Much has been made about Marissa Mayer, Yahoo!'s new chief executive. But shareholders need to know what will become of the company, not the CEO. Her challenge is big and urgent, but not impossible if Ms. Mayer and the board have the guts and business acumen to transform the company from providing services to creating products. Think of the revamped Yahoo! as a utility that offers other companies the online tools they need to succeed. Here are five things she must do – and soon:
1. Take an inventory
The company's product mix needs an asset inventory. Today, Yahoo! places a distant third in the online search market today, a business they arguably helped create. Over the years Yahoo! has been building infrastructure that powers and, more importantly, generates content. For now, Yahoo! is the only broad-based Internet medium that generates content that doesn't come from its users. It has many products (search, mail, mobile ads) that provide bits and pieces of the end-user experience, but its mission statement “Your world, your way” is too vague and its market target too broad to be best in class at any one thing.
Yahoo!'s opportunity is to focus its people and development talent in mobility, advertising, entertainment and search and target them to a smaller market segment.
2. Know the competition
In the new digital world, users are consumers and, equally, competitors as they bring content to life on other platforms. The sale price of Instagram, a photo-sharing service and social network, and the purchase of face-recognition technology by Facebook are some leading indicators of where Yahoo!'s competitors are looking to up their game. Yahoo! has enough of the technology built out to be a provider – a utility company, if you will – to Internet and traditional enterprise companies as well as consumers. Its competitors have already leapfrogged it and learned what the consumer and enterprise want. Yahoo! should provide the infrastructure to them.
3. Build products. There are two types of leaders: subject-matter experts who lead through insight and relevance in their field; and those who build great teams and know how to fill the white space around their personal strengths. Mayer, a former executive at Google, is in the first category. Her relevance to Yahoo!, and shareholders is the ability to identify products, form them into an integrated mix, and push them to market. Yahoo!’s new CEO has the opportunity to apply what I have termed "constructive disruption" to the business model to bring innovative products to market.
4. State a direction. “Bad decisions can be reversed, slow decisions sow doubt.” On Wall Street, doubt is worse than bad earnings. Yahoo! must have a clear message as its value proposition. Time is not on Yahoo!’s side. Its relevance in the marketplace is rapidly eroding. Google's large and splashy entry in the consumer market with Google Fiber, which will provide high-speed Internet service, telephone service, and TV, movies, and other content, make Yahoo!’s content less appealing. That’s part of the problem, now that the digital domain has become richer and more diverse, Yahoo! needs to have laser focus on what it will evolve into. That will help define its trajectory.
5. Fail fast, fail early
Mayer could take a page from agile development methodologies. Agile is a software development life cycle where code is developed in short (14- or 30-day) “sprints,” based on simple but direct user requirements. It allows development teams to deliver many things into the marketplace quickly. That suggests Mayer should focus on small products that meet an immediate need. Today’s market is primed for the mobile marketplace; entertainment, advertising, micropayments, and geo-fencing (creating virtual borders for geographic areas) are a few examples of what Yahoo! could quickly deliver. Not every new product or service from Yahoo! must be a win, but it must demonstrate that the company can turn out successful products quickly and learn from its mistakes.