Harvard Business Publishing

Umair, What examples are there of companies that have incorporated radically new DNA from experimentation? Has this only come about with new management top down?

For Yahoo to even consider attempting to first assimilate a new culture, and then propagating it, seems incredibly difficult.

I worked at a sister company of Microsoft's for some time. One thing I learned was that it's not just the top management that can mutate the DNA. Once established, said DNA will fight mutation via multiple strategies. Some are overt such as undermining top management's attempts to mutate. Others are much more subtle such as the use of inertia to not move projects or attitudes along.

As an outsider to Microsoft, I suspect that the DNA is entrenched and that it is unlikely to be able to change. What served it's past has been discarded and the current, industrial DNA has too great a stake in it's self preservation to allow for change.

Microsoft has sadly grown more and more strategic inept the bigger it has become. Rumour has it that even Bill Gates couldn't get the message through towards the end of his tenure. Buying Yahoo! - or anyone else for that matter - will only escalate this trend.

If you look at strategy as a playbook, Google is constantly rewriting it forcing the competition to focus on coming up with defensive plays instead of allowing it time to come up with offensive - and gamechanging - moves of its own. In my eyes that's the real beauty of Google's strategy and execution.

I liked your counterexample on BGen a while ago:

"What if the NYT had bought blogger?"

What if Nikon had bought Flickr?

What if Nielsen bought delicious?

etc.

The only example I can give of a "fresh DNA" M&A strategy is Guitar Center buying TuneCore. GENIUS.

(almost as genius as the Voltron/wet towel comment...LOL)

The only talking point I buy is: buying Yahoo will increase the number of searches @ live.com + yahoo.com... in theory that should help with the search algorithms and consequently more relevant results.

Will that help? Yes.

Will that help in countering Google? To an extent.

But is buying Yahoo the best strategic move for MSFT at this time? No.

So what is?

Today, advantage is, to use an unintentionally ironic metaphor, in a company's operating system - not in its hardware. Advantage begins in the DNA. It's a function of the principles you use to organize and manage - not in what assets you own, what capabilities you have, or how many monopolies you had yesterday.

Yes.

Beautiful piece, Umar. Doesn't matter who microsoft buys, the point here is how microsoft thinks. A thousand lines were written about this topic, but nothing like your lines. Thanks!

I appreciate your blog, Umair, but I wish you would occasionally present an example of a good company that isn't Google. Google's great, but is it the only great company? I really don't know. Just wondering if you have any other examples.

It's a function of the principles you use to organize and manage

If one accepts that today's Web creates an organizing principle that is a real change from top-down strategy and decision executed in ways seeking to capture and lock up customers towards one that embraces " a dynamic two-way flow of power and authority based on knowledge, trust, credibility and a focus on results, enabled by interconnected people and technology", then it follows that organizations can enter into, engage with and benefit from an ongoing dialogue with those customers and other constituents that cedes power to them and will surely lead to trust and credibility. That trust and credibility will foster real constructive and effective feedback from customers and constituents on an ongoing basis (instead of frustration, outrage, and abandonment), and help the organizations use that new "DNA" to grow capabilities with respect to responsiveness, innovation and effectiveness.

Umar, I 've been following this blog for a while and notice you keep coming back to Google. What if Google's success was a lucky shot at the right time (see MS-DOS in '81) and the 'we're not evil' stuff is just a marketing moto with little substance?
I am just saying 'what if'...

So can we just forget about Google and look how this new strategy or new DNA has benefited other companies? And then just refer to their success against Microsoft or Yahoo's demise (if there is such thing).

Umair,

Thanks, as always, for the thinking and conversation starting.

I have just one small chicken bone to pick with you. You write: "For example, Yahoo invested heavily to build a brand - Google, as we know, didn't."

I think you're doing the discipline of branding a big disservice here by confusing it with one of its optional tools, advertising. In so doing, there's a potential to miss a much bigger role that branding plays at Google and should play at any firm or organization.

No, Google hasn't mounted big ad campaigns with people yodeling as they run naked to jump into hot spring pools, but Google has invested heavily in branding by doing the very things you point out. They've invested in the discipline and the rigor to maintain and deliver a vision. At its core, that's what branding is. And often the most expensive part of successful branding is the cost associated with taking a pass on something that's not true to your brand vision and values.

Happy branding (whether you advertise or not).

"Today, advantage is, to use an unintentionally ironic metaphor, in a company's operating system - not in its hardware. Advantage begins in the DNA. It's a function of the principles you use to organize and manage - not in what assets you own, what capabilities you have, or how many monopolies you had yesterday."

That's it in a nutshell. Management innovation is what will make or break the companies of the future. That's where the true strategic advantages lie.

In your opinion Umair, what do you think Microsoft should be doing to "turn the titanic around" and cultivate a new culture of innovation?

I agree completely with the premise and I'm glad it's being discussed. Microsoft's buy don't build (read invent/innovate) attitude permeates every inch of their corporation. Take Vista for example. At what point are they going to stop editing Windows 3.1 and start from scratch? The memory requirements required to run the OS optimally are staggering and reflect a design/development philosophy that refuses to acknowledge the best of Windows yesterday doesn't necessarily translate to today's market.

While Google may have its faults being open to suggestion from users isn't one of them. If anything the company's constant experimentation can seem at times frivolous. While Yahoo! is looking to buy a widget, Google is out trying to invent a widget that's ahead of what's available. Apple recently opened the door to this on a grand scale with its iPhone apps developer toolkit. Steve Jobs just unleashed what I believe will prove to be another industry defining practice (cooperative development commerce) with an army of developers whose sole motivation is to build a cool app and make money in the process.

And in the end it's all about attitude. Microsoft and Yahoo! are made for one another. I hope they end up married and start looking for side-by-side plots.

another great topic, Umair

viewed from a strategic risk and control point/barriers of entry perspective:

- the control point in the industry used to be focused around standards i.e. windows and office, which locked competition out.

- now, the control point is the search experience, which google dominate (and have fortified their business model - and btw STILL continuing to gain market share!) - this is an important control point because of network effects - msft is locked out

- google being savvy realized MS Office as a major control added to msft's pain by releasing google apps (free) - not because of revs, but precisely because of the control point (and undermining it)

- msft has the wrong strategy. By trying buy yahoo they're continuing to play into google's hand by reinforcing search as a pivotal control point. If msft really want to change things - they need to eliminate search as the pivot. How do you do that? very simple! OPEN SEARCH UP. Use this control point to your advantage. Join forces with wiki open search project, yahoo search etc and create a value-network of open-search. There's only one thing you can do to defeat a network effect as a lock-in control point - that's a value-network - This is precisely what google did with FB - created the openSocial value network (and facebook reacted!) - the value-network acts as the dominant control point.

my $0.02

Even though the post is primarily meant for strategists, i'd like to add something from a user standpoint.

Be it flickr, del.icio.us or RightMedia; has bringing these brands under the Yahoo umbrella altered the overall user experience in anyway? I dont think so. Not for me atleast. I see it as a pretty transparent process. Though im not a big fan of Yahoo, im still glued to its other offerings..and im sure there are zillions out there like me who share the same thoughts.

If its strategically not a good move, then its not bad either. Microsoft has already successfully built a strong brand. Even if this acquisition turns out to be a disaster (and i have my doubts here) Microsoft is strong enough to take the hit. Microsoft has always been the centerpoint of monopolies and to some extent controversies too - and it has managed to weather the storm. If it wont gain anythign then it surely wont lose anything as well.

What do other strategists have to add from a user perspective.:)

There is a saying in sales that Microsoft should learn. "Take two nos then blow" otherwise you end up looking desperate, leaving a bad taste in everyone's mouth - like GM trying to attract smart car buyers when their stock is below $10 a share. These preferred customers do not want to buy products or use services that say dumb things about them. And Microsoft is getting dumb and dumber - which is why (if you believe in the Kraft Mac 'n Cheese maxim that younger kids want what the older kids have) more PC users are moving to Macs. You think someone's going to go around saying, "Oh yeah, I Yahoo'd it?" It's the wrong two syllables for all you name creation marketing gurus. Google has the strong Gs, while Yahoo is all soft with the ya and hoo. Who has the insight talent to create a new search engine in house at Microsoft - remembering that rapid growth new brands get that way by being fewer things to fewer people - then all the later adapters glom on and 'management' succumbs to the gravity of making it more things to more people, which is when the transition begins to mature earnings business. This is a job for strategic innovation, consumer insight and new product expertise. It sure will cost a lot less than buying Yahoo which will be a notch on Balmer's belt that will never fit around his waist comfortably.

The interesting irony here is that when Yahoo acquired delicious and flickr it was doing the right thing in terms of buying and injecting future forward DNA. Would companies like digg? or perhaps even small companies like Dubit http://www.dubitlimited.com/ in the UK... be the right kind of fresh thinking MS needs to pull itself out of the past.

Thanks Umair,
I still think that the future belongs to the best planners and strategists,microsoft is actually bloating search as pivotal to its acquisition of yahoo this is might be a generalized opinion for now do not forget the subscriber/users of yahoo and of cause the long standing innovative tendencies of microsft every ne wants to know the effect of this M/A, i think microsoft doesnt really want yahoo, and is trying to creat a hype that will enable microsoft go for the fledging smaller startups like diggs, its a good education on strategy,branding and advertising though to know whats next.

Thanks for the article Umair;

Steve Ballmer continues to insist that only roof hitting economics demand of Yahoo! led to this withdrawal. He carefully spun the web around share value, current market stake & money being pumped. What he elusively covered is the under-math of DNA strategy. He perhaps understood & acknowledged the mistake Yahoo! made in its take-off days. On the other hand MSFT may not be interested in the first place. Whatever be the reason, this buy-out DIDN'T really mean much to companies. But the action behind it will surely impact fragment companies & MSFT will re-claim its monopoly.

Thanks for the article Umair;

Steve Ballmer continues to insist that only roof hitting economics demand of Yahoo! led to this withdrawal. He carefully spun the web around share value, current market stake & money being pumped. What he elusively covered is the under-math of DNA strategy. He perhaps understood & acknowledged the mistake Yahoo! made in its take-off days. On the other hand MSFT may not be interested in the first place. Whatever be the reason, this buy-out DIDN'T really mean much to companies. But the action behind it will surely impact fragment companies & MSFT will re-claim its monopoly.