It appears Marissa Mayer’s tenure is coming to an end at Yahoo! as the company still struggles to find a place in the world reports Forbes.
“The cardinal sin of the computing industry is the creation of complexity,” is quote attributed to Oracle founder Larry Ellison and often repeated at the company’s Open World forum which I’m attending at the moment in San Francisco.
For the computer industry that complexity has been a very profitable profitable business with everything from the local computer shop through to the big technology vendors and integrators.
One of the biggest beneficiaries of that complexity were the salespeople, big complex enterprise deals meant big commissions.
With the shift to cloud services and apps, those fat margins and commissions have evaporated, leaving the lucrative old models of business stranded. IBM are probably the greatest victim of this while Microsoft are, once again, showing the company’s ability to evolve in the face of a fundamental market change.
For the salespeople the days of fat commissions are over, with thinner margins it’s not possible to pay big lump sums for winning contracts.
The simplification of the computer industry is changing the fortunes of many IT businesses, but that change isn’t limited to the tech sector or their salespeople as those fundamental changes are rippling into other sectors.
A constant claim by Internet of Things evangelists is that the IoT will squeeze inefficiencies out of businesses and this is exactly what we’re seeing with cloud and mobile based services like Uber and AirBnB.
If you’re in a business that profits from market inefficiencies then it might be time to figure out how to survive in a low margin environment. The challenge facing companies like Oracle is one whole industries are now having to face.
Twitter’s new Executive Chairman finds the service intimidating to use reports the Wall Street Journal.
With a distracted CEO juggling the Initial Public Offering of his other business, it’s hard to see how Twitter is going to get the focused management and supervision it desperately needs to maintain its valuation.
“In all my issues at Google, I knew I had no idea what to do, but I knew that I had the best team ever assembled to figure out what to do,” says Google – and now Alphabet – chairman Eric Schmidt in an interview with LinkedIn founder Reid Hoffman.
Schmidt’s interview is a great insight into managing fast growth companies,”almost all small companies are full of energy and no process”. While he reflects on his early days at stricken companies like Sun (“tumultuous and political”) and Novell (“the books were cooked, and people were frauds”).
Moving to Google he found all of his management skills exercised at a company with a unique culture and rapidly growing headcount.
One notable anecdote is how Larry Page kept a 100k cheque from an early investor in his pocket for a month before cashing it.
Compare and contrast that attitude with the current startup mania where by the end of that day a media release would be issued proclaiming the company to be a new unicorn on that valuation.
Schmidt’s view, like many others, is that the real key to success in the company is the people. This echoes the interview with Meltwater’s CEO earlier this week where Jørn Lyseggen described how the key to starting a venture in a new country was the first five people hired.
One great takeaway Schmidt has from his time at Google is how great companies are created through the Minimal Viable Product method, “the way you build great products is small teams with strong leaders who make tradeoffs and work all night to build a product that just barely works.Look at the iPod. Look at the iPhone. No apps. But now it’s 70% of the revenue of the world’s most valuable company.”
Ultimately though Schmidt’s advice is to make decisions quickly, “do things sooner and make fewer mistakes. The question is, what causes me not to make those decisions quickly.”
“Some people are quicker than others, and it’s not clear which actually need to be answered quickly. Hindsight is always that you make the important decisions more quickly.”
“The next day I quit my job. I remember walking home that night and thinking I felt incredibly privileged to be living right at this point and I was going to see how the internet would unfold.”
Jørn Lyseggen, the founder and CEO of media monitoring service Meltwater, was describing his first encounter with Netscape 2.0 in 1995 while working on artificial intelligence at the Norwegian Computer Centre.
Today, Meltwater has 1,100 employees in 41 cities across 21 counties and Jørn spoke to Decoding the New Economy in the company’s San Francisco head office last week.
Having quit his job as a researcher, Jørn became what he describes as ‘an Internet evangelist’ in the early days of the Norwegian web and founded a series of online businesses including Norway’s first web mall.
The fourth business Jørn set up was Meltwater which they originally operated out of a shed in a disused shipyard, Shack 15. “We got free office space from one of my former clients,” he recalls. The old customer also gave them 25 old computers which they patched together to become the company’s first server farm.
Building the world’s smallest software company
“Our aspiration originally was to create the world’s smallest software company,” recalls Jørn. “We wanted to be four engineers creating the most sophisticated technology in our industry then we would sign up resellers then sit back and watch our revenue go through the roof.”
At the time media monitoring was largely made up of clipping services that would hire armies of contractor to physically cut and paste newspaper articles.
“What we wanted to do was build software that could keep track of everything that was published online,” Jørn explains. “When news started to come onto the internet then you could start to analysie it automatically. We thought there would be a better way to do this with algorithms and software.”
The best laid plans
It turned out however the plans to have a small software company didn’t work out. “We poured our heart into our technology for the first year and then we got really excited when we signed up two really respected resellers in the Norwegian market.
“They presented to 1500 companies, which is a really big number in Norway, and the results were devastating with 1499 ‘no’s and one maybe.”
For Meltwater’s founders it was a time for re-evaluating the idea. “That was a pivotal point in the company as we had to ask ‘is this a business?’. What we realised was that we were too focused on the technology and what clients are really worried about at the end of the day are the pain points.”
“Once we did that switch we started to get business and then we grew very quickly so instead of being the smallest software company in the world we set out to become the biggest in our industry.”
From there the spread across Northern Europe and the UK, “every time you start up in a new country it’s like starting a new company.” Jørn ruminates. Strangely it was Germany that proved to be the most difficult to break into. “It’s counterintuitive, you’d think the shared culture would make it easy for a Norwegian company. It wasn’t.”
The big move though was the United States, on the basis that any company with global aspirations has to be in the world’s biggest market. “Norway is a small country, we used to joke there are bus stops in New York with a bigger population than Norway.”
Jørn was surprised to find the US was an easy market to break into than the United Kingdom or Germany, “I love their open mindedness and the welcoming factor of the US culture,” he smiles.
“They are very open minded in the US, it’s a strength in their culture. In the US if you present something interesting to them they’ll accept it. The flip side is if they are open minded to you then they’ll be open minded to your competitors.”
Hiring as a key factor
Choosing the right people is the key to business success Jørn believes, with local hires being essential when expanding into foreign markets, “You need some local credibility.”
More importantly though is the importance of getting the right people early in the life of a startup business, “It’s all about culture.” He states, “make the first five to ten people the base for your platform.”
Having the right people also made it easier for his management team to delegate as executives focused on the international expansion. “We’ve got really smart young people working here, they don’t miss me when I’m not around,” he smiles.
“Back in the day it was considered you started a company because you couldn’t get a job,” Jørn laughs. “I’m the first to encourage entrepreneurship but it worries me when it becomes trendy.”
“It’s important that entrepreneurship doesn’t become too romanticised. Because it’s really hard work and most startups fail and most people have to work for years while barely getting by financially and it’s high stress”
“I never saw myself as a business person,” Jørn remembers. “I had a healthy scepticism to the commercial world, that’s why I became a research scientist because I thought it was a better use of my time.”
Becoming an entrepreneur
However the revelation of Netscape 2.0 changed all that, “it really blew my mind,” he grins as he recalls how he decided “the best way to be part of this was to be in my own business.”
Building your own business though is not an easy process and there’s tough decisions to be made. Jørn though believes that the hardest times running your own business are not when cash is tight but when the tough decisions have to be made, “sometimes you have to make calles that are challenging.”
For Jørn, he only sees more exciting times ahead as the internet evolves, “social is still in its early stage. A lot of companies struggle and worry that they haven’t figured it out, but the truth is most people haven’t figured it out.”
Paul travelled to San Francisco as a guest of Oracle
Last week at the AWS:Reinvent conference in Las Vegas, I had the opportunity to interview the company’s Global Head of Enterprise Strategy, Stephen Orban about where he and Amazon see the direction of the cloud computing market and how business practices are being reinvented.
Among the things we discussed was Orban’s seven best practices for a company’s journey to the cloud, gleaned from his own experiences in his AWS role of advising clients on adopting and his previous experiences as a technology officer at Dow Jones and Bloomberg.
Orban laid out what he thinks are the keys to success in a company heading to the cloud in his own blog post and during our conversation he expanded on his ideas which also very much reflect the changing role of the CIO or IT manager.
Supporting the C-suite
The first point is the IT department has to understand the business and align technology with the organisation’s objectives.
“Somebody who understands technology who can merge technology with the business needs” will be better able to win the confidence of management says Orban.
Doing that is the key to winning support from the executive suite Orban believes. Once CIOs have that trust from senior management it gives their teams the space to experiment with new ways of delivering value to their companies.
“The second thing is to provide training and education,” Orban says. “People tend to get a bit anxious of what they don’t know, particularly when it affects their jobs.”
In Orban’s experience, having informed staff makes them more open to change within the business, “with the transformation I went through at Dow Jones, most of what we accomplished was because of the people who’d been there a long term. They had the institutional memory but they were very open minded.”
Foster a Culture of Experimentation
One of the great benefits of cloud computing is how it lowers the costs of experimentation and development, “gone are the days when it cost hundreds of thousands of dollars, even millions, to try something.” Orban says.
Learning what works and fails is essential, he believes. But as long as there is executive support then a tolerance towards unsuccessful experiments will develop in the organisation.
Working with partners
Outside parties are essential to most organisation’s IT systems and Orban believes partner ecosystems have changed with the advent of cloud computing. “There’s a whole new breed of partners that have been going through this,” he says in citing ‘born in the cloud’ software developers and systems integrators who are changing how projects are being delivered.
Build a Center of Excellence
“Creating a center of excellence is, I think, one of the key practices any organisation should invest in. You want a body of people who can institutionalise best practice within an organisation,” observes Orban.
As cloud services take away the complexity of computer systems it becomes an opportunity for organizations to rethink boundaries between the IT department and business operations.
Move to the cloud
Given Orban’s employer it’s not surprising he sees cloud computing as key to a company’s transformation however he admits that few organisations will make the jump straight into cloud services.
“Hybrid will be a part of every enterprise’s journey. Any company who’s been doing IT for any period of time will have existing investments,” he says. “Our view is that we will make it as easy as possible to create that bridge.”
“We do believe in the long run that enterprises will find they become so much more effective over here (in the cloud) they will move in that direction.
A Cloud-First Policy
Once an organisation has its cloud strategy and experimentation culture in place then having a ‘cloud first’ policy, “it reverses the burden of proof away from ‘why would you use the cloud?’ to ‘why wouldn’t you?'”
While Orban is emphasising the Amazon Web Services view of the world where ultimately all business computing will be done on the cloud – preferably their cloud – his views illustrates the change facing businesses as they implement online technologies.
For most, the availability of easily accessible cloud computing services is an opportunity to rethink their business processes and how organisations can deliver the best products quickly to their customers.
As announced two months ago, Google quietly morphed into Alphabet after stock trading closed on Friday. The Wall Street Journal describes the new structure and the rationale behind it.
It’s hoped putting the smaller, more speculative operations into a separate business units from the company’s core search and advertising businesses will allow managers to be more focused on the business while giving more flexibility to the newer divisions.
One of the major reasons for Google’s reorganisation is the company had become too unwieldy with the WSJ story quoting one former employee who illustrates the problem.
Many entrepreneurs believe “it’s easier to do their business outside Google rather than inside,” said Max Ventilla, who left Google in 2013 to found an education startup. “There’s a lot of red tape for head count and money to get through at Google.”
At the moment it’s not clear that headcount is going to fall under the new structure and certainly some more revisions to the core business are going to be needed to get focus back for products like Google Docs and the local business search operations which have been drifting for some time.
Over the next two years we’ll see how successful the new structure is. If it works, then Alphabet could be showing the new model for corporate conglomerations.