Yahoo bets on the wrong CEO, plus entrepreneurship and football

  • When the business frame is broken, tinkering at the edges is not going to work
  • On to football: Is Leicester City FC rewriting the rules of management?

Yahoo bets on the wrong CEO, plus entrepreneurship and footballIT looks like Marissa Mayer will be another high-profile CEO (chief executive officer) casualty.
 
She was appointed CEO of Yahoo in July 2012, after a 13-year career at Google. Yahoo’s problems were well known and several CEOs had come and gone, with nothing to show for their tenure.
 
After cofounder Jerry Yang stepped down in 2009, Carol Bartz, chairman Roy Bostock, Tim Morse, Scott Thomson and Ross Levinsohn have all had a shot at turning around the company, without success.
 
Yahoo bets on the wrong CEO, plus entrepreneurship and footballMayer (pic) was the 20th employee at Google and had a reputation of running a tight ship. In 2005, Fast Company profiled her as “the high priestess of simplicity,” and in its May 2015 edition, technology editor Harry MacCracken  heralded her transformation initiatives at Yahoo.
 
Fast forward to 2016, and Yahoo is still struggling four years after her appointment. Plans for a tax-free sale of the ‘golden egg’ – shares in Alibaba – were rejected by the authorities.
 
Yahoo’s share price has been a reflection of the value of its holdings in Alibaba, whose own shares have been volatile.
 
After Alibaba listed in September 2014, both stocks peaked in November 2014 – Alibaba at US$111.64 and Yahoo at US$51.75. Alibaba has now fallen to US$80 and Yahoo to US$40.
 
Yahoo stock actually showed a steady increase during Mayer’s appointment, in anticipation that she would successfully remake the company or sell the Alibaba and Yahoo-Japan stake.
 
The remake is not working, but the auction of Yahoo’s Internet assets has sparked some investor interest in the stock. Recently, Warren Buffet, as chairman of Berkshire Hathaway, backed a bid to participate in the second round of bidding.
 
Mayer not the only one
 

Yahoo bets on the wrong CEO, plus entrepreneurship and football

Ron Johnson (pic above) is another notable CEO casualty.
 
The head of Apple’s retail business under Steve Jobs, Johnson was made CEO of J.C. Penney (JCP) in November 2011 when activist shareholder Bill Ackman (who had a year earlier acquired a US$900-million stake) pushed its board into accepting the appointment.
 
Much has been written about J.C. Penney (JCP) during this period, when Ackman seemed to be managing the board and Johnson the company. Indeed, many commentaries have accused Ackman of taking the JCP board for a ride.
 
However, a deeper dive reveals that JCP had tried several strategies to halt declining sales, but nothing worked.
 
The board seemed desperate for a magic wand, which Ackman waved in front of them. He got them to agree to a radical plan to reposition the stores under the stewardship of Johnson.
 
While the frustration at the fallout is justified, blaming Ackman is grossly misplaced. The repositioning exercise was a disaster.
 
Johnson’s vision was to create a new and lucrative style of retail with high-end ‘shops’ of specific brands, replacing the frequent mark-down sales – a staple of JCP – with round-the-year, “fair and square” pricing.
 
During the fourth quarter of 2012, sales fell 28.4%, contributing to a net loss of US$552 million. Same-store sales fell 32%, leading some to call it “the worst quarter in retail history.”
 
A total of 19,000 employees lost their jobs, from 134,000 during Johnson’s time. In April 2013, Johnson was fired as the CEO and replaced by his predecessor Mike Ullman.
 
Broken business frames
 
JCP got into the discounting downward spiral and could not find a way out. Johnson basically said, “My ship, my orders” – and almost took the ship down with him.
 
Yahoo has been struggling with its business model, or as we prefer to call it, business frame, for years.
 
Sadly, when the business frame is broken, even a talented CEO cannot fix it.
 
Buffet expressed this neatly when he said, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
 
Are companies over-reliant on the CEO?
 
Yahoo and JCP were both in a desperate situation and brought in an external CEO to fix the problem.
 
One wonders what senior management and board members did or did not do that got them into the mess in the first place.
 
This is why it’s so important – from an early stage – to harness the talents and resources of the entire company, senior management, and the board.
 
Technology companies seem to do this quite naturally. Board and senior management have “skin in the game” and everyone seems to be pulling in the same direction.
 
This sense of vision, or purpose, what we refer to as Passion, coupled with Realism and Energy-Action-Bias, drives success.
 
These are qualities that allow entrepreneurs to navigate dangerous and uncharted waters. “My ship, my orders” just doesn’t work in today’s Volatile, Uncertain, Complex, Ambiguous and Hyper-Connected (VUCA-H) world.
 
Leicester City FC’s rules of management
 
Football clubs are not run in a consultative way, and typically, the manager is all-powerful.
 
That is, until the team hits a stretch of poor results and the board decides on a change.
 
At Manchester United, David Moyes (July 2013 to April 2014) and Louis Van Gaal (July 2014 to May 2016) were only told of their dismissal after the decision was leaked to the media.
 
That says much about the culture of the club. Much has changed following the departure of Sir Alex Ferguson (November 1986 to May 2013), who in his time there established comprehensive control.
 
It would be interesting to see if Jose Mourinho, who has been appointed manager to replace Van Gaal, will find success.
 
Mourinho is also a strict disciplinarian, not unlike Van Gaal and Moyes before him. Will this management style work?
 
Another approach, adopted by Claudio Ranieri (pic below) as manager at surprise Premier League champions Leicester City FC since July 2015, is reflective of a new management style – more consultative.
 

Yahoo bets on the wrong CEO, plus entrepreneurship and football

 
In a recent study, Google found that team performance was enhanced with psychological safety – team members feel safe to take risks and be vulnerable in front of each other.
 
Our own research on successful entrepreneurs reveals nine characteristics that are important, or what we call entrepreneurisms.
 
The Leicester City team displayed many of these entrepreneurisms: Self-Efficacy, Risk-Taking, Passion, Learning, Realism, Persuasiveness, Opportunism, Innovation and Energy-Action Bias.
 
Defending deep, hoping not to concede an early goal and waiting for a counterattack opportunity, is a risky strategy, but realistic given the resources at the club’s disposal.
 
What a remarkable season they had. Only three defeats in 38 games, with 23 wins, and they conceded 36 goals, only one more than Tottenham Hotspur and Manchester United, who had the best defensive records.
 
A culture change is also underway at Real Madrid, where Rafael Benitez (June 2015 to January 2016) was replaced by former star-player Zinedine Zidane.
 
Although he has not been in command for the full season, Real Madrid have done well, winning the 2016 Champions League Final against Atlético Madrid and finishing behind Barcelona in the Spanish La Liga.
 
Outgoing manager Benitez had a reputation of being a control freak, which was resented by the players. Zidane brought back the fun in the game, and seems to have convinced superstar player Cristiano Ronaldo to abandon his plan to leave the club.
 
Entrepreneurial management
 
What is entrepreneurial management?
 
It starts with having the right people with a shared vision of where they are going.
 
Most startups only have a vague idea of what they are trying to do, and this gets refined over time through what we call a business frame.
 
The leadership needs to provide appropriate motivations to their people. These motivations take the shape of policies, procedures and technologies – which we call the infostructure.
 
Adopting the appropriate entrepreneurisms and putting in place the infostructural motivation will enable companies to move past pocket initiatives and energise the entire organisation.
 
Anwar Jumabhoy is passionate about bringing entrepreneurship into large companies, and is co-author of the book Beyond Corporate Entrepreneurship, which is due to be released in 2016.
 
Related Stories:
 
What CEOs and the Beautiful Game have in common
 
Week in Review: Leadership lessons from Jobs, or Picard?
 
Startup slugfest: Business model vs business ‘frame’
 
 
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