The shakeup at Yahoo is a fascinating reflection of the life and times of a tech company. Now many consider Yahoo a competitor to Microsoft and I have no interest in disparaging their company, but this is an interesting business case study and there is a lot of learn here from a strictly academic perspective. So ignore my MS bias and assume my statements are made from the perspective of a innocent bystander.

Seems like even before the shakeup, there'd been a lot of dissension over at Yahoo, which included an e-mail entitled "The Peanut Butter Manifesto" that came out last month. In it, a Yahoo senior exec called the company to task for (among other things) spreading themselves too thin across too many projects (losing focus) and pretty much giving a half-baked effort on their projects. He seemed to think the company lost its drive and was wallowing in their bloat. Interesting. There are two parts of the document that are interesting:  the diversification of interests and the operational efficiency of a disenfranchised workforce.  I've got a lot of thoughts on both, so I'll split them into two blog entries.

Judging the "Peanut Butter" effect as it relates to an overdiversification of business interests, it makes for an interesting debate. According to rumors that I recall floating around, Google is undergoing the same sort of internal scrutiny and recently shut down their Q&A service as a possible harbinger of things to come. While their success has been far greater than Yahoo, they are being critical about how they are execute on their charter. They also believe that they need to focus on the businesses that have the highest chance of success instead of the spaghetti approach of throwing a bunch of stuff against a wall and seeing what sticks. When Jack Welch was at GE, one was his most popular approaches to optimizing its success was to tell businesses "either you're #1, #2, or you will be #1 or #2 in an market within a couple of years. If not, out you go." Well, those might not have been his exact words, but you get the point. Welch was focused on markets that he could successfully compete in. For students of the BCG 2x2 matrix, he wanted to be a Star or a Cash Cow, but had no interest in the question mark or the dog. For those who have read Jim Collins' Good to Great, this sounds like the "Hedgehog" concept (fwiw, I really didn't like that book) in determining what you do best.  With the Yahoo memo, there was a suggestion that they were complacent in being the question mark (high growth, low market share) and that was impeding their ability to succeed in their other businesses and hurting their overall corporate health. Some might suggest that Microsoft is in danger of doing the same thing.

I agree that simply getting into businesses for the sake of getting into the business is a bad idea. I also agree that you need to learn when to say no. But I also believe that there are some businesses that may take a while to incubate and you need to know where to preach patience and where to come quick. I look at other companies and wonder how their decisions are being perceived internally. eBay's decision to buy Skype shows a plan to diversify in a way that (in my mind) still doesn't quite align with their strategy to be the world's greatest flea market. Amazon's S3 play is a bold move that has nothing to do with retail. Are these good or bad? My instinct is to say "bad", but I've been too quick to judge in the past.  I do recall chuckling when Apple came out with the iPod, thinking "what does the iMac company have to offer the gadget world? Here's another Newton..." Well, I was obviously wrong about that. Now, in retrospect, that was a great move by Apple. But wasn't that spreading the Peanut Butter a little bit?  I have to admit that I like a lot of Yahoo's offerings.  I think their foray into being a content company wasn't as flawed as people are trying to make it out to be in retrospect.  The problem with bold, gutsy decisions is that you are a hero when they succeed (Steve Jobs and the iPod) and an idiot when they fail (John Sculley and the Newton)--and oftentimes, the result has as much to do with luck as with any specific aspect of the decision.  For Microsoft, diversifying into enteprise computing has given them a growth engine that has been pivotal in the last several years.  Building a home and retail presence with XBox and Zune is meant to give us something to hang their hat on for the next decade.  To base Microsoft entirely on operating systems and productivity applications (the historical primary money makers) and cut all else would completely ignore the fact that you need to prepare for life after your core competency.  Thank goodness Microsoft didn't give up on SQL and hopefully we'll be saying the same about Zune in a couple of years.  

Again, I'm not suggesting haphazard business launches for the sake of letting workers do whatever the heck they please.  But when I see things like Live Labs, I am excited, rather than pertubed, by what to bodes for Microsoft's future.  Cutting businesses provides a short-term fix and does quench the Wall Street thirst, but be careful where that leads you in the long run...