In light of the Yahoo! - Microsoft fiasco, fellow bloggers Larry Dignan and Vinnie Mirchandani have
been asking the question whether there is too much emphasis on just one
stakeholder - the shareholder. After all, shouldn’t a technology
company (or any company for that matter) be equally focused on the
value for customers, partners and employees.

I believe that the real problem is not that of prioritization of stakeholders but a more fundamental issue: Does your company stand for something?

Larry and Vinnie discussed the following in a recent conversation:

• Technology companies cater to Wall Street interests too much often at the
  expense of good strategy.
• Isn’t what a company does for customers and developers more important than
  shareholder interests?
• What’s
  wrong with being a mid-size technology company if customers and
  employees are happy and the products–software, hardware, services–fit a
  need? There’s nothing wrong with it, but Wall Street would lead folks
  to believe that any company that isn’t acquired by Oracle isn’t worth
  existing.
• And why are we listening to Wall Street at all given
  that analysts, investment bankers and other financial wonks can’t even
  manage their own businesses (subslime, credit swaps, write-offs galore)?

Even
as I do agree that the recent focus on shareholder’s (short-term)
returns is probably misplaced, the real problem is elsewhere.

What Does The Company Stand For?

The
problem with Yahoo! is not just its mediocre financial performance
compared to its more successful cousin in Mountain View - Google, but
that Yahoo! does not seem to stand for anything and rarely arouses any
passion amongst customers, employees or partners. Its a listless
organization that seems to be going through the motions - see this excellent post by Jeff Nolan.
Marc Andreesen recently wrote up an article praising dual-class structure
to help management teams prevent hostile takeovers. I believe this is
the wrong remedy - its a cure for a disease that should be prevented in
the first place: A lack of clear vision around what a company is trying
to achieve.

A company (and its management team) deserve to be
independent as long as they inspire confidence among investors,
employees, parters and customers that the company has a vision that it
aspires to that the stakeholders can commit to.

After all, what
does Yahoo! stand for? A hodge podge of websites relating to
entertainment, communication, search etc with no grand vision of
changing our (digital) lives. There are hundreds of smaller companies
that are not under any duress to be acquired because their management
teams inspire confidence around a vision.

Here is a list of
companies that I don’t know what they stand for, and hence will not
have shareholders clamoring to keep them independent if the right
opportunity came along:

• BEA (Sold)
• Yahoo!
• Tibco
• WebMethods (Sold)
• IAC (Bought/Sold/Consolidated/Unbundled)

Contrast this with list with:

• Salesforce.com (Changing the enterprise software world; See my disclaimer)
• Google (Organizing World’s Information)
• Amazon (Changed Retail, Now Web Services)
• COST (Concur, Omniture, Salesforce and Taleo - the SaaS horsemen, per Phil Wainewright)

The
same holds true beyond technology businesses - if your company does not
stand for something bigger than management’s entrenched interests and
egos, its not very likely to inspire shareholders to forgo a 50%
overnight return.

There is a story
of two labourers working at a construction site, breaking stones. A
passer-by asked one labourer what he was doing. “Breaking stones”, was
the bored reply. A few yards down the road the traveller came across
the other labourer. This worker was different; there was a spring in
his steps and a tune on his lips. So the passer-by asked, “What are you
doing?” “Oh, I am helping Christopher Wren to build the greatest
cathedral in the world.” The vision of the great architect, Sir
Christopher Wren, of building a cathedral that was to be the pride of
England, gave meaning to the labourer’s work.

So, the question
is: Do your stakeholders see your company as a stone-breaking venture
or as a company that’s building a Cathedral?