Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Wednesday, November 29, 2006

Industry Note: Why Yahoo is the New AOL, Or The Anatomy of Strategy Decay

If you haven't read the Peanut Butter Memo/Manifesto, you should.

It's not just a deeply felt, shot through the heart cry of corporate Bon Jovi style pain. It's a mini case study in how not to...everything in the post-network economy - a mini case study of what strategy decay in the post-network economy looks, smells, feels, and tastes like.

I've argued for a long time that Yahoo is the new AOL. The strategic and organizational parallels to AOL circa 2001 are eerie.

Siloed organization, creating enormous inertia? Check.

Lack of vision, insight, and direction at the top? Check.

Too many bright people in the middle, tussling over a shrinking pie? Check.

A fundamental misunderstanding of what the business, economics, and dynamics really are? Check.

A deep-seated fear of ruffling the feathers of the Golden Goose (ie, home page)? Check.

I could go on, but it would be belabouring the point.

Which is that there's a deeper truth in this parable of the convergence in strategy decay of two very different companies (remember, Yahoo was born in typical freewheeling Valley fashion, whereas AOL was beancounterville from the beginning).

That's that the next set of consumer industries demand a fundamentally different kind of firm - one whose DNA has been renewed and reshaped by markets, networks, and communities.

Though Yahoo pays lip service to them, they are nowhere to be found in it's DNA (contrast for a sec with Google).

And, ultimately, this - the stale, tired industrial DNA of the last century, utterly out of sync with the radically new kind of firm the post-network economy demands - is the cause of all the problems (not the stuff in the Peanut Butter Manifesto, though there are tantalizing glimmers of this in there).

And - yeah, I told them all this a very long time ago; they don't listen to punks like me :)

-- umair // 5:04 PM // 5 comments


Good post. Reuters suffered from this same fate in the 90s. An extra ingredient that is critical to the mix is a cash cow business that keeps going strongly while your culture decays around you. Too many bright people in the middle was one of the biggest problems at Reuters.

I'm not so sure that Google has the answers now though. I think success in 21C will come to those whose cultures delegate authority to the edge and maximise agility. I don't see that at all at Google.
// Anonymous Anonymous // 9:03 PM

Your check list equally describes countless other companies as well as whole industires--such as US telecom.

While AOL fizzled, Verizon keeps pluging along.

So if Yahoo! fits the checklist why would it end up like AOL rather than Verizon??
// Anonymous Anonymous // 7:00 PM

Excellent observations. Yet, in this article "Yahoo Builds 'Brand Universes,' Asks for Zero Ad Dollars" found at where in the coming months, Yahoo will begin rolling out the first set of what it calls "brand universes" - dedicated areas on Yahoo for fans of a movie or product to congregate, share and connect with each other, reports Adweek (via MarketingVox). Is this not delegating to the edge?

// Blogger Unknown // 8:11 PM

I agree entirely. It has always puzzled me why yahoo engage so poorly with their users and seem to maintain a centralised approach to new product R&D (ala Microsoft) rather than create a tighter feedback loop with their communities. I have used myYahoo as my primary homepage/email/RSS aggregator for 7 years and in the last 2 months have been sorely tempted to try the Google suite of services due to frustrations with Yahoo (althought the new email client is very good).
// Anonymous Anonymous // 12:28 AM

Yahoo is the "Old" AOL. AOL seems to be quite on track these days.
// Anonymous Anonymous // 7:22 PM
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