbling the ability of policymakers everywhere to influence economic events.

While this is overall a perplexing state of affairs, it is of far greater than academic significance: if, for example, the best economic experts among us no longer understand the forces at work in the world economy, what does that augur for their ability to manage crises? Will they have the policy wherewithal to respond to gyrations in capital markets or currency rates unleashed by these very forces? Will the drumbeat of varied economic malaises of the past - stagflation, eurosclerosis, irrational exuberance - replay in a macabre display of economic history repeating itself? And what about that most unholy of economic nightmares -the spectre of hyper-inflation?

Certainly, a matter for grave disquiet.

More Bang for the Innovation Buck?

A new study confirms the weak link between R&D spend and innovation output

As I had pointed out in an entry on this blog in March, measuring a company's success in innovation by looking at the size of it's R&D budget is pretty much futile. If confirmation of this was required, here it is: A survey released on November 13th by management consulting firm Booz Allen Hamilton, reported in Business Week, finds that

"there are no significant statistical relationships between R&D spending and the primary measures of financial or corporate success: sales and earnings growth, gross and operating profitability, market capitalization growth, and total shareholder returns."

An interesting discovery of this survey is that there are some 'high leverage' innovators - companies that spend, on average, half as much on R&D as their industry peers but perform two to three times better. The study identifies companies from diverse industrries -Kellogg, Apple, Boston Scientific, Tata Motors, Christian Dior and Kobe Steel - that have the ability to do this.

How do they do this? As may be expected, there is no single answer. The study concludes that these companies are noted for their distinctive skill in at least one element of the innovation process - such as generating ideas (Google), developing new products and processes (Toyota) and customer understanding (Apple).

One thing common to all high leverage innovators: they listen closely to their customers across the entire innovation cycle.

So it appears the customer, after all, is King.

Cisco's Transatlantic Move?*

A world-leading builder of network equipment flattens the world.

Phew! This "world-flattening" stuff sure is gathering steam. It's just a few days since Wisden, that great cricketing icon, said it is moving the global headquarters of Cricinfo ("the home of cricket on the internet"), from London to Bangalore.

Now, here's bigger news for world-flatteners everywhere (it sure had me flattened!): Steve Hamm, BusinessWeek's admirable technology writer, reports in his new blog on speculation that Cisco will soon announce it's second global headquarters in...you guessed it, Bangalore. Says the worthy gentleman,

"This is the first time that a major US technology company has established a corporate headquarters in India, and it's yet another sign of the growing importance of India on the world technology map".

Breathtaking** and heady stuff indeed. But before we break out the bubbly, here's some cause for pause: a spokesperson for Cisco India was asked if this is true. Here's his clarification:

"Cisco's corporate headquarters remain out of San Jose, California. We have made no announcement on the change of status in our corporate headquarters. What we have stated is that Wim Elfrink, senior VP, customer advocacy, will be relocating to India at the beginning of the calendar year to help lead Cisco's commitment and investments in India."

Cisco is a company whose influence stretches well beyond just commercial clout. US House Speaker-designate Nance Pelosi has said that Cisco CEO John Chambers will likely be one of the industry leaders that she will "consult regularly".

And by building a good deal of the equipment that powers the internet, Cisco can claim to have contributed much to the world-flattening that the internet has brought about. Now, will they go the whole hog? I guess we'll just have to wait for an answer. It's going to be an interesting wait.

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* Couldn't help noticing a wee bit of irony here. Cis is a Latin word meaning "on this side of", and is the opposite of trans, which means "across" or "on the other side of". Tongue-in-cheek suggestion: maybe they should first change their name to Transco..

** If you're in Bangalore (as I am), you may want to go a bit easy on the "breathtaking" part: the air quality is none too great these days... (tongue in cheek..just tongue in cheek...!!)