Run by Wall Street? A Cause or a Company?
In light of the Yahoo! - Microsoft fiasco, fellow bloggers Larry Dignan and Vinnie Mirchandani havebeen asking the question whether there is too much emphasis on just onestakeholder - the shareholder. After all, shouldn't a technologycompany (or any company for that matter) be equally focused on thevalue for customers, partners and employees.I believe that the real problem is not that of prioritization of stakeholders but a more fundamental issue: Does your company stand for something?Larry and Vinnie discussed the following in a recent conversation: Technology companies cater to Wall Street interests too much often at the expense of good strategy. Isn’t what a company does for customers and developers more important than shareholder interests? What’s wrong with being a mid-size technology company if customers and employees are happy and the products–software, hardware, services–fit a need? There’s nothing wrong with it, but Wall Street would lead folks to believe that any company that isn’t acquired by Oracle isn’t worth existing. And why are we listening to Wall Street at all given that analysts, investment bankers and other financial wonks can’t even manage their own businesses (subslime, credit swaps, write-offs galore)?Evenas I do agree that the recent focus on shareholder's (short-term)returns is probably misplaced, the real problem is elsewhere.What Does The Company Stand For?Theproblem with Yahoo! is not just its mediocre financial performancecompared to its more successful cousin in Mountain View - Google, butthat Yahoo! does not seem to stand for anything and rarely arouses anypassion amongst customers, employees or partners. Its a listlessorganization that seems to be going through the motions - see this excellent post by Jeff Nolan.Marc Andreesen recently wrote up an article praising dual-class structureto help management teams prevent hostile takeovers. I believe this isthe wrong remedy - its a cure for a disease that should be prevented inthe first place: A lack of clear vision around what a company is tryingto achieve.A company (and its management team) deserve to beindependent as long as they inspire confidence among investors,employees, parters and customers that the company has a vision that itaspires to that the stakeholders can commit to.After all, whatdoes Yahoo! stand for? A hodge podge of websites relating toentertainment, communication, search etc with no grand vision ofchanging our (digital) lives. There are hundreds of smaller companiesthat are not under any duress to be acquired because their managementteams inspire confidence around a vision.Here is a list ofcompanies that I don't know what they stand for, and hence will nothave shareholders clamoring to keep them independent if the rightopportunity came along: BEA (Sold) Yahoo! Tibco WebMethods (Sold) IAC (Bought/Sold/Consolidated/Unbundled)Contrast this with list with: Salesforce.com (Changing the enterprise software world; See my disclaimer) Google (Organizing World's Information) Amazon (Changed Retail, Now Web Services) COST (Concur, Omniture, Salesforce and Taleo - the SaaS horsemen, per Phil Wainewright)Thesame holds true beyond technology businesses - if your company does notstand for something bigger than management's entrenched interests andegos, its not very likely to inspire shareholders to forgo a 50%overnight return. There is a storyof two labourers working at a construction site, breaking stones. Apasser-by asked one labourer what he was doing. “Breaking stones”, wasthe bored reply. A few yards down the road the traveller came acrossthe other labourer. This worker was different; there was a spring inhis steps and a tune on his lips. So the passer-by asked, “What are youdoing?” “Oh, I am helping Christopher Wren to build the greatestcathedral in the world.” The vision of the great architect, SirChristopher Wren, of building a cathedral that was to be the pride ofEngland, gave meaning to the labourer’s work.So, the questionis: Do your stakeholders see your company as a stone-breaking ventureor as a company that's building a Cathedral?
