“Communications is at the heart of ecommerce and community. By combining the two leading ecommerce franchises, eBay and PayPal, with the leader in Internet voice communications,” announced eBay’s CEO in September 2005, Meg Whitman, “we will create an extraordinarily powerful environment for business on the Net.”
By 2005, what Meg Whitman had learned about “ecosystems,” such as they are, would have had to have come from her tenure as president of Stride Rite Shoes, the maker of Keds; and later as chief of Hasbro’s Playskool division, where she directly oversaw the marketing of Mr. Potato Head. Inspired by the reintroduction of the toy brand into popular culture with Pixar’s Toy Story, Whitman’s innovations included the licensing of the brand to television, leading to the 1998 premiere of Fox Kids’ “The Mr. Potato Head Show.”
You may laugh. But assume for a moment that you were in charge of a nearly defunct plastic toy brand in the electronics era. If you had managed a deal with Fox TV, you’d be credited with a stroke of genius, even if the show bombed.
Meg Whitman’s career (aside from her failed run for the California governorship in 2010) has been around leading consumer products. This fact alone will send a signal to both HP’s investors and customers, both consumer and enterprise, that HP’s most recent change of course (which followed former CEO Mark Hurd’s change of course) is changing course. She is not a technologist. She believes in obtaining cumulative advantage, which includes accumulating assets where necessary, in order to build a larger foundation for the brand. (Hopefully stronger, but for the meantime, larger.)
A great deal of attention has already been paid to Whitman’s now-historic comment from October 2005, following eBay’s acquisition of Skype, that the cost of voice transmission will trend toward zero. It was such a polarizing comment at the time that not much attention was paid to what she said immediately afterward, which speaks more to her business philosophy than anything she’s ever said:
Our belief is that the winner in this space will be those that have the largest ecosystem, and what I mean by that is, the largest number of registered users, the largest number of voice minutes, the largest number of developers who develop against the platform, the best product, and the best array of value-added services that users of a certain network are willing and want to pay for. And we think that this that the way ultimately four or five, six years from now, maybe it will be a little sooner is, that the value-added services will be the way that Skype and many other of these providers are monetized. And we think we have a huge lead in that regard. One of the things we understand now better than ever is how far ahead Skype is in users, in usage minutes, and in the product capability that Skype brings to market, and the size of the ecosystem. The hardware ecosystem, the developer ecosystem, the build out of the APIs. So we subscribe to your thesis. I don’t think it is this year or next year, but I believe the ultimate monetization method of voice communications on the net changes from a revenue per minute to, you know, based on the size of the ecosystem.
During Whitman’s run for the State House last year, the opposition dragged a number of damaging incidents into the open. Some of those were taken largely out of context, and several actually took place before her watch. But the Skype acquisition, and the way in which eBay almost immediately began starving the growth out of that property, is a failure so colossal that it dwarfs most attempts at context. How Whitman handled that failure as it was happening was unique. First, she acknowledged that her initial tactics were wrong. Second, she repeated the tactics in a new context.
At eBay’s Q3 2007 conference call with analysts, she introduced a catch-phrase that she might have heard first from someone at Microsoft: “delighting the user.” Freely admitting that her initial analysis of the trend-toward-zero in voice communication was flawed, she replaced one goal with another, but her method for achieving that goal was essentially the same: conglomerate with something big, even if that something big doesn’t fit.
Over the next several months, we will work to improve the way we engage and delight Skype users. For example, yesterday’s announcement about the MySpace/Skype partnership is the next phase in our plan to make Skype available across multiple platforms. We also want to fully develop our nascent e-commerce services, like Skype Prime and Skype Find. Additionally, delivering the synergy with eBay and PayPal that we had always envisioned will be a renewed priority. We are also looking forward to the next generation of the Skype client, which has some fantastic features and will debut next year.”
There had been too much incentive, Whitman admitted to a Citigroup analyst, to monetize the Skype acquisition right away with programs that cut into the service’s value proposition. Given that customers were expecting free communication from Skype, why charge for it with services like SkypeIn and SkypeOut? Correcting her company’s course, she said, would involve turning its attention toward delighting the user, through combination deals like the one announced with MySpace.
FOR MORE:“Will Meg Whitman Succeed as HP’s CEO?” by David Strom
Step 1 for Meg Whitman at eBay was to collect and acquire resources; Step 2 was then to find some way of stitching them together into a platform. Step 3 became remedial: Unstitch the pieces when they don’t fit, and try another way. It’s Step 3 with which she has the greatest experience, for better or worse. Whitman has given a name to this tactic. In a speech to the George W. Bush Presidential Center last April, she dubbed the process of making many disparate pieces fit together under a guiding principle “BHAG” – Big Hairy Audacious Goal.
“And you know what? The BHAG works time and time again, because what happens is it becomes more than a goal,” Whitman told the Bush Center. “It elevates itself and embodies what we stand for, and what we strive for as an enterprise. It becomes a rallying point. And at eBay, we often found that BHAG to be our North Star, focusing and directing all of our efforts. And if something didn’t keep us directly on the path to that goal, then we had to question whether or not it was worth doing.”
It’s here where the following important and curious observation is worth noting: Last March, Meg Whitman joined the financial firm Kleiner Perkins Caufield & Byers as a strategic advisor. Raymond Lane is a managing partner of that firm, and today Lane was named HP’s new Executive Chairman. Kleiner Perkins was one of the early investors in Handspring, the innovative spinoff company from Palm that engineered the early Treo device, and was later spun back into Palm. In many ways, Palm was one of Kleiner Perkins’ babies.
If Whitman’s strategy as CEO of HP becomes a repeat of her approach to eBay, she may be less likely to spin off the Personal Systems Group responsible for PCs. And she may at least partly reverse course on HP’s webOS tablets, whose production was suspended by predecessor Léo Apotheker. But it may already be too late for HP to undo the process of acquiring Autonomy, the British software maker building a “Universal Search” platform – certain breakup costs would be incurred. Search is something that has appealed to Whitman before at eBay, at least by name.
So if history is any guide, Meg Whitman may try to stitch together these unlikely partners: touchscreens, business consulting services, ink production, and universal search algorithms. When they won’t fit together the first time, she’ll try another route, and then another. Big, hairy, and audacious. Like a certain Hasbro toy she helped resurrect.
