Yesterday was not a good day to be Jerry Yang. A year after returning to the helm of the company he co-founded, Yang found himself faced with an unsolicited bid from Microsoft, one that offered to pay a 50% premimum over the price of Yahoo stock. Though not ruling the merger out, he played a bit of hardball in hopes of forcing the Redmond-based company to raise the financial stakes. After some initial moves upwards, Microsoft eventually backed out (which may or may not be considered a "backfire," given that Yang's overtures to Google certainly didn't imply enthusiasm on his part), thus leaving Yang to explain to shareholders why it made sense to pass on an arrangement that would have yielded returns in excess to anything Yahoo had proved recently it could achieve on its own.
I think the deal was definitely to Yahoo's advantage. As I noted in past blogs, however, I wasn't so sure if it was as great a deal for Microsoft. Culture lay at the heart of my concern, a concern perhaps exacerbated by the awareness that the company's iconic founder and historical chief ideologue, Bill Gates, retires this month.
Is this the right time to try to merge with a second-tier Internet company, even if they are one of the original name brands of the Internet age? Though I worried about the cultural ramifications, I could readily understand why Ballmer and company were interested in Yahoo. Monetizing free content and services in the ubiquitous networked future is a crucial feature, and a critical competency for a platform company that hopes to set the terms of computing for the next 50 years. Yahoo could, potentially, be a leg up in that regard.
Given that the deal has collapsed, however (never say never, to be sure, though I doubt later offers, should they materialize, would value Yahoo quite as highly), I'm left wondering what would have made me more comfortable with the deal. If my concern over a merger was that it would be hard for 75,000+ employee Microsoft to contend with the absorption of 17,000+ Yahoo, at least at this stage, what would make the merger more seamless?
Personally, I think it would be for upper management to sing in unison about the wonders of building an ubiquitous platform that is internally consistent across Microsoft product lines and open to anyone who wishes to plug into it (Ray Ozzie, to his credit, does occasionally cut loose with such a tune). That core theme has already proved highly successful. It is, I believe, the core identity Bill Gates established for the company he co-founded. It is an identity that should be cherished and recognized for the success it was, is, and will be. It certainly should be viewed with more respect than an anonymous Mary Jo Foley source seems willing to give it:
A primary lesson here is that BillG’s (Chairman Bill Gates’) mantra of ‘integrated innovation’ has finally started to wither. This socialistic perspective meant that engineering teams were pressured into reusing code and approaches from other teams, even if it meant that much of the IP transfer would not fit perfectly or have to be rewritten in order to meet the specific needs of that team’s particular customer market.
I ran across that quote on Friday before hopping on my flight to London (Virgin Atlantic, which I highly recommend, as every seat has Video on Demand integrated into it), and it stuck in my head like an angry drunk as I struggled to sleep upright during my long trip. Frankly, what planet does this anonymous source living on, and how can I avoid it?
What's the point of being a company like Microsoft if all its divisions are like cats forced to occupy the same room in a building? By that standard, having 25 DVR platforms within Microsoft makes perfect sense, so long as each team has a specific need unique to it. Never mind that the result is a bunch of DVR files that are incompatible with each other (among other things), or that the goal of a "platform" as envisioned by Bill Gates and which has served as the cornerstone of Microsoft strategy from day one is left by the wayside because it's more politically useful to develop one's own code.
The last thing Microsoft wants to encourage is the natural developer impulse to reinvent wheels. It's not that programmers are being intentionally obtuse when they give in to it. Rather, it's because programmers like to program, particularly if they are good at it. For people who love programming, hard nuts are particularly compelling, and there is a lot of code that has take a whack at hard nuts.
The problem, however, is that if you reinvent a wheel, you have to maintain that wheel. Further, if there are other wheels running around the company (which is sure to happen in a company the size of Microsoft, not to mention the wider market), you feel compelled to constantly add features to that wheel just to remain competitive, thus leaving less time to concentrate on areas unique to a particular project. This is a drain on productivity, and turns those previously enthusiastic for the wheel reinvention to grow tired of the treadmill, in contrast to a developer energized by the prospect of doing something truly innovative. I think its essential to reuse common functionality as much as possible, even if it requires modifications to support new usage scenarios, as it leaves responsibility for that functionality to those who specialize in it. "Division of Labor" is more than just an interesting turn of phrase used by 18th century Scottish economists.
I do concede that, sometimes, wheels do need to be reinvented. The sentiment expressed by Foley's "anonymous source," however, if allowed to thrive and turn into a normal state of affairs over the long term, is the sort of thing that will kill a company of the size and breadth of Microsoft...particularly if the core of their business is built around platform creation.
Microsoft wants to beef up its advertisement platform, and I believe that to be an absolutely essential goal. The first order of business, however, is for Microsoft to discern what makes its products uniquely Microsoft products. That, I think, is the best avenue to success with its platform, even as I concede that lassoing content companies into the Microsoft ad corral is a useful and important strategy (make deals with the Facebooks of the world until the cows come home, in other words).
We are a platform company. Everything we do should be an extension of that platform. Developer orientation is not a curse, even if, in the modern age, that platform includes more emphasis on standardization and aims to a greater degree for consumer-oriented functionality. Developer orientation is Microsoft's competitive advantage.
Such an orientation should be well-nigh constitutional at Microsoft, thus making anonymous Microsoft sources as likely to declare the wonders of platform fragmentation as anonoymous Apple developers are to sing the wonders of boring gray enterprise-oriented hardware. It worked before, and though it must be modified slightly to account to modern IT realities (more consumer orientation, more documentation of Microsoft-created protocols and/or use of existing ones developed outside the company), I strongly believe it will still work.
If I felt that was a keenly felt principle throughout the company, I would become a more enthusiastic "Microhoo" supporter...should that ever again become a possibility.