Bob's Gutsy Leadership Blog

Yahoo’s Problem: Ignoring Reality and Doing What’s Familiar

Much has been written recently about the problems at Yahoo. When a new leader was hired in 2012, there was a lot of hope. This person was the 20th hire at Google and had helped that start-up become a raging success.

In 2012, Yahoo was an aging member of the class of early internet successes. Its products had become stale and growth was hard to come by. Clearly what was needed was an overhaul of Yahoo’s aging portfolio of well-established franchises that had evolved into high-usage but minimal-growth internet services, with virtually no focus on the emerging and enormous potential of mobile.

Instead, the new leader basically ignored the established Yahoo properties and went on a shopping spree for start-ups that looked like they might become the rage. Some 20 acquisitions were made at a cost of $2.8 billion. As of today, none of the acquisitions had been successful and Yahoo’s core business is failing, having basically missed the explosion of the use of mobile devices. Recent data shows Yahoo has a 1.5% share of mobile advertising.

So why was Yahoo’s core business left to stagnate while the new leader pursued all the start-up acquisitions? Here are a few reasons that I believe are operative here:

1.) If You Have a Hammer, Every Problem Is a Nail: Individuals like to do what has worked for them in the past, versus stepping back and learning about the problems in front of them. The head of Yahoo was a small company person, and when hired by Yahoo, decided to buy a bunch of small companies and ignored the key issue of rejuvenating Yahoo’s core products and capitalizing on mobile.

2.) Overconfidence Trumps Paranoia: People get seduced by success and actually begin to believe they know how to handle any situation. The litany of ousted leaders is full of examples of big egos that did what they wanted instead of what was needed. Andy Grove gave the business world the best advice I believe it has ever received: namely, only the paranoid survive. No matter how many business wins you have achieved, when faced with a new situation, you need to objectively identify and confront the key challenges.

3.) Forgetting About Your “Customers”: A leader of an organization can have many constituents that should be considered as customers: current and potential users of the organization’s products and services, suppliers, shareholders, employees, etc.   All decisions need to be evaluated from all of these perspectives. The Yahoo leader basically did the thing that was familiar (start-ups) and ignored reality.

In summary, at every juncture, a leader’s job is to analyze the current situation, develop a game plan for success, and execute with success.

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