Quickly: It's good for Microsoft that it didn't buy Yahoo -- now it has to reform itself.
Steve Ballmer unintentionally dodged a bullet today when the Yahoo/Microsoft deal collapsed. Yahoo + Microsoft would have been a disaster -- the best and the brightest from Yahoo would have gone to Google, the culture clash would have been destructive, it would have put Microsoft back in the sights of the regulators. And Yahoo wouldn't have helped Microsoft with its biggest task at hand -- adapting to the emerging executable Internet software model.
The thesis: "...we have been turned loose in the industrial age equipped with the brain of prehistoric times." Simply stated, most human beings are terrible at managing complex systems. Dorner's students run a model of a small fictitious African village -- changing variables like cattle stocks, food stores, arable land. Invariably the students kill off the entire "population" through their miss-planning
As it turns out, good managers of complex systems showed common approaches:
At the Forrester Marketing Forum in LA, held on April 8-9, I gave a short presentation on my first two months of blogging. Many of the marketing executives in attendance are urging their CEOs to blog -- I thought my early impressions might prepare them for CEO reactions. Here goes:
Number One: "No one is reading my blog -- my out-sized ego can't take it." Prepare your CEO for a slow audience build.
Number Two: "Once a week? I'm too busy trying to run the company to do this." Yes, one post a week may only take a few hours -- but "...getting into the conversation" -- reading and commenting at other blogs -- what all experienced bloggers urge you to do, will double the time required.
Number Three: "The technology sucks." Blogging technology is shockingly crude. Get ready to give your CEO tech support -- even around the fundamentals like getting a picture into a post.
Number Four: "I'm not getting anything back." This is the corrollary to Number One. I often feel like I'm on a one-way phone conversation -- I talk, but there's no one listening. I lust for value-filled comments that will improve and drive my ideas. With time, they will come.
Quickly: Conventional wisdom glosses over China's limitations and problems.
Roger Cohen's starry-eyed China tribute in the New York Times is emblematic of the runaway euphoria surrounding that emerging economy. Threat to America…threat to Asia…ready to overtake Europe in the next 10 years…exploding – the gold rush place to be...450 million cell phones…becoming highly creative and innovative…the new model…the future.
I was at a Forrester event on Wednesday with 50 $1B+ CIOs and Enterprise Architects. When I asked the group whether they thought we were in a recession, three fifth's said "yes." Then I asked whether they thought their tech budgets would be cut this year-- one fourth said "yes." And one smart ass CIO said, "Hey my budget always gets cut -- nothing will be different about this year."
Quickly: Advertising's limitations will put a lid on the "free" economy.
Chris Anderson's article in the latest issue of Wired claims that Web economics will drive almost all content to be "free," funded by advertising, cross-subsidies, etc. While this is an obvious conclusion given Google's run, advertising has its limits:
Here's the lightning account of what's happened at General Motors over the last ten years. The company lead all automakers in cost. Even though its IT was outsourced, it ignominiously sported the most expensive IT costs per car. Enter Ralph Szygenda as CIO with the charter to fix the mess. Ralph (along with then CEO Roger Smith) realized that they had to change an out-of-control decentralized culture in which every brand did things their own way. So Ralph didn't focus on tech -- he centered on standardizing process -- designing, engineering, manufacturing, and selling vehicles the same way, all over the world. The results have been amazing: costs down, quality up, speed increased. With a single process language the company can now design a car in China and build it in Detroit. It has gone from total decentralization to global in the space of a decade -- an amazing achievement for an organization of its size.
Under Six Sigma, companies gradually improve process to enhance the quality of their products. With Social Sigma they use feedback from social networks to improve products.
Two great examples.
1) Credit Mutuel, the second largest retail bank in France, has been drafting its customers into product improvement through a program called, Si j'etais banquier -- "If I was a banker." The bank has recorded more than 50,000 suggestions, e.g., "If I was the banker, I'd explain the fees in clear terms." and recently let customers vote on the top 30.
2) GM's Fast Lane blog carries some amazingly straight-up conversations about GM's cars and trucks. Bob Lutz, the company's chief designer, uses the blog to hear firsthand from customers about design, quality, and product problems.
Product design and R&D will become much more of a continuous conversation -- not a black box, "Here it is!" process. Products will be revised under much tighter schedules, with obvious product errors corrected in new versions.
1) Google gets the best and the brightest from Yahoo. Why? Compensation. Microsoft, in a titanic mistake, eliminated stock options as an employee incentive early in the decade, replacing them with much less lucrative and leveraged restricted stock. If you're a hot programmer at Yahoo, you'll get options at Google -- not at Microsoft. Aside from compensation, Google's culture, speed, lack of bureaucracy, location, lack of legacy will be big attractors of talent.
2) The confusion factor. Microsoft has never acquired or absorbed anything as large as Yahoo -- unlike Cisco it has no culture or processes around large-scale integration. Microsoft's tight programming ethic will be naturally suspicious of Yahoo and its culture of media and advertising. When the inevitable integration plans are drafted, MSN and the search gurus at Microsoft will defend turf. In a market defined by a quick pace, Microsoft will take years to get this integration right.