Reinventing The Wheel

Stephen Yagielowicz
Can struggling companies — including those who may have outgrown their business models, or seen them driven into obsolescence — meaningfully redefine themselves and earn another shot at success?

This is the life or death question facing news and entertainment companies today, including those trying to survive and prosper despite the current turmoil of the adult biz.

“AOL, we have a big f-ing problem,” AOL’s Brad Garlinghouse said. “There’s no confusion about that.”

The comment served as a rare public admission of failure from a major corporation and an admission that would likely not be forthcoming by his former employer, Yahoo, which is also struggling with its own reinvention.

“The first step to solving a problem is admitting you have a problem,” Garlinghouse added, underscoring the importance of corporate “honesty.”

This can be problematic when lacking, as needed initiatives go undone due to outright denial by management that anything is wrong, or due to a lack of accurate information as relevant facts go unreported by staff that fears “rocking the boat,” among other reasons.

At AOL, the abandonment of failed social-networking acquisition Bebo, new senior management and other maneuvers are helping the company transform from a provider of obsolete dial-up Internet access to become a contender in the digital content arena.

‘There’s no doubt that AOL’s making an effort to go through a massive turnaround — internally, we actually use the term ‘startaround,’” Garlinghouse told CNET, saying that AOL is actively engaging leaders that demonstrate “the willingness to be dramatic and aggressive and make wholesale change.”

He contrasts this to the attitude at Yahoo, which relegated innovation to a project known as Brickhouse.

“It was up in San Francisco in this cool hipster building and it wasn’t part of the culture of Yahoo,” Garlinghouse offered. “I thought it was the right thing for Yahoo to do to end Brickhouse because innovation needs to live everywhere at Yahoo for it to be successful.”

This is a vital consideration of course, since innovation cannot live in isolation.

“Brands are a manifestation of the products they build,” Garlinghouse stated.

“The Apple brand was toast,” he added, commenting on how Steve Jobs’ return to the company was the catalyst for its rebirth, which today is defined in terms beyond its initial market space of providing a PC alternative.

It is the expansion of business options, for example, the offering of new product lines such as Apple’s iPhone and its dominance of the Smartphone market, which drives the revival of “tired” brands.

While AOL has yet to see the final results of its new initiatives, it is making progress along the road towards reinventing itself — a task that Google is also undertaking, with a similar brand-redefining mission.

Consider that with its overwhelming domination of the search market, there is little room for Google to grow within the confines of its core competencies. This reality leads to diversification and an overall stronger company, but also illustrates the challenges of evolving a brand that has become a verb.

“Yes, the company is still growing at rates that would be the envy of the rest of the Fortune 500,” Michael Copeland wrote for Fortune. “But its core business is slowing, its stock is down, its Android mobile platform generates scant revenue, and competition (hello, Facebook) is fierce.”

“In classic Innovator’s Dilemma fashion, the company seems unsure about how to move beyond the core search business that has brought it such massive success,” Copeland stated. “Google has placed expensive bets on acquisitions ... but none of those deals have yet significantly diversified [its] $23-billion-a-year revenue stream.”

“Google’s main focus continues to be driving people back to the search box and the ad dollars that Google collects for helping marketers reach highly targeted consumers,” he added, noting that its highly touted Android product is still not a big money maker.

While Google’s dominance of the search market seems assured for the near future, even as its market share is in question, the changing nature of the Internet may pose the most difficult challenge.

For example, many users today consider Facebook to be “the Internet,” relying on it as an email replacement and daily lifestyle hub with an impact exceeding its social uses. Regardless of its current popularity, however, Facebook is a transient fad, awaiting the next new thing to come along and replace it.

This cyclical evolutionary process affects all markets to one extent or another and makes coping with today’s competitors as well as the competitors of tomorrow a tough balancing act that few can master; as evidenced by the many failed companies littering the current business landscape.

Sometimes, balance is not what is required — a total reinvention of the wheel is.