I am frustrated to see a great company get destroyed like this.
Scott Thompson, CEO of Yahoo! says:
"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. "
In the background, unstated but assumed, is the theory of business "core competence". I believe the phrase was invented by by C.K. Prahalad and Gary Hamel in this May, 1990 issue of the Harvard Business Review:
Sometimes a great essay gets badly misinterpreted.
Since that time, there have been many, many books that have developed this idea. See "Strategic Management and Core Competencies: Theory and Application" by Anders Drejer.
Inspirational for this concept was what Jack Welch argued for while he was CEO of GE, during the 80s and 90s: the company must be in the #1 or #2 spot in any industry, otherwise they will leave that industry. This is taught to MBAs. I have the sense that most of them draw this lesson: shrink the company down and focus on whatever currently works. My concern is that this frequently means focusing on what works in the short-term, without much thinking about where growth will come from over the long-term.
The original essay by C.K. Prahalad and Gary Hamel can be interpreted in another way. This sentence sounds like it is describing Amazon.com, constantly inventing new services:
"A few companies have proven themselves adept at inventing new markets, quickly entering emerging markets, and dramatically shifting patterns of customer choice in established markets."
When CEOs have no idea what a company should do in the long-term, they claim that the company is going to focus "our efforts on our core businesses". There is absolutely no hope for a company that follows that strategy. Especially in technology, where things change quickly, one needs to be inventing the new, new thing, or one is dead.
I was recently lucky enough to be in a conversation with an ex-VC who, in the process of discussion, illuminated me on a variety of things, but one of the things that stuck was this:
"A company should never forget what its business is." Pennsylvania Railroad was at the top of its game, evaluated as the best run company in America, and was projected to have nothing but upsides. Within ten years of that point, they were bankrupt.
If you'd asked the executives of the company "What business are you in?", you likely would have gotten "the train business" as an answer, when in fact, the real answer was "transporting people and goods."
The train was, for all purposes, just the vehicle (in all senses) used to get that done. They focused on what they thought were their core competencies, and as a result, went the way of the Dodo.
I think it's interesting as it applies to Yahoo because, frankly, who knows what their core business is anymore, or what their direction is? Even with other semi-ambiguous "web" companies, you can usually target what, or how the company makes its money, and how they can expect to make their money in the coming months and years, but Y! has shifted gears so many times over the years, and made so many false steps into new markets, only to backpeddle out of those same markets just as quickly, I think it's hard for them, a rather successful business with a ton of money in the bank, to know where their money comes from tomorrow.
> I believe the phrase was invented by by C.K. Prahalad and Gary Hamel in this May, 1990 issue of the Harvard Business Review
A quick search of google will show you it was around quite a long time before that.
> Inspirational for this concept was what Jack Welch argued for while he was CEO of GE, during the 80s and 90s: the company must be in the #1 or #2 spot in any industry
Jack Welch took an industrial organization and mortgaged it. GE capital was an enormous percentage of the company when he left. Sure enough, a credit contraction caused GE to take a bailout in 2008.
He talked a great game, but their performance was exposed after he left.
"A core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers."
No doubt the phrase was used before then, but I've never heard anyone suggest that the very specific business meaning it has now existed before their article.
> There is absolutely no hope for a company that follows that strategy.
Well said. It may work or even be optimal in mature areas where there is little or no change. But in a technology company failing to adventure into new areas aggressively is death. Consider that once Yahoo was the 800lb gorilla and Google was the tiny startup. Where was Yahoo's Android? Where is their Google docs, etc? They've made lots and lots of small bets but they never made the big bets, at least, not successfully. Now they are too weak to make big bets, but they should make them anyway, possibly under a different brand.
jobs would cut the email export tools imap/pop access and start charging for every account.
now, back on topic, there's no silver bullet for anything. a company should be in the #1 and #2 of any market and while at there, try to invent new markets to keep being the #1 or #2 at something in the long run.
It was on topic, you shoved it off topic with your BS characterization. .me accounts have always had IMAP and POP access. They're also free. Try trolling again.
I remember hearing this when I was in business school, how in one case study a company "returning to their core competency" would be presented as a good thing while in another case study, "diversifying their business model" was also presented as a good thing. It took me a while to see that it all depends on context and ability to execute.
I'll refrain from making any comments about Yahoo's ability to execute.
Actually it depended mostly on hindsight bias. For those companies that succeeded, we invent a narrative and apply it backwards in time to decide that "core competencies" or "diversification" was the critical inflection point.
But it might have been due to the rise of the dollar against the yen, or the effect of an outbreak of gastro in the plant of a critical supplier in Guatemala, or because a supplier's supplier went bankrupt and your supplier is preoccupied trying to get money from the smoking ruins of a business you know nothing about.
Scott Thompson, CEO of Yahoo! says:
"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities. "
In the background, unstated but assumed, is the theory of business "core competence". I believe the phrase was invented by by C.K. Prahalad and Gary Hamel in this May, 1990 issue of the Harvard Business Review:
http://hbr.org/1990/05/the-core-competence-of-the-corporatio...
Sometimes a great essay gets badly misinterpreted.
Since that time, there have been many, many books that have developed this idea. See "Strategic Management and Core Competencies: Theory and Application" by Anders Drejer.
Inspirational for this concept was what Jack Welch argued for while he was CEO of GE, during the 80s and 90s: the company must be in the #1 or #2 spot in any industry, otherwise they will leave that industry. This is taught to MBAs. I have the sense that most of them draw this lesson: shrink the company down and focus on whatever currently works. My concern is that this frequently means focusing on what works in the short-term, without much thinking about where growth will come from over the long-term.
The original essay by C.K. Prahalad and Gary Hamel can be interpreted in another way. This sentence sounds like it is describing Amazon.com, constantly inventing new services:
"A few companies have proven themselves adept at inventing new markets, quickly entering emerging markets, and dramatically shifting patterns of customer choice in established markets."
When CEOs have no idea what a company should do in the long-term, they claim that the company is going to focus "our efforts on our core businesses". There is absolutely no hope for a company that follows that strategy. Especially in technology, where things change quickly, one needs to be inventing the new, new thing, or one is dead.