In October 2000, I called VU a "fast follower to the loser," railing its misguided me-too strategy inspired by AOL TW. In this post I also thought Yahoo wanted to be a software company, but Semel took the opposite direction (and I’m not sure he’ll still be here two years down the road, looking at how uninspired Yahoo has become.) Finally Messier is out, his convergence strategy now fully exposed as a stupid excuse for thinking (main finding from his book: "AOL did it, it changes everything so we have to copy them"). Here’s another exec becoming roadkill to the "Internet consumer vision."
Expect VU to be dismembered. It’s high time these conglomerates supposedly built for integration purposes, were exposed as the 80’s-like diversified groups they really are. There’s no point putting a water utility with a cell phone company with a media group. It takes forever to integrate, there’s often less combined value than promised, and investors can get diversification simply by buying a mix of stocks. If you hear "1+1=3" as a rationale for a merger, cringe. When I worked at AT&T GIS in 1995, you could still find NCR letter paper 4 years after the merger, and just before AT&T split itself from what became Lucent and… NCR back again!
Mergers are a good way to absorb competitors and relieve some pricing pressure from the marketplace, while it’s a lot harder to get added value from them. Besides, you often can get the same benefits at a lower cost/risk from partnerships. And if what your department produces is sub-par in its industry, don’t expect much cross-divisional support from elsewhere in the company. The other guys don’t want to lose their business because they pitched your crap to their customers. But they’ll have to resist your attempts at forcing them, and that’s time wasted internally instead of making more business. Oh, by the way, why did I join AT&T at the time? Convergence of telephony and computing was about to explode, or so I thought, young and naive that I was at the time.
More seasoned professionals should know better, and companies would gain spending less time chasing dreams of owning customers through pseudo-vertical integration (Vivendi tried "directly from the sewers to your ears," and are shoked! at the result), and more time doing a better job servicing them in the natural space they’re in.
07/02/02 update: France Inc. Follies.
