Last week I read one of the better post-mortems on Meg Whitman’s ill-advised, bloated acquisition of Skype. It was in the Economist, of course.
The piece, short and pithy, as that newspaper’s stories always are, gets right to the point of eBay’s most recent day of reckoning: the vacuousness of “three lessons,” honed over a 30 year-career in business, which Whitman claims informed her 2005 decision to pay $2.6 billion for the Internet phone service shop. At least, this is what Whitman apparently told a crowd at Standford, a while back. The Economist recounts her wisdom in the piece.
We’ve summarized it this way:
ONE: Details matter in execution. Such as….
whether the nozzle on shampoo bottles should be half or three-eighths of an inch wide
…a tenant acquired during Whitman’s tenure at Procter & Gamble.
TWO: Pay up, and quick, if only so your competitor doesn’t get the deal.
A few years earlier, Whitman decided to buy Paypal. So…
she negotiated for a year, during which the price kept rising. She concluded that in the internet industry one bids early, boldly and pre-emptively high.
She vowed not to let this happen again, as in, with Skype.
THREE: The price of inaction is far greater than the cost of a mistake.
The third lesson was that in such a fast-moving realm…mistakes can always be corrected. In other words, it did not matter that the “synergies” between a telephone service and an online flea-market seemed few and far between. In [Whitman’s] view, eBay was right to buy first and look for the answers to such concerns later.
Like the Economist points out, these three “philosophies” ended in management disaster, and a $1.4 billion write-down. But the value here is in reinterpreting Whitman’s so-called lessons. Here’s what we mean:
Lesson ONE. Details matter. Of course they do, like uh.. revenues and profits. Where were they in Skype? it’s not clear eBay ever formulated a plan for generating them.
Lesson TWO: Pay up, and quick, if only so your competitor doesn’t get the deal. Pay up and pay quick, if you’ve gone through step one and there is a strategic reason to pay up, and pay quick. Otherwise, let your competitor have it.
Lesson THREE: The price of inaction is far greater than the cost of a mistake.
This seems way too close to ‘act first, strategize later.’ We’re sure no management guru would ever suggest this is so — even HBS-graduate Meg Whitman, were it put to her this way, in a moment of reason. And of course mistakes can be corrected…with like, a $1.4 billion write down.
But this is business after all, and you’re in it to make money. And as the Economist correctly points out, by taking a charge Whitman hasn’t made “right” the mistake, she has merely admitted it.
In conclusion: Do pay attention to details. Don’t pay up, or pay fast, just for the sake of doing it. And don’t ever take an action that isn’t informed by your vision, or doesn’t in some way contribute to your strategy to fulfil that vision at your company.
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