Yahoo was once the biggest and most valuable web company in the world. AOL was a dominant company too. MySpace was the clear leader in social networks. Dinosaurs once ruled the world too. They didn't die because they were big and slow. They died because they couldn't adapt to change.
How can clear leaders crumble to directionless losers in just a few years? Poor management decisions, trying to do everything, over-extending, and forgetting their core values. Can Yahoo be turned around? Yes, but it is unlikely to happen because they can't bring themselves to adapt and make the necessary changes.
The Biggest Loser - The TV show "The Biggest Loser" is about grossly overweight people completely changing their lives with diet and exercise to get back to healthy, happy people. It looks impossible. These people feel like they have tried everything to lose weight, and have just given up, or maybe convinced themselves it isn't that bad. The truth is they can do it, but not on their own. They need a coach to control every aspect of their lives, totally change their daily routines, and get them back on track. Once they do this the results are absolutely amazing.
Back to basics - Both Yahoo and AOL need to get back to basics, and focus on what is working. Some of those things that worked in the past might not work now because the competitive landscape has changed. They need to laser focus on the things that are working, and cut everything else. Literally, cut everything that is not core to their success, or not profitable.
Admitting mistakes - The concept is simple, but hard to execute. People don't like to admit that they made mistakes. They don't like to admit that they can't fix something that isn't working. They rationalize that things really aren't that bad. They always believe that given some more time everything will work out. Sorry, but it won't. This is why new management is usually required to make the tough decisions. The old management made the decisions that led to the failure and they can't admit that, and change course. Just like The Biggest Loser, they need a coach to come in and change everything. They need a plan that can work.
Complacency rules - The biggest barrier to change is complacency. We rationalize that things aren't that bad. In the case of Yahoo they have over $6 Billion in revenue and over $1 Billion in net income. Their market cap is over $16 Billion. What's wrong with that? Nothing if you are satisfied with being average. Stockholders and employees expect more.
Grand plans - Great visions, innovation, and grand plans can not be built on an unstable foundation. Sometimes you need to cut back to your core before you can resume growth. Sort of like a shrub or tree that has grown tall and spindlely, with a bunch of bare spots. You need to cut it back to the base in order to get abundant growth. So, there will be a time for grand plans and technical innovation, but for now they need to focus on strengthening the core business.
Unfortunately, this isn't TV. Just changing the CEO will not solve the problem. They need to clean house, eliminate whole divisions, cancel products, double down on the things that are working, and clearly spell out a road map to success. They will lose some employees in the process who don't agree with the direction. Pundits will complain that they have lost their vision, ruined the culture, and made reckless cuts. What they fail to realize is that the current situation isn't working, and is never going to work. They can die a long and slow death clinging to the status quo, or they can make drastic changes and pivot like a start-up would, to chart a new course.
Who could turn Yahoo around? Kara Swisher has some safe good choices. My choice would be Mark Cuban. Mark was the founder of Broadcast.com, which he sold to Yahoo many years ago. Mark understands the media business, and he understands technology. The new leader for Yahoo must be an expert in both. Terry Semel knew media, and Carol Bartz knew technology, but neither of them could master both. It is not easy.
Who would acquire Yahoo? Microsoft is not coming to the rescue. They are not likely to again offer billions of dollars to acquire the company. They already got what they wanted (search business) without buying the company.
What is likely to happen? Yahoo will probably name a new CEO with a well known name, or prior history at Yahoo. The new CEO will make incremental changes, trim here and there, and announce a new product direction. None of it will work...soon enough. Unless the economy turns around and ad spending increases dramatically...things won't improve much. Expect more of the same.
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