Channeling Steve Jobs to Turn Yahoo Around

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Yahoo has been a bit of a revolving door lately. This week saw the departure of five board members including the CEO, three new board members, and an interim CEO, that actually has more pertinent industry skills that the full time CEO who left.  While Yahoo is certainly a mess with all of this change, it is nowhere near as bad off as Apple was when Steve Jobs got in. This suggests that much of the process Steve Jobs used to turn Apple around might work for Yahoo.  

Using the Steve Jobs method there are three basic phases to a turn around.

Phase One: Cut to the Core Promote the Rest

When Steve took over at Apple he hated the products and it was a mess with failed or failing ideas from everyone who had been running the company over the prior decade. He did two things, he cut the company down to a set of core products and initiatives, and then he promoted those products heavily, even though he thought they too were crap. His reasoning was that if he didn’t get people buying what they had, the company, which was months from going under, would be unrecoverable. It would simply bleed out.   

The reason to cut back sharply to the core is to create a solid foundation you can rebuild from. If a company is very complex and the CEO doesn’t understand much of the complexity then they spend their time patching, but never actually moving the company forward. That was largely what his predecessors had gotten stuck doing, they were spending so much time dealing with massive numbers of critical small problems they could never get to the big ones. Jobs cut the company back to their consumer PC lines, and then drove them to make them profitable.    

From that core they were then able to add the iPod and the rest is history, but had he not cut to the core first, he likely would have never even seen the iPod opportunity let alone been able to resource it to success.  Microsoft, for instance, struggles far more than Apple largely because it has reached a level of complexity where Steve Ballmer can’t focus on major initiatives because he is too busy putting out lots of critical small fires.   

Phase Two: Bury Hatchets Look for Partners

When a company gets into trouble it is often surrounded by large numbers of conflicts and exists in a business world where it is largely isolated. Vendors are concerned about getting bills paid, investors are running for the hills, and enemies are starting to think about going in for the kills

Jobs, and this was clearly not consistent with his personality, picked his biggest enemy and turned him into an asset. He convinced Bill Gates that Microsoft needed Apple enough so they would invest $100 million in the company. The money wasn’t near as important as the vote of confidence was, because it opened up investor wallets, made vendors more comfortable with Apple in the long term, and gave the impression that Apple was on the mend. That one deal, which had to be incredibly painful to cut, changed the perceptions of a critical mass of people from thinking Apple would fail to thinking it wouldn’t and perceptions later clearly became reality.

He also quietly started working with Intel, a firm he was actively marketing against, and got access to resources that exceeded what Dell and other Intel partners had access to, without actually spending a thing. Andy Grove later regretted this but that’s another story.  

Phase Three: Do Whatever it Takes

This is the part I think most CEOs don’t get. Jobs was willing to do whatever it took to win. For instance, after hearing about an amazing new MP3 player that HP was going to come out with he called Carly Fiorina and gave her a unique proposition. He convinced her Apple wasn’t interested in iPod retail sales, arguing that HP was far better, and that he would allow custom iPod colors (they launched with an HP Blue prototype), and transcoding to the Windows Media format in exchange for HP staying out of the market with their own offering for years. He then refused to approve any color other than white (arguing that iPods had to be white), and turning down the request for transcoding. Finally he priced under HP’s cost for the iPod forcing them to abandon the partnership but with the clause that locked them into not bringing out their own product intact. 

Later they came out with iPods in a variety of colors (though never HP blue) and locked in their dominance in the MP3 player market. This was very risky (HP could have sued them into next century but didn’t or voided the contract), but it paid off massively and the result was the most highly valued technology company that had ever existed and Jobs winning CEO of the decade.

Wrapping Up: Yahoo

For Yahoo’s new CEO, he’ll first need to cut Yahoo back to a set of products and offerings he can manage and build from and then make sure they are promoted to a level that optimizes the revenue/expense/profit lines.  

Yahoo needs partners, and rather than suing Facebook, they might instead look to see if there is anything they could do with the company, instead of jointly making attorney’s rich. He may want to strengthen the Microsoft partnership or chat with Google to see what those two companies could do together. He could also meet with advertisers (likely already is) to craft unique offerings that give them more of what they want.

Finally he’ll need to do whatever it takes to put Yahoo back in the game.Controversy in media (driving his folks to get the news first), creativity in offerings, and creative ways to get advertisers to see Yahoo as their best value for certain targeted segments. In short he’ll want to replace the people who say “can’t” with those that instead say “hmmm, this is how it could be done”.    If he does that, Levinsohn, who actually looks rather good on paper (some disagree) for this effort, could turn Yahoo around. If he doesn’t he probably won’t be any more successful than his two predecessors.  




Edited by Brooke Neuman

President and Principal Analyst, Enderle Group

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