There is no shortage of articles about the troubles at Yahoo, which today has its quarterly earnings announcement. The core problem is the lack of a “big idea” that would represent new consumer offerings or dramatic changes to existing products that would generate genuine consumer excitement.
Unfortunately, Yahoo has basically been following a “me-too” strategy. Facebook and Google went big into mobile ads, so Yahoo eventually announced its efforts in this area. Netflix and others became huge in video streaming, so a couple of years later, Yahoo decided to spend $100 million on video, only to write off $42 million recently as the effort faltered.
Is it possible for big companies to find and achieve big success behind big ideas? You bet! Let’s look at two that did just that recently.
Over the past couple of years, Ford made a bet on a key modification to its highly successful F-150 line of trucks. Specifically, it swapped out every steel body panel in the truck for lightweight aluminum alloy. In combination with this 700-pound reduction in the weight of the truck, the company moved to a sedan-size 2.7-liter engine. Naturally, a key driver of this change was the upcoming stringent fuel-efficiency guidelines dictated by the U.S. government.
The key questions were: Will the truck have enough power? Will it haul as much as earlier F-150s? Will it really have better gas mileage? The answer to all of these questions is “no problem.” It is faster, hauls more (an impressive 12,200 lbs. max), and gets an amazing 22 combined (city & highway) MPG. This fall, with the marketplace intro completed, F-150 sales have been surging, even as Ford backed off the aggressive introductory incentives it used to initially inform the public.
What makes this move by Ford to an aluminum F-150 so impressive is the fact that the F-150 was and continues to be the most successful model Ford produces. It accounts for around 90% of the company’s profit and one out of every three vehicles Ford sold in the past year. In essence, this was a particularly big bet by Ford, which is apparently very successful.
Moving to the technology industry, consider AOL, the Internet and publishing company that in recent years was much like struggling Yahoo. AOL was acquired by Verizon, and I think we are just now beginning to understand why Verizon was so interested in AOL. Specifically, AOL has developed what now appears to be quite a big idea.
Just over a year ago, it introduced a system that helps companies automate the process of buying and selling online advertising. In more detail, this sophisticated software system lets publishers sell space on websites and digital videos and includes a bidding platform. It also enables the automation of purchase orders, simplifying a paper-bound process that advertisers, publishers, and TV networks have used for decades. The type of system AOL has built is part of an emerging class of tools referred to as programmatic advertising platforms or, more simply, automated ad systems. The global revenue generated by this emerging set of products is expected to triple in the next two years, according to the latest estimates from MagnaGlobal, the research division of media buying firm IPG Media Brands.
For perspective, AOL’s revenue gains from this area have increased 63% versus year ago, while its content group only gained 4%. The CEO of AOL has indicated this move represents a switch in focus from original content to ad technology and that “this will definitely be the fastest growing part of our business going forward.” Clearly, AOL is an example of coming up with a big bet to energize the company.
Both of these examples demonstrate a key point; specifically, it’s the responsibility of the leader to constantly come up with the truly big ideas that are going to stake out significant strength for the future. Doing so leads to success rather than the organization slipping into the mentality of protecting the status quo, like Yahoo.
Bob Herbold is the former chief operating officer of Microsoft and the author of three books on leadership. The latest is “What’s Holding You Back? Ten Bold Steps that Define Gutsy Leaders” published by Wiley/Jossey-Bass. His blog on leadership can be found at BobHerbold.com.
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