29
May
07

Popularity’s High Price

What happens when you become all things to all people, or at least attempt to? You end up with all sorts of headaches. For example, I like Google, but right now, I’m super frustrated with Google. I hadn’t even recognized it until I read danah boyd’s post on poor Google searches, and a second post by someone else (I’ll add a link to the real post if I can ever find it again) on issues with Google Reader (e.g. slow posting/updating).

These issues , however, don’t take away from the overall convenience of having all my Google stuff integrated. Part of me does wonder what Google would be like if they had stayed focused on only search. The other part is open to the possibility that everything Google is doing will only further enhance its search capabilities.

Choosing the Right Direction

Diversification is not a bad thing in and of itself. But what happens when people and companies stretch themselves too far or in the wrong directions? History is littered with both good and poor direction choices. (I found these events via an article on the Fortune site.) Most of the poor direction stories will leave you shaking your head. Here’s a sample:

  • Western Union passing on the telephone: “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”—William Orton, Western Union President
  • The exploding Pinto: A Ford cost benefit analysis showed that it would cost less for Ford to pay restitution to people injured in their rear gas tank mounted vehicles than issue a recall and fix the vehicles. Unfortunately, the public found out.
  • AT&T breakup: Charlie Brown, then-AT&T president, made the decision to voluntarily break up the company before the government could step in. Brown spun off the seven local phone companies, not realizing that profit-driving long distance could be replicated, unlike local phone networks.

Fighting to be King of the Hill

Hindsight makes it easy to say, “What were they thinking?” or “I’d never do that.” However, I believe we underestimate the temptation to be the popular kid, to be the “king of the hill.” For example, Time Warner’s chairman “wanted to make a statement” during the merger between his company and AOL:

Jerry Levin…decided not to place a collar on the transaction. A collar enables the seller—in this case Time Warner—to revisit the terms of the transaction if the buyer’s stock falls below a certain price.

Why did he make that choice? “With a collar, the implication is that you are not really sure and you need this kind of protection,”…”I wanted to make a statement that I believe in it.”…Almost as soon as the companies announced their historic deal, the Internet bubble burst and AOL shares plunged 50%.

Without a collar, Time Warner couldn’t renegotiate the deal. Some Time Warner executives urged Levin to use the drastic drop in AOL’s stock price as an excuse to cancel the merger altogether, or at least as leverage to rework the terms to give Time Warner shareholders a greater stake in the combined company. But Levin…never did. (link)

Sometimes, to succeed, you must make the bold decision, the daring move. At the very least you owe it to yourself, and anyone depending on the outcome of your decision, to carefully consider why your pursuing your chosen path. I try to remember that as enticing as popularity appeared in high school, it came with a price. I believe the same applies in the business world. Just ask Time Warner:

Time Warner shareholders–who once owned 100% of a company worth $75 billion–today own 45% of a company worth, well, roughly $75 billion. (link)

What price are you willing to pay?

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