Yahoo and Yang are (were?) in big trouble

Note: I wrote this on Thursday before Microsoft's latest bid for Yahoo; it's a follow-up to a post I wrote six months ago. I have two comments on Microsoft's offer: 1) It's aggressive and it's a sweetheart deal for Yahoo's shareholders; I think Yahoo's board will accept it; and 2) nevertheless, the issues I present are the same; it just becomes Microsoft's problem.

It's been seven months or so since Yahoo chief and co-founder Jerry Yang replaced Terry Semel at the helm of the ailing internet giant. At the time, I pondered the obvious question: Can Yang fix Yahoo?

For the record, I thought the board acted rashly in appointing Yang--a relatively inexperienced executive--to perform what would clearly be a challenging turnaround. I didn't think he had the experience to pull it off.

At the time, I thought that Yang--a visionary--wasn't what Yahoo needed. I thought Yahoo's problem was largely failed execution and missed opportunities in search advertising that allowed Google to leapfrog its more mature rival.

At this point, I'm even more convinced that Yang was the wrong choice. But I think the problem is bigger than missed opportunity and failed execution. The company does indeed need a new vision. And it needs a CEO who's capable of articulating and selling that vision down through the ranks and ensuring everybody's goals are aligned.

That's a tall order, but it can be done. Lou Gerstner did it at IBM, and that was no walk in the park. But Jerry Yang is no Lou Gerstner.

In all fairness, Yang does appear to be trying to do the right things. He just doesn't appear to be succeeding. Here's a summary of the results of his efforts:

Jerry Yang

(Credit: Yahoo)

Vision and strategy
To date, Yang has recommitted the company to its original goal of being the No. 1 portal that delivers the largest audience for advertisers. Fine, but how he plans to achieve that with Google out in front and the Internet continuing to mature and fragment is anybody's guess. Just slugging it out with Google and all the other sites drawing everyone's attention isn't going to cut it.

Operational execution
Internet advertising is a zero-sum game, and it's not at all clear how Yang intends to win it. Moreover, Yang plans to offset a token layoff with increased spending to further his nebulous plans. In the meantime, growth is slowing and profit margins are declining. The company's stock is at a four-year low and so is investor confidence.

Cultural change
Word has it that Yahoo's once nimble and entrepreneurial culture has turned sluggish and bureaucratic. The company's organizational structure and compensation system appears to be rewarding silo behavior that inhibits change. Yang's initial attempt at changing the culture--a program called One Yahoo--has understandably met with resistance and appears to be ineffective.

Here's what Yang needs to do to keep his job:
Lead the company through a process that determines a clear vision for the company, including credible strategies for achieving that vision and quantifiable success metrics.

As part of that process, he needs to determine what barriers to success exist inside and outside the company and implement a plan for overcoming those barriers and achieving the company's strategic goals. Part of that plan would have to include a process to drive cultural change, including goal alignment and behavior modification.

Yang has to crystallize and articulate all of this in appropriate forums for employees, investors, and customers. And he has to sell it. If he can do all of this before the company's key stakeholders lose their patience, he will survive long enough to see if his efforts are successful.

If not, I don't believe this board will be as patient as HP's board was with Carly Fiorina. He will be out before the year is up. This time, I trust the board will be more effective at finding the right chief for Yahoo.

[n3td3v]

Don't blame Jerry Yang for this mess, its all down to Terry Semel.

Terry Semel has ruined Yahoo, its a dreadful and critical disaster Yahoo is in right now.

Jerry Yang should be left alone in the blame game.