Category: Management

Business Week writes:

eBay’s revenues rose 62%, last year, to $1.1 billion. That’s its cut from nearly $15 billion in gross sales from member auctions of everything from baseball cards to catering trucks. Profit growth has been accelerating, too, as earnings jumped 172% last year, to $249 million.

eBay’s success comes as much from its 31 million active buyers and sellers as from executive brilliance. Members not only decide for themselves what to trade, they also handle all the inventory and shipping, and much of the commercial interaction — which explains the company’s juicy 80%-plus gross profit margins. The secret, says CEO Meg Whitman, “is the community of users who have built eBay.”

[Meg] moved the site beyond its auction roots, urging merchants to sell at fixed prices as well as at auction. Fixed-price trade now accounts for about 26% of the site’s gross sales, attracting new kinds of buyers and speeding the pace of commerce on the site. And last year, eBay bought payment processor PayPal, whose billing software lets buyers avoid sending checks in the mail and results in instant payments to merchants.

Continue reading eBay’s Success

Stewart Alsop lists the contributions amde by Steve Jobs: Apple II, Macintosh, Laser printers, Pixar, Industrial design, OS X, iLife, iPod, along with the iTunes Music Store. Says Alsop: “[Apple’s] financial results have been mediocre, and some people wonder whether it can keep moving ahead. Based on what I’ve seen Jobs do over the past 20 years, I’d have to say that the company will not only keep moving forward itself but also keep pushing the entire industry along.”

WSJ writes about how “hit by downturn, tech firms are forced into tough choices.” It takes the case study of Handspring which eschewed its line of organisers for the unhedged bet on the cellphone/organiser combo. So far, the gamble hasn’t paid off.

Handspring quickly discovered its old business habits didn’t work in the cellphone industry, where mobile-service carriers control retail sales and insist on lots of special customized features. And demand for combination devices was slow to materialize.

Sales of Handspring’s new product, the Treo, have been sluggish, with about 180,000 sold since January 2002. The global market last year for Treo and its rivals was $1.4 billion, according to International Data Corp. — compared with $3.1 billion for the old-style organizers that Handspring tossed aside.

It is a choice we all face as managers in tech businesses. On the one hand is a business which is stagnating but can provide steady business, on the other hand is the unseen future. Which path do we choose? (And choose we must.)

Ideas are aplenty in our lives, the question is how many do we actually execute on. I have flet this often in my life – the ideas get far ahead of our capability to make them reality. Thinking, dreaming up new worlds is perhaps the easier part, executing on these ideas and doing so as the right time is the challenge.

I have been feeling this as I look back over the past couple of years and the many ideas that I’ve had (and written about on the Tech Talk columns and the blog). At times, I find myself going back to something I had thought of a long time ago. Maybe then, the time for execution was not right. Something was missing. It is hard to say if now is the right time, but that’s a gut feel one has to rely on.

One such idea I am contemplating is the Linux Desktop. We have had limited success so far with our thin client-thick server solution. I am wondering if I didn’t make a mistake by not going ahead with an innovative Linux desktop built around the dashboard and RSS aggregator. Am thinking about it again. This time, there is a wider context to the idea.

I should have made a bigger bet on Linux and related services. I remember thinking many years ago about setting up a Linux Development Centre in India. Support is one of the biggest constraints in the adoption of Linux, and we could have addressed that problem by offering it from India.

There are many other examples. Thinking is easy – its only our imagination that needs to be exercised. Execution is the hard part – it requires us to do a detailed plan and have faith that what we are doing is right. At times, that’s the leap we don’t make, and the idea slowly slides away. The one nice thing about a blog is that at least one can read about all the ideas one had and didn’t implement!

Continue reading Ideas and Execution

Fortune writes about how times have changed for Amazon:

While most of American business is still sputtering, Amazon’s revenues, at $4 billion, are growing by more than 20% a year. Marketing, inventory, and warehouse operating costs, once so high they made old-fashioned retailers look efficient, are now so low that only Dell’s and very few others’ are better. Amazon’s operating profit margin, at 5% in the all-important fourth quarter, beat that of most retailers, and approached Wal-Mart’s 6%. And Amazon is generating so much cash–$135 million last year, rising to an estimated $300 million this year–that it just paid off 12% of its $2.3 billion debt. At a recent $30, Amazon’s share price is at a two-and-a-half-year high, making it one of the top stocks over the last five years, even taking into account its rise and fall during the bubble. It has outperformed Dell, Cisco, Microsoft, Wal-Mart, and GE, to name a few.

“In the physical world it’s the old saw: location, location, location,” Bezos says. “The three most important things for us are technology, technology, technology.” Amazon spent big on software development, but now its platform requires little additional investment. Thanks largely to its conversions to the free Linux operating system, technology and content expenses are down 20% in the past two years. “There just aren’t other companies that let a consumer order two out of what are millions of products in a warehouse and then quickly and efficiently, at low cost, get those two things into a single box,” Bezos says.

A related story looks at Bezos’ management style:

Hire smart Even for menial jobs, Bezos banks on brains. His fear? Mediocrity multiplies: A students hire A students, C students hire C’s.

Depend on data Good information trumps good judgments. Junior employees learn that with the right numbers they can outshine senior execs.

Make employees owners Stock options may be out of favor but restricted stock is not.

Blunt the boss Allow employees to make decisions without asking permission.

Bet on tech Technology gets cheaper while everything else gets more expensive.

Think long term Bezos ignores the critics and keeps firing away at his initial idea.

Continue reading Amazing Amazon

News.com writes about the emergence of Barry Diller as the “Net’s new poster boy” following his recent acquisition of LendingTree.

While many other CEOs have been complaining about the burst of the bubble, Diller, chief executive of USA Interactive, has been methodically picking up the pieces from the rubble.

He now controls Hotels.com, Match.com, and Expedia–which are all in the middle of the hottest growing areas of the Net.

Quote from an interview in the WSJ with Diller: “Firstly, we like fragmented businesses, and financial services is the essence of fragmentation. Second is businesses that are essentially offline moving online, that have characteristics that are advantaged in being in an online versus offline universe. Things like personals, dating, travel, information about cities, etc. Finally, we like businesses where the scale and leverage effect is easy to discern, where you can see that once you have sufficient level of activity, the scale affects are mighty. Those are the only lessons we intend to give anyone else.”

Jim Collins has authored two best-selling books on management: “Built To Last” and “Good to Great.” He now commands USD 1,000 a minute for his speeches. Forbes has more:

He spins out reassuring truisms: Companies should set especially ambitious goals. Chief executives don’t have to be charismatic to succeed. Those who put their companies first, rather than themselves, are more likely to thrive. Companies that make profit maximization their priority don’t perform as well as firms that live up to the core values of their founders. He preaches patience: A real turnaround can take seven years, and failing to “embrace that fact is one of the primary causes of chronic mediocrity.”Collins says it’s okay to enter a new tech market late rather than get there first, and that technology doesn’t assure greatness but merely accelerates it–soothing words for tech-shy chief executives.

Collins says that how a company measures its performance is critical. Sheer profit isn’t the best gauge, he argues; corporate greatness requires every company to isolate and measure the most profound economic denominator that best reflects its ability to make money. Less than 10% of companies understand their true economic denominator, he asserts.

Now Collins, at the urging of Intel Chairman Andrew Grove, is turning to corporate autopsies, studying why great companies relapse into merely good ones and why some fall all the way to mediocre.

Continue reading On Jim Collins

WSJ writes about Cisco’s efforts to root out inefficiencies in the organisation. For that, it needs another year of slow growth “giving the company a chance to make better use of its 35,000 employees.”

In a way, 19-year-old Cisco is learning how to run a real business. Its efficiency moves might be natural for older companies accustomed to economic cycles. But Cisco had never experienced such cycles: Between 1995 and 2000, Cisco’s revenue grew an average of 53% annually, an unheard-of rate for a multibillion-dollar company. Just keeping pace consumed all of Cisco’s energy, leaving little time for rules or reflection.

Changing that culture is slow and painful. Some of the most tangible results, such as new products, won’t be visible for another year or more. Mr. Chambers, who led Cisco through the boom, says the company deserves no better than a “C” for its transformation so far. He says Cisco today is evolving from a loose federation of start-ups that rewarded “speed at the expense of teamwork” and last-minute scrambling to grab opportunities. His goal: more internal cooperation to “avoid the diving catch.”

This is another example of a New Age company learning from the more traditional styles of management. Now, Cisco wants to focus on better leveraging its own internal resources rather than growing through acquisitions.

Continue reading Cisco learning to go slow

When HP decided to merge with Compaq, I was among those skeptical of the prospects of the merged entity. The history of big mergers in the computer industry had not been encouraging. So, it was with interest that I read this story in the WSJ which said that “elaborate planning is keeping the union on target”:

With an elaborate playbook of action plans and time tables, H-P Chief Executive Carly Fiorina has managed to succeed at the first chapter of the biggest high-tech merger ever: putting the pieces together. A chorus of critics predicted the deal would become stalled, like so many tech mergers before it, in a mess of technical and personal tangles.

Instead, using a methodical approach put into action months before the deal closed, Ms. Fiorina formed an elite team that studied past tech mergers, mapped out the merger’s most important tasks and then checked regularly whether key projects were on schedule.

H-P’s integration crew learned, for example, that during Compaq’s merger with Digital, some server computers slated for elimination were never killed off. In contrast, H-P executives quickly decided what to ditch and every week pored over progress charts with red, green and yellow markers to review how each product exit was proceeding. Red and yellow markers indicated a task was troubled; green signaled a task going well.

Now, just a year after the merger closed, H-P has shed numerous duplicate product lines and shuttered dozens of facilities. By last October, it had cut well over 12,000 staff — more than the 10,000 targeted for that date — from its combined 150,000 employees.

And by early this year, after just nine months as a combined company, H-P was approaching $3 billion in savings from layoffs, office closures and consolidating its supply chain. Its original target was $2.4 billion in savings in the first year and a half after the deal.

The punchline: “Fiorina says Tom Ridge has lunched with her several times in recent months, seeking ideas on how to merge the far-flung units of his Homeland Security Department.”

Fast Company has an article about superstar investor Roger McNamee, contrasting the “old normal” with the “new normal” in the context of investing and competing (link via Abhay Bhagat):

Old Normal: Internet Time: Measured in days, weeks, and dog years (for the business cycle). Absolutely everything was accelerated, from hiring to going public. Eighteen months was the magic number for major undertakings, from startup to ship, from funding to IPO. The bumper sticker was, “Stop for lunch and you are lunch.” Says McNamee: “It was a kind of hormonal reaction. There was so much urgency that every standard — for due diligence, leadership, recruiting, and investment — was relaxed.”

New Normal: Real Time: “The New Normal,” says McNamee, “is about real life — and real time. Getting things right the first time is more important than getting things done quickly.” That’s the opposite of the late-’90s mantra, “Fail faster to succeed sooner.” Everything — whether it be building companies or hiring top talent — takes longer in the New Normal. Even more important in the new time frame: Don’t waste your own time. Dedicate it to what you truly enjoy doing.

Old Normal: Grow Market Cap: The ’90s were all about fast money. Capital was quickly available and virtually free to businesses growing at exponential rates. (And it didn’t matter what was growing. Any metric would do: eyeballs, page views, or click throughs.) The logic was, spend to grow.

New Normal: Create Real Value: Today, it’s all about smart money. Capital is expensive, but it’s available to truly committed entrepreneurs who have rigorously developed business plans that demonstrate real positives in the near term. In the late ’90s, customers got a free ride, and capital underwrote everything. The new logic is, pay as you go.