Tag: Change

Categories
Entrepreneurship

Building for Change

One of the themes that everyone is required to contend with today is change. Change is inevitable and necessary in these times. Radical changes are being forced upon us and the world is adapting rather quickly to these changes. 

Humans hate change!

Change in itself is not something that we take to, naturally. Humans tend to push back to change. It is our natural reaction to it. 

Having said that, we have been subjected to rapid changes. The second world war was the starting point.

Aviation, automobiles, television, food processing and several others. There have been consistent changed hurled at us and we have changed ourselves to adjust to those changes. Each of these has changed our lives in meaningful and irreversible ways. These are important and critical to our comfort and our productivity. Also, they have spawned several new businesses that would not have been possible before their introduction.

Think about it, 10 years ago you could not have imagined pulling out a slab of glass from your pocket and summoning a cab. Today you cannot imagine a world without it.

Over the years, there are several changes that the world has seen. Over the past 3 decades, the world has been in a paradigm of accelerated change. The only difference with the current situation is that this change is being thrust upon us rather than chosen by us. 

Startups are created and thrive at the cutting edge of change. If you look at the graph above, each jump was accompanied by pioneering companies that took advantage of that change. The last time such a change was brought upon us was when the smartphone was unleashed. Back in 2007, the world was a much different place. Since then, smartphones have not spared any business. From retail to transportation; from supply chain to finance; everyone had to bow to the power of the smartphone and the cloud.

The wave swept the world in a matter of 7 years and everything changed forever. So much so that the next world war will not be fought on a battlefield but the internet.

The current pandemic is unprecedented in our lifetimes. Also, it is taking place at a time when we have the ability and the technology to make changes at unforeseen speed. This is the time to get on the next curve.

Smartphones reached maturity (~80% market penetration) in a matter of 7 years. The revolution that this situation is going to unleash will reach maturity in a matter of 3 or 4 years. There will be winners who will emerge from this and their fortunes will turn in a very short period. 

To illustrate this – Temple Run was a company founded by a couple who operated out of their bedroom. The game was launched in 2011. In 2014, the company had over a Billion downloads and generating Millions in revenue. Not bad for 3 people. There was never a game, before 2011 or thereafter that has been this successful in such a short time and with so little resources.

The current situation can give birth to equivalent businesses in certain industries ripe for change. Any thoughts on what those changes are going to be? Most would say video-conferencing. But no.

The industries that are currently at the throes for radical change and whose future no-one knows are Real Estate, Travel and Tourism, Automobile, Education and Healthcare, amongst others. Each industry is broken in their unique way. The pandemic has broken them. They are going to be altered radically by the changes that this pandemic is unleashing. 

Instead of going ahead and building on business models which existed 5 years ago; the questions entrepreneurs should be asking is which business models would be thriving in 5 years? Where will this settle?

Categories
General Thinking

Change

Status Quo is a very powerful thing.

Have you ever heard anyone tell you that they are enjoying the hunt for a new job? They might realise that a change is necessary and important; nevertheless they would not enjoy the process. There is a certain inertia in the way things are. Change implies overcoming that inertia and changing direction. This is inherently a hard thing to do.

People hate this process; people hate change.

When a bridge falls, you just see the change happen on the day that the bridge falls; but the change has been in the works for a while. The cracks were forming for a period of time, the stresses were building, the structure was weakening; it is just that you did not have the ability to see it happening. You see the final outcome and hate the outcome.

Many people notice change when it finally arrives at their door. They think, the situation changed overnight. Change rarely happens overnight. Change has to overcome inertia and then arrive to be. Change is usually a long time in the making. It is our ability to perceive this change that is weak.

Therefore people are rarely prepared for change.

Strength had to transform into weakness and weakness into failure for the bridge to fall. While most of us notice the second part, we do not notice the first part. Change is persistent.

Most of the startups are trying to get into areas that are not traditional. They are trying to do things that have not been done before. This means that they need to change the behaviour of their customers. It is wrong to expect this change to arrive when you seek for it to arrive. It will be a gradual process beginning with taking the inertia out of the system.

Set a goal, pursue it, seek it out. Initially, it may seem like nothing is happening. Then slowly but surely, change will become visible.

Categories
General Thinking

Yahoo! – The Upside

A lot of ink has been spilt on the many mistakes made by Yahoo. How the company refused to buy Google or Facebook when the opportunity existed. Yahoo might in fact be a story of many missed opportunities. But those misses did not really define the failure. Yahoo failed because of a series of poor decisions and a company culture that did not permit it to move forward.

The implicit assumption in all of the criticism is that Google would have certainly gone on to become the company that we know today. Yes, perhaps there would have been one less competitor to deal with.

Those of us who adopted and started using Google did so because its simplicity and precision. Do you really imagine that Yahoo! which was always a portal, would have purchased Google and retained a blank white page with a box?

Cultural Deceit

Yahoo failed because of the things that made it successful to begin with. It was launched as a directory service and then went on to adopt the portal model. For whatever it is worth, it worked very well for them in the late 90’s.

The linked post on stratechery which talks about the development of culture.

Culture does not beget success but it is the product of it

When a company does something and it works out for the company, it becomes a formula. The people who join the company hear the same stories and do the same things.

An employee who joins Marriott hears stories of awesome customer service which helped them retain customers, got someone promoted. The formula to get ahead becomes, providing awesome customer service.

Yahoo was a portal and wanted to continue to survive in that paradigm. It was just much easier to sell the idea to advertisers and generate revenues through multiple channels. Google went with income from ‘Search’ only. Honestly, the good boys at Google did not want to do even that! Eric Schmidt had to wrestled them into advertising.

Yahoo’s culture did not allow them to adjust to the changing nature of the web. Much like Google finds it hard to adjust ‘search’ to the demands of smartphones. Facebook by comparison found it extremely comfortable adapting to mobile.

Mergers and Acquisitions

Yahoo may not have bought Google or Facebook, but they bought often and bought a lot. Here is a list of all of the M&A that Yahoo has been engaged in over the years. You may notice that there are a list of 114 companies there. In the space of 18 years, that is an average of 6 per year; or one every alternate month! Number deceive in the absence of context; they made 23 off those in 2013 alone. An additional 19 were acquired in 2014.

Yahoo made big acquisitions in the 90’s that did not pay off. GeoCities, Broadcast.com (founded by Mark Cuban) and Overture Services were all multi-billion dollar acquisitions which went nowhere. Flickr still survives and could have easily been Instagram, but is not.

I am sure had they acquired Google and Facebook, they would have been equally lost in the quagmire that was Yahoo. Throwing everything into a portal and melding it into one was not what was needed, but Yahoo could not help but do that.

Marissa Mayer kept deflecting criticism by acquiring one company after another. She closed 5 deals in Jan 2014 alone. When Steve Jobs went back to Apple he figured out the soul of the company and let go of everything else. Marisa Mayer did exactly the reverse in the case of Yahoo, kept everything and added more garbage.

So what is the upside?

For starters thank Yahoo that they did not acquire Google for $1 Million, you would probably be using bing today! Also, you might have been using Google+ had they ended up acquiring Facebook.

Yahoo redistributed 10’s of Billions of dollars to many startup founders through acquisitions. These founders went on to invest in other startups and created the startup eco-system that exists today. This is by far the most critical contribution that Yahoo made. This alone contributed significantly towards changing the trajectory of investments in startups.

Yahoo by itself might not have been a hugely successful business. A combination of cultural undercurrent and poor leadership ran the company into the ground. Having said that, Yahoo has made contributions that are valuable.

Not buying Google and Facebook are one amongst them.