February 11, 2008

Yahoo! Makes Good Call on Microsoft Purchase

The Wall Street Journal article about Yahoo! Rejecting Microsoft Bid (many more stories on TechMeme) was one that restored my faith in Yahoo! (not that it was really lost). I am proud of the Yahoo! board, but not for the reasons most are talking about. Since hearing about the Microsoft bid to take over Yahoo! I thought it was a really poor idea, well horrible idea. I really like Yahoo! and a lot of the things they are doing. I also really do like Microsoft (it is just some of their products that frustrate me to no end), in particular I think the MS Live group has come up with some great ideas out of research and that pleases e to know end. I am a giant fan of Ray Ozzie (oh, where have you gone Ray?).

Merger Would be a Giant Culture Clash

Yes, there are the technology concerns with some of the best open and shared technology development and augmentation coming out of Yahoo!, which is counter to the Microsoft focus on using their own tools (most of the web is built on open tools and Yahoo! helps make that a great platform to develop upon). This is not my big concern.

Where I see a giant problem is the management and employee culture. I know and have known a lot of employees and managers (mid-level and upper-level) at both organizations. Microsoft is a tough business culture with keeping the top percentage of employees and contributers on a project and moving others off to find a spot on other projects. In talking with many Microsoft employees (most were in the top performer group) this is often seen as horribly disruptive to the team when the changes occur. This management model also discourages sharing collectively and building collaboratively, which is also stated as a huge problem. These disruptions and metrics that are counter to strong development for the web and quick iterative cycles (not that Yahoo! seems to iterate quickly other than Flickr and a handful of other products) are quite counter to an open shared development process at Yahoo!. The clash of management cultures on this front, unless Microsoft did the unthinkable and adopted the Yahoo! approach, which could fix a lot of what has been holding Microsoft back (well, from current and former employees perspectives).

Related to the performance of employees the management teams go through similar reviews. But, many employees I have talked with (at conferences, networking events, airports and airplanes (there is always one within 10 seats of me it seams), and chat) have been really frustrated with management changes that can occur after 6 to 9 months. Having a new manager often changes focus and direction, which breaks momentum and continuity. Talking with great people Microsoft has lost over the past couple years, this management change was their biggest reason for leaving. The changes in management also often lead to conflicting measurement goals, which would make a great product or team look as if they were not working up to the standards. This is not management, but business process failure. This is not saying Microsoft has poor managers, quite the opposite in fact as many are some of the best I have run across in the business. But, the structure, processes, and measurement that the top management of Microsoft has established seems to be what has inhibited Microsoft from really top performance. What may work for some parts of Microsoft does not seem to work for other areas (actually, of all the Microsoft employees I have talked with from all across the organization the model does not work outside of sales).

The Yahoo! management has had more than their share of restructuring, but the disruptions this has made to product development and progress have been minimal. The goals, direction, and means to get the job done do not change for the most part (from what I have heard). Employees are flustered, but not demoralized. Yahoo! seems to have much greater continuity and central focus. Their products are well known, well used, and they iterate (over time). Many discussions with Yahoo! employees and managers outside the walls of Yahoo! are more frustrated by the silos and inability to work across the silos, but some the restructuring in the past couple of years has helped move to alleviate these problems. The cross platform team that works to help research, understand, and develop best of class solutions is a great step in this direction (from the perspective of many within Yahoo!). Yahoo! has known what has been holding back its efforts (Panama ate focus and resources) and has taken steps to alleviate the problems and move in a new positive direction. There are many things in Yahoo! that were more transparent two years ago than they are now (part of that may be those talking about things openly have been insanely busy). One of the things that seems to be problematic (from an outsider's perspective) is blinder focus and lack of concurrent development within groups.

Sum of Parts are Not Positive

When looking at the two cultures of the companies they are incredibly polar. One of the first steps in looking at a purchase or merger must be to look at compatibility of the cultures. Sure the products and services look like they may be a good fit by some at Microsoft, but those products and services are built by people with in a culture that propagates an environment to build wonderful things. Breaking that culture (Microsoft repeatedly iterated the vast savings the combination of MS and Y! would make) through integration of polar cultures has the high probability of destroying the value of what you believe will help. In this case a one plus one could equal less than one.

Partnering Not Combining

Yahoo! and Microsoft could have increased value partnering and working together though a Microsoft investment. What and how I do not know, but Microsoft needs positive outcomes and Yahoo! could use some financial boosts. Microsoft could also use a culture change, but that does not seem to be with in their vision as of yet and it is a huge organization to move in a new direction.

Yahoo! could improve its lot with partnerships, be it Microsoft, Ebay, Murdoch, Time Warner (AOL), and Google. I really do not want to see the Yahoo! search engine go away as the competition is good and provides alternatives should something go wrong with a one player or few player marketplace (oligopoly).



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