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How Can Yahoo Get Back on Track?

Lessons from Yahoo – and the strategies that could solve the company’s problems.

Lizwe Nkala

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Yahoo

Two globally respected analysts were recently polled on how they would get the shine back on a declining Yahoo if they were appointed chief executive of the business. They had notably polarized views on what they felt to be the company’s challenges; hence they prescribed equally different remedies.

Right or wrong in their estimate, each would not be alone in the growth conundrum arena that faces many business decision-makers today. The one analyst thought that Yahoo’s biggest problem was a lack of competitive technology, something that has seen the company fall rapidly behind the likes of Google.  His assertion was that the solution lay in bringing a new hard-hitting technology product.

The second analyst attributed Yahoo’s lackluster performance down to what he thought was an outdated business model that was rendering’s Yahoo’s product offering seemingly weak relative to that of its peers.

Different strategies

If the above wannabe CEOs were given further room to develop the turnaround business case for Yahoo, the capital and human resource commitments to make each plan happen would be significantly different.

The risks pursuant on each option and its set of actions would be day and night apart and generally the execution of each recommendation would take different timelines to produce results. One and not both options would build a decidedly better Yahoo while the other would compound the problems of a company already in trouble.

Fortunately for the two analysts, the Yahoo story is a hypothetical case that was played out in a control environment.

For the immediate-past incumbent CEO at Yahoo, Carol Bartz, the growth conundrum cost her the top job after being released for failing to restore web service company to its former glory. Growth for a once No1 Internet search engine, has suddenly become the highest stakes game, summed up by the Chairman of the board’s statement of intent; The board is “committed to exploring and evaluating possibilities and opportunities that will put Yahoo on a trajectory for growth and innovation and deliver value to shareholders,”

Strategy decay

Such is the growth question’s significance that it separates star CEO’s and boards from pretenders. Now than ever before, the growth bull’s eye has become an increasingly elusive target to hit. Mistakes in the pursuit of growth can be costly, in some instances hard to come back from especially where such growth involved capital projects or acquisitions.

If earnings have flat-lined and the share prize tanked, chances are the business now needs an injection of new energy, but where should your organization start given the complex array of issues to take into account and deal with?

Naturally, business is cyclical due to constantly changing market and competitor conditions. Periods of boom are punctuated by slow spells as businesses adjust to changed conditions. Intelligent executives work hard to prolong the boom cycle, while they strive to limit the onset of slow spells.

Should they occur, as they inevitably will, intelligent executives adopt aggressive strategies to limit the toxic effects to the business in the short and long term. However, a different kind of contraction than a short-term bleep must be vigilantly watched. Businesses experiencing a protracted period of flat-to-low growth in a market where their peers are outperforming their sector have more to be concerned about.

Chances are that such businesses have hit ‘strategy decay’: the gradual misalignment between the organization’s competitive value proposition and its delivery model with the market’s perception of value.

Some indicators of strategy decay are the following:

  • Turnover growth with flat or declining profits year-on-year: this reflects a business that is working a larger and larger market for a smaller and smaller return
  • Declining turnover with increasing profits: this reflects a business that is enjoying temporary profitability due to aggressive cost cutting, income from disposals or product prize increases that improve margins. All of these in the long-term are unsustainable
  • Rising ROCE with declining PE multiple: This reflects a business that may be giving shareholders healthy returns in the short term but the market is not confident about the business model’s future ability to sustain that run
  • The oldest business units and products account for the bulk of turnover and profit: this reflects a business that is overly dependent on an old portfolio of rents, patents and customer bases, with very little by way of new assets to sustain its competitiveness and profitability in the long run
  • Convergence of strategies in the industry are making it difficult to differentiate businesses and consolidation becomes the only viable option to survive in the long-term

Even the best-conceived corporate and business strategies wear out with time because markets and competitor actions are a constantly moving target. Forward thinking businesses therefore manage the ever-present threat of strategic decay ahead of each business cycle. Our observation is that those kinds of businesses are not many. T

he majority of executives are too busy responding to shareholder andmarkets pressure to deliver the next quarter results. They manage strategy decay by exception, choosing to respond to crises in piecemeal fashion rather than act in a proactive and structured way. In our South African and broader African business environment it is not too difficult to spot companies that have hit a brick wall on growth options.

Just like the story of Yahoo, they are effectively playing catch-up in a market where immediate competitors keep raising the bar while the rate of global change far outstrips the speed at which the organizations are re-inventing themselves

Industries in trouble

There is no shortage of people wanting to own an airline in Africa. Start-ups are plentiful but there is little in the performance of established players like SAA, BA/Comair and Mango etc. to suggest that there is excess demand. It is a heavily churned industry defined by prize wars, international oil prize and heavily exposed to consumer sentiment.

It is an industry akin to a lagoon that is a pleasure to frequent in times of calm and a nightmare to be caught in by a raging storm. Margins are squeezed as fewer passengers fly in a global economic crunch; couple that with the volatility of fuel costs and you have a cocktail of disaster.

The usual escape route of expanding to new routes and code sharing has been beaten to death, and even that has created its own problems with Africa’s difficult legal and legislative terrain either cumbersome to get hands around or sabotaging well intentioned plans to the extent of folding them altogether.

SA Express’s recent mission to the DRC got grounded even before it took off, taking with it some R30m of sunk costs in a desperate charge to find new sources of revenue growth

Fixed line telecommunications businesses are deep in the mire after mobile offerings completely obliterated what was left of years of a stagnant business models and non-existent product and technology development. The growth of data is an opportunity sailing to the sunset that these archaic businesses simply cannot exploit without having to reinvent their entire infrastructure, a mammoth task to undo given decades of investment in what is now liability assets that cannot respond to market and competitor shifts.

For Telkom for example, it is all-hands-on-deck as the company scurries to salvage some respectability after years of poor performance signified by losses in excess of six figures even for the newly launched mobile subsidiary. The ill-fated Nigerian excursion for the state company ended in tears.

Even a renowned industry turnaround artist closed the door and walked away fearing for his own reputation in the contamination that was destined to happen. Happen it did and the outcome does not make for happy reading There are very few books that have enjoyed the trust of readers for centuries, more than newspapers and magazines.

Not any more because the world has suddenly changed and continues to do so at an alarming rate. The technology tsunami is revolutionizing product platforms, disrupting advertising patterns and income streams as well as changing the way we all consume media.

The popularity of mobility, portability and interactivity has altered the prospects of print, and digital platforms are entering the fourth wave of development, which means any player still stuck to the print model is all but out of contention. Their demise is a question of time.

What more with social media creating a global on-line newspaper; survival in this industry is a case of must-do and not optional revolutionary thinking. Avusa Media is a case in point where investors are getting nervous because the growth story has evidently stalled. The business stayed routed to an outdated business model for far too long and is now susceptible to sniper fire from just about every direction as digital media platforms rule the roost.

Finding new pastures

The innovation revolution is sweeping across just about every industry in every sector, and it is no buzzword. A management team still debating its validity is not going to last, every organization must find new sources of value to stay afloat in a volatile world

  • Define the business’s vision for innovation behind a compelling business case. In other words, get to grips with where, how and why the business has slowed down. Frame the issues in a compelling statement that pinpoints the fragile aspects of your business and build an organization-wide coalition to go and change the game
  • Get the organization’s leadership from board to executive to own and champion the innovation mission. By-standers in positions of responsibility transmit negative energy to staff and give an impression that the innovation ‘fad’ is an inconvenience to the status quo: giving an impression that if ignored enough it will fade away and life will go on as usual
  • Get the right culture embedded in the organization. Cultural resistance is the biggest hindrance to innovation as identified by the latest Booz 1000 Innovation study results for 2011. Old beliefs, behaviors, attitudes and assumptions can frustrate the process of innovation. Hierarchies and established dogmatic tendencies usually frustrate creativity that is needed to generate innovative ideas. Leaders raised in a culture that values staff obedience; control and fear-driven diligence in people will struggle to get passion out of them, the sole food of innovative mindsets
  • Get the innovation formula and mix right. Define clearly what the innovation thrust for your business needs to be. Given the extent of strategy decay in the industries we outlined above, nothing less than a holistic business model renewal will create meaningful, new sources of growth. Some businesses may have business models that are still working and relevant but may need innovative business processes or new products to be launched
  • Test the innovation logic thoroughly. Project the payback of the innovation portfolio you are recommending and see a four to five year value build up to justify commercialization of ideas. The innovation logic must map back to the initial process of framing the fragile aspects of your existing model as well as staying true to the broader strategy and value philosophy of the business. Look for innovation ideas that can be supported to thrive within the current capabilities of the business to avoid a performance lag of the idea while the business tries to acquire the right capabilities to execute the ideas
  • Institutionalize an innovation process that will ensure a high-pressure innovation pipeline. Put staff at the heart of the innovation process that works top-down and bottom-up
  • Ring-fence the innovation ideas, their incubation, funding, implementation, and performance measurement from the mainstream operational parameters. Expecting innovation ideas to deliver at the level of established businesses performance benchmarks in terms of expected returns on investment too quickly can frustrate and jeopardize the business renewal effort.

Driving growth through innovation is a creative process. It requires leadership that can free up the business to explore and venture into unchartered territory. The biggest enemy of innovation therefore is the organization itself and its legacy management models of the past.

If there are entrenched, outdated management models, getting outside expertise to design and kick-start the process, transfer skills and get the business on its way to new pastures may be the right thing to do. It will not be a quick fix for the likes of Telkom and Avusa Media, it may be a long trudge in difficult conditions but results are sure to come in the long run.

Lizwe Nkala is an influential corporate strategist working at executive and board levels of large corporations. He is the MD of Flamingo Moon Consulting and a founding partner of the Strategic Thinking Institute, where he coaches executives and presents tailored strategic thinking seminars and webinars, and provides strategic thinking tools and templates on a subscription basis for corporate clients. For more, visit www.flamingomoon.co.za

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Strategy

6 Questions You Should Be Asking When Coaching

Top athletes have coaches because they’re winners. Business leaders should be the same.

Nadine Todd

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Dr Marshall Goldsmith

Whether you’re a CEO looking for a mentor, coaching your management team, or structuring a coaching programme for your managers to implement, there are six questions that can help anyone get better at anything.

The expert

Dr Marshall Goldsmith is a best-selling author and world-renowned business educator and coach. He has coached top CEOs, including Alan Mulally, former President and CEO of Ford Motor Company.

The key to a successful coaching programme is simple dialogue and establishing responsibility. The person being coached must understand and agree that success lies in their hands. They must take responsibility for their actions.

Related: How Business Coaching Can Help You Achieve Your Goals

The method

Once every few months, have a direct coaching session. Ask (or answer for yourself) these six questions:

  1. Where are we going?
  2. Where are you going?
  3. What are you doing well?
  4. Do you have suggestions for my improvement?
  5. How can I help you?
  6. So you have suggestions for me?

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Strategy

4 Ways To Develop The Leaders You’ll Need In The Future

One of the most challenging aspects of leadership development is consistently and effectively identifying the next wave of leaders.

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One of the most challenging aspects of leadership development is consistently and effectively identifying the next wave of leaders.

It can be easy for those at the top to forget that eventually someone will have to take their place at the helm. And ignoring that fact has lead to issues with succession planning, unwanted turnover and other challenges in leadership development in many organisations.

2016 High Impact Leadership research from Bersin by Deloitte asked 2,422 HR and business leaders from around the world how well they believed they could discover new leadership talent. Just 35 percent of respondents said they were above average when it came to successfully identifying and developing leaders.

To understand why this is, consider the typical leadership development paradox. Traditionally, the first step is to choose who has leadership potential, then develop their skillset. Logically, however, this makes little sense.

How is it possible to identify effective leaders if employees have yet to receive any type of leadership development?

Here are four ways to properly identify better qualified candidates for leadership positions:

1Stop choosing potential leaders based on unrelated skills

Gallup’s 2015 State of the American Manager Report, which studied 2.5 million manager-led teams in 195 countries, found that the top two reasons employees are promoted to management positions are because they were successful in a non-managerial role or because of their tenure with the company. Neither of those criteria have any proven correlation with leadership skills or relevant experience.

Create a better means of measuring for true leadership potential. Look at the culture of the organisation and envision what it would look like for someone to lead by those values.

Also consider how successful leaders evolved over time in the organisation. Then use that information to make a list of recognisable traits to look for as signs of leadership potential.

2Broaden leadership development to more employees

People learn and grow at their own unique pace. Requiring that an employee reach a certain position or be with the company for a certain number of years before they’re offered leadership opportunities holds back those who might be ready for more responsibility now. Or even worse, it might push those who aren’t yet ready into leadership roles.

Instead, let leadership development be a company-wide initiative. This gives more people the chance to take the next step in their career. It also creates a larger pool of possible great leaders to draw from across the organisation.

3Track progress and growth

Track progress and growth

There’s no way of knowing who is ready to step up and lead unless development is monitored. Remember that this is a process. Employees need feedback from their mentors and coaches to know for certain what skills they’ve mastered as well as where there can still be improvements made.

Develop a way to assess progress for different leadership positions, and be clear with employees and coaches about what success would look like in different situations. For instance, explain what is expected of a first time project leader.

Get everyone on the same page about the developing leader’s responsibilities and how that should guide their team.

Then collect thorough feedback from all those involved. Ask the leadership candidate what challenges they faced as well as where they think they thrived. Pose the same questions to those they supervised and organisational mentors.

Over time, this will reveal patterns that make it easier to identify who is best suited for leadership in the long-term.

4Focus on continual leadership development

There is no such thing as too much experience. There is always more that can be learned. After leadership candidates have been identified, continue to nurture them. This keeps employees from feeling that they have plateaued, which is unfortunately common.

The 2014 Insigniam Middle Management Survey: Middle Management’s Critical Role In Saving Company Innovation looked at responses from 200 middle managers from around the world. It found that only 15 percent of managers believe they will ever be promoted to the next level of leadership at their company.

Whether intentionally or not, employees who have proven their leadership abilities are being told that their leadership journey is over – and this hurts both them and the organisation. Encourage a steady stream of highly trained and skilled leaders working their way up by demonstrating that there is no end to development.

In order to clearly see who the next wave of leaders is going to be, employees need to be given the chance to hone and exercise their skills.

That means redefining how leadership potential is identified and providing each employee with the chance to develop personally and professionally.

This article was originally posted here on Entrepreneur.com.

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Strategy

Have You (Really) Put Your Business To The Test?

You should constantly test things in your business to see if they’re working. In that direction lies success.

Nicholas Haralambous

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nic-haralambous

There’s a pretty famous saying that people in business like to use: Always be closing, or ABC. It’s a very sales-driven concept that suggests that whatever you do, you should always be closing a sale.

I used to like that way of thinking: Drive your pipeline growth, work on the numbers and push the sales as hard as you can all the time.

That approach definitely works for certain types of businesses, but after a while it can be soul destroying work that leaves a business a bit hollow. So over the past few years I’ve been working on a tweaked methodology.

I call this method of building and selling: Always be testing or ABT.

Related: 3 Sure Fire Ways To Improve Efficiency And Find Your Business’s Productivity Sweet Spot

The concept is simple. You should constantly be testing things in your business to see if they’re working. If they are working, great, you can then start testing how to improve them. If they’re not working, you find out and can start testing fixes for the problem.

This applies to your team, your product, your day-to-day strategy for selling, customer acquisition and anything else you can think of.

Start testing yourself

The obsession with testing things started in my personal life. I was doing it without realising what I was doing. I started waking up 15 minutes earlier every month and after a while I was spritely and awake by 5:30am and walking my dogs or working while everyone else was asleep.

Then I stopped eating sugar for a while to see if I’d feel better. I did. That didn’t last but I then stopped drinking coffee to see if I’d sleep better. I did. So now I don’t drink caffeine of any kind after 3pm.

I found that I was constantly testing out everything that I did and tweaking my life accordingly. So one day I realised that this model would probably work in my business: Small, frequent tests with specific goals in mind to try to learn something new or verify something old.

Related: How You Can Make Those Sales When Nobody’s Buying (Yes It’s Do-able)

business-reporting-structure

Testing requires reporting

Setting up tests is not difficult. But tracking the results of the test requires preparation. Interestingly, when I moved Nic Harry from a pure e-commerce company into physical retail, I discovered how slow real world retailers have been to use technology to track changes they make in store.

With nicharry.com we have been able to test, tweak and track results for years. I have many tests and lots of data to pour through when I want information about a decision. I can make a change on the homepage and see if it leads to more transactions than the previous homepage tweak. If it works, great, if it doesn’t, I go back to the way it was.

I decided to take this type of thinking into our flagship store by treating each wall and window as a web page. We kept notes of which socks were on which walls and which socks sold better where in the store.

After a few months we had figured out which walls were the hotspots in the store. Then we started to move the socks around and see if we could influence who purchased what just by placing the socks in a different place.

This type of tiny testing environment helps me understand my stores, my team and me products with granular detail. However it wouldn’t be possible if my systems weren’t set up properly to help me track these changes.

Why test something that works?

People often ask me why they should test something that is clearly working. Well, what if one day your product stops selling and you don’t know why? What if your core revenue stream dries up over the course of a few months or years and you haven’t noticed?

Testing helps me to stay in front of my problems. I can think of a stand out example of a company that stopped testing and ended up losing: Blackberry. Do you remember them? I do, but not many people will in a year or two.

Related: 10 Brilliant Responses To The Customer Who Is ‘Just Looking’

It’s also worth remembering Kodak. Kodak was founded in 1888 and thrived for a century, literally. Then it stopped testing in the face of innovation all around the company and from within. In 2012 Kodak filed for bankruptcy protection. The ironic part of the Kodak story is that digital photography killed their business. Why is this ironic? Kodak developed the first digital camera in 1975 but didn’t test it in the market. They were worried it would eat into their existing business.

If only they had tested the product before they dropped it. Tests do not have to be large and complex. Implement systems that allow you to track the changes in your business whether online or offline. Then engage with your team about how they can help you to measure and manage the tests and then start with something small.

Testing for no reason is futile. It’s imperative to know what you’re testing and why. Once you’ve figured out your goals, start testing and never stop.

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