Yahoo, a twenty-one-year-old web pioneer, was acquired recently by Verizon for $4.8 billion. Once valued at more than $125 billion at the height of the dotcom boom, it passed on opportunities to buy Facebook, YouTube and Skype. The company has always suffered from identity confusion. It was never sure whether its business was search, media, email or advertising and it had tried and acquired companies in all of these segments.
Yahoo’s early investments in Alibaba and Yahoo Japan ultimately generated the real value of the company, and on two occasions, activist investors entered the fray and pushed for the company to separate, which eventually led to the Board deciding to sell off the core business. (Today, those two assets along with a patent portfolio are worth almost ten times more than the sale price for what we know as Yahoo.)
With the benefit of hindsight, we can learn a few lessons from this sad story. First, while it is hard to become a leader in a category, it is arguable that it is even harder to retain that position. Second, it is critical to focus on what you can do better than anyone else – if you are a utility infielder you will never become an MVP. Third, Boards of Directors must understand the market dynamics and fully engage with their leadership teams; they must question assumptions, challenge management, force tough trade-offs and decisions and hold leaders accountable. There can be no compromise when it comes to this kind of commitment to engagement.
Much is being written about the CEO of Yahoo, Marissa Meyer. Clearly, the company she inherited was damaged goods and her mandate was to sort it out, focus and re-energize it. Unfortunately, she did the exact opposite. And yet, according to the most recent article published in Fortune.com on July 27th, the expected severance package for Meyer is close to $122 million.