The Next Net

Yahoo's Peanut Butter Problem

  peanut butter. 
  Originally uploaded by megamommatron.

The blogoshere is abuzz with a leaked memo written in October by Yahoo senior VP Brad Garlinghouse dubbed the Peanut Butter Manifesto.  In it he warns that Yahoo is spread too thin and is all over the place.  Excerpt:

We lack a focused, cohesive vision for our company. We want to do everything and be everything -- to everyone. We are scared to be left out. We are reactive instead of charting an unwavering course. We are separated into silos that far too frequently don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics.

Our inclination and proclivity to repeatedly hire leaders from outside the company results in disparate visions of what winning looks like -- rather than a leadership team rallying around a single cohesive strategy.

I've heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.

I hate peanut butter. We all should.

We lack clarity of ownership and accountability. The most painful manifestation of this is the massive redundancy that exists throughout the organization.

IBM's $100 Million Brainstorm

  Brainstorms at INDEX: Views 
  Originally uploaded by Jacob Bøtter.

At IBM, brainstorming is now a company wide affair.  Over the past few months, more than 150,000 employees, business partners, and clients have been coming up with new business ideas for IBM to pursue in a series of "Innovation Jams" and smaller face-to-face meetings.  They've boiled the ocean  down from 46,000 initial ideas and postings to ten, and IBM CEO Sam Palmisano is about to announce the final winners from a corporate event in China (and on Second Life simultaneously—it's the trendy thing to do).  He is putting $100 million into the final ten ideas in the hopes that a few may turn into billion-dollar businesses. Here is where he is placing his bets:     

HP's Dept. of Dirty Tricks

  Spying 
  Originally uploaded by BarGal.

More details are emerging about Hewlett-Packard's surveillance of its own board members and journalists during its leak investigation.  My former colleage Damon Darlin (who started the B2Day blog) has been all over this story for the NYT. He is now reporting:

Detectives tried to plant software on at least one journalist’s computer that would enable messages to be traced, and also followed directors and possibly a journalist in an attempt to identify a leaker on the board.

Ironically, someone in turn leaked this information to Darlin. (Better start using pay phones and checking your laptop for surveillance software, bud).  That's how investigative journalism works.  Companies can try to discourage such activity all they want, but in the end, the truth will out (unless you're Apple, and you make corporate secrecy a core competence).

One big question remains.  All of the blame so far for this fiasco has been placed on the shoulders of HP chairwoman Patricia Dunn, who ordered the investigation into the initial leak.  But what did CEO Mark Hurd know, and when did he know it?  After all, he is a board member as well.

HP's Agents Impersonate Journalists in Widening Scandal

  the call 
  Originally uploaded by velco.

So not only did investigators working for HP impersonate its own board directors to uncover the source of a leak, but they also pretended to be journalists to obtain those journalists' private phone records.  It is not clear whether any laws were broken, but of they were, HP might have some lawsuits on its hands.

At the very least, an ethical line was crossed.  HP needs to respond in a very public way to restore the trust that this incident is eroding.  Perhaps by asking for the resignation of its chairwoman Patricia Dunn, who ordered the investigation in the first place.  As for the phone companies like AT&T who are giving out account information willy-nilly, they would be wise to review their policies.  (Forget about asking people for their social security numbers—those are so compromised at this point.  But simply asking what was the amount of your last bill, along with another random identifying question would make it harder for this sort of thing to happen).

The ironic thing here is that more damage is being caused by the investigation than by the original leak itself.  If you read the original Cnet story that quotes the anonymous board member about HP's upcoming strategy, it's pretty straightforward stuff about HP's desire to acquire more software companies, move closer to AMD, and target the commercial printing industry.  The types of things that shareholders should know about anyway.  Nothing really revelatory.  The anonymous board member was quoted as saying things like:

"By the time the lectures were done at 10 p.m., we were pooped and went to bed," the source said.

Ooh, better get Anthony Pellicano on the case.

HP Spies on Itself

  Calculating 
  Originally uploaded by thermophle.

Hewlett-Packard's chairwoman Patricia Dunn apparently thinks she is Patrick Fitzgerald (the prosecutor who investigated the leak of Valerie Plame's CIA identity) . 

After an HP director leaked some information to Cnet she not only ordered an investigation, but went so far as to obtain the personal phone records of her fellow directors.  The leaker was found out (Dr. George Keyworth II, according to the WSJ, who ironically is chairman of the Progress and Freedom Foundation).  But the investigators she hired used questionable methods to obtain these records—calling phone companies and pretending to be the directors in question to obtain account information.

Another HP director, Tom Perkins, was so outraged at this "sub-rosa" investigation that he resigned from HP's board.  But HP never disclosed the true reason for his resignation.  (You can read his letter of protest here).

Perkins was correct to be outraged, and its heartening to see a corporate insider like him stand up for his principles and ethics instead of for his cronies.  As for HP shareholders, they  should now be asking themselves what was really gained by the investigation,and whether it was worth all the bad press that its unveiling is now generating.

Out-Create the Competition

   
  Originally uploaded by glenn..

Forget strategy.  These days competitive advantage goes to the most creative.  From the mind of Umair:

everyone and their grandmother knows how to pick profitable markets, segment them, price goods and services, analyze competitors, understand industry economics, etc, etc.

Strategy itself, in a very real sense, is becoming a commodity.

In a world where strategy is a commodity, creativity becomes the vital factor from which value flows. When everyone can think strategically about everything, the locus of value creation shifts from out-thinking everyone to out-creating them. The prime mover of value creation becomes putting the ability to create (goods, services, processes - even strategies) at the heart and soul of the firm.

Hmm, thats sounds like a good strategy to me: make better stuff.

The question is: How?  What Umair is hinting at gels with the notion that it is better to put out a product as fast as you can (even in a half-baked beta version) and refine it based on market feedback than to spend years perfecting it while the market moves onto something else.  It's the iterative process of reacting to market signals that is key.  So those companies that can create more have a greater chance (statistically) to  ultimately create something that is better. 

Unless, of course, you are Steve Jobs and you just get it right the first time.  But, then, that is just a different form of creativity.

The Google Plane

A tiff between two contractors refurbishing a Boeing 767 widebody jet for the personal (read: party) use of Google founders Larry Page and Sergey Brin has brought out some details about the way Google CEO Eric Schmidt mediates between the two.  One of the contractors, Leslie Jennings, a designer of high-end plane interiors, told this to the WSJ:

Mr. Jennings says Messrs. Brin and Page "had some strange requests," including hammocks hung from the ceiling of the plane. At one point he witnessed a dispute between them over whether Mr. Brin should have a "California king" size bed, he says. Mr. Jennings says Mr. Schmidt stepped in to resolve that by saying, "Sergey, you can have whatever bed you want in your room; Larry, you can have whatever kind of bed you want in your bedroom. Let's move on." Mr. Jennings says Mr. Schmidt at another point told him, "It's a party airplane."

So that's how the triumvirate works.  Schmidt makes sure that both Larry and Sergey get whatever the hell they want.  But forget the  California king bed.  Put two of those together (with some of that spare velcro Google uses to hold its millions of servers together), and you've got yourself a Mountain View mogul bed.

But who gets stuck with the hammocks?  I guess all the other people on the plane—those just going along for the ride—will get to fight over them.

B2.0's Top 50 People in Business

In our next issue, B2.0 is publishing it's first-ever list of "50 People Who Matter Now."  This is our take on who is creating the most change in the business landscape. As we explain:

In assembling this list, we emphasized one key question: What have you done for us lately? We also considered its important corollary: What will you do for us tomorrow?

It includes big shots like Rupert Murdoch (No. 4), Ray Ozzie (No. 10), and Mark Hurd (No. 19), as well as emerging big shots like YouTube co-founders Chad Hurley and Steven Chen (No. 28) and the intellectual father of Web 2.0, Tim O'Reilly (No. 35).  Yes, Steve Jobs is on the list (No. 5), and Sergey and Larry (No. 2), but the top spot goes to you (No. 1), the consumer as creator.

Just to stir things up, we also include a supplementary list of 10 Who Don't Matter (it's pretty harsh, but aren't all lists?)

And yes, all of this is quite subjective, but it is a good starting point to discuss who is changing the world and who is not.  So read the lists and then tell us who you think we left off, and why? 

Comments are open (Please, no pitches from PR folks.  The list is already published).

Bill Gates and the End of Software

Now that Bill Gates has formally announced his intention to retire in two years, the question on everyone's mind is whether or not Microsoft can adapt without him?  The fact that Ray Ozzie, the champion of Microsoft's Web-based Live software projects, is taking over the reigns as chief software architect is a hopeful sign that it can. 

But Ray Ozzie is not Bill Gates.  He may have the software chops, but more than anything Gates combined his technical knowledge with an understanding of where markets were going and how to profit from those shifts.  It is not yet clear how to make money from Web-based software, at least for Microsoft—because it would take a heck of a lot of advertising to make a dent in its $11 billion quarterly revenues and $3 billion quarterly profits.  Steve Ballmer knows this, and whether or not he is the right man to take Microsoft into the future, financially at least, that future is going to be a long time coming.  If anything, Ballmer is a realist. And he doesn't get excited about things until he sees the money.  That's why Microsoft needs Ray Ozzie.

Here's the dilemma for Microsoft.  It knows that the Webtop is coming.  It knows that desktop applications and Web applications are going to become more and more indistinguishable.  And it is making a play for that future with Windows Live and Office Live.  But as an organization, it's heart is just not in it.  And why should it be?  All the money is made from Windows and Office on desktops and servers.  Once you open your applications up to the Web they become platform agnostic.  They can run on Windows machines or Mac or Linux.  Windows Live does not reinforce Microsoft's current strengths on the desktop.  It ignores them.  Nevertheless, Microsoft must play in this Webtop space because that is where the most interesting pieces of new software are being developed (and Microsoft has always understood the importance of keeping the software developers happy).

It's a classic innovator's dilemma.  And Microsoft is fully aware of it.  But that doesn't mean it will be any easier to avoid it, even with Ray Ozzie steering the software part of the ship. 

Sun Sets for Scott McNealy

   
  Originally uploaded by Umaru Idi-Catteau.

It's the end of an era.  Scott McNealy is stepping down as CEO of Sun Microsystems, and handing the reins over to Sun president Jonathan Schwartz.  Today, the company reported a quarterly loss of $217 million, and the legendary McNealy departs after a cumulative $4.5 billion in losses since 2002—not a good note on which to leave.

Meanwhile, Schwartz is a software guy, which is a tacit admission that a focus on computer hardware may no longer be the best way to regain profitability.

Update:  I just listened in on the conference call announcing this change.  A few key takeaways:

1.  McNealy, who will continue as chairman and take on more of a chief-diplomat role, says the timing of the change was his call:

It’s certainly a big day for me—22 years I’ve been running this joint.  When you start a company, you always wonder who will carry it on?. I was not going to hand it off when it was deteriorating post-bubble. The time is right to do it now.  We’ve got it stabilized, and just had a wonderful growth quarter. We generated another big pile of cash despite what the GAAP numbers say.  We are very fiscally sound.  We’ve got the cash to play long-term with $4.4 billion in the bank.  I think we are on the right track, the board thinks we are on the right track and customers think we are on the right track.  Twenty one percent growth is not bad.

The timing fit me to a tee and it was my call. I think I can be the chief evangelist full-time.

2.  Schwartz was predictably upbeat, claiming the entire future growth of the Internet and corporate networks as Sun's opportunity:

We view the opportunity as quite literally planetry in scope.  Demand for what we build, for network innovation, will never decline as long as I am on this earth.  Not even the oil industry can look at unlimited demand [like that]. 

3.  Asked if Sun was to embark on a major stratgey shift, Schwartz answered:

No. Here is our vison: The network is the computer.