Rabu, 28 April 2010

Quick thoughts on Palm and HP

It could have been worse. A lot worse.

Many of the companies rumored to be looking at Palm would have bought it mostly for the patents or the brand, and tossed aside everything else. But I think there's a good chance that HP bought the company to keep running it. HP has a long history of activity in the mobile devices market, but hasn't had a lot of knockout success there lately, other than in notebook computers. Palm makes it a player again, or at least potentially a player.

The press release makes it sound like HP was especially interested in the software side of Palm rather than the hardware. WebOS was mentioned six times (compared to one mention of Pre), and Todd Bradley, EVP of the Personal Systems group at HP, was quoted in the press release as saying, "Palm's innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices."

Sure sounds to me like they're planning to deploy the OS across different classes of devices. And tablets were reportedly mentioned specifically in the press conference after the deal was announced.

So overall, I think Palm users and developers should feel good about the deal. Obviously, everything will depend on execution. But at least the company's not being immediately dismantled, which could easily have happened.

Here are some other thoughts on the deal:

Upside for Palm device sales. With HP's huge sales infrastructure, the Pre can move quickly into a lot of interesting places Palm couldn't easily reach -- especially corporate sales, more international markets, and more operator deals.

Ominous news for Microsoft. Between the gains for Android and the Apple-driven trend toward mobile companies owning their own platforms, the market space for Microsoft's mobile software continues to shrink. But more important than that, HP is the number one Windows vendor, and it now owns its own operating system. That's not an immediate crisis for Microsoft, but it should keep someone there awake at night.

Can the old dog HP learn new tricks? Historically, HP has been pretty close to inept in two areas that Palm knows how to run: Managing a consumer developer community, and creating a great user experience by combining hardware and software. If HP is wise, it will keep the Palm teams intact and let them gradually spread those skills to the rest of the company. On the other hand, if HP tries to "help" the Palm folks execute, it will almost certainly drown them in process and bureaucracy.

What is HP's goal in personal systems? The thing that surprises me most about the Palm purchase is that the rumor mill in Silicon Valley said HP was moving away from differentiation in PCs. The company has laid off many of the Apple refugees who had come in to help run the PC business, and the quirky advertising seems to have faded into the background. Supposedly, HP was much more interested in emulating Acer than Apple in PCs. But the Palm deal positions HP as a much more direct competitor to Apple.

Maybe HP sees mobile as a different marketplace, where investment and innovation can pay off better.

PS: I won't even get into the irony of former Palm CEO Todd Bradley now controlling the company again. Let's just say Silicon Valley is a very small place.

Rabu, 21 April 2010

SHOW US YOUR FACES, DEAR CEOs!

CEOs come in many flavours. While some are plain vanilla, others are charismatic. While some fail, others redefine success. And while some hide, others believe in the fact that “seeing is believing”. Which one are you?

Undercurrents of controversies have always chaperoned the question: Should a CEO’s face represent the company and vice-versa? The answer is, yes – for good or for worse! That black and white photograph of Henry Ford, standing next to the ancient Model-T will always represent what Ford Motors was during its glorious heydays. Bill Gates will always be the representative of the might of Microsoft, all across the world, despite his giving away all his executive powers. Carly Fiorina will remain in the memories of thousands, for having been the loud public CEO, who created the much criticised HP-Compaq giant (the world’s largest IT company today). And whose face do you recall when you think of Dell Computers?

Much has been written and discussed about the Fed’s unceremonious firing of Rick Wagoner (the-then CEO & Chairman of General Motor Co.) in March last year, after he came under heavy criticism for allowing GM to bloat beyond logical dimensions, thereby paving way for $82 billion in losses since he took over as its CEO in June 2000. The Harvard Alumnus scrapped the EV1 electric- car program and diverted resources away from hybrids (his biggest mistakes as he confesses), but had built enough credibility to carry all shame on his strong shoulders. And to give what’s due to him, he became the symbol of the imperial auto manufacturing American nation called GM, so much so, that the Fed practically had to ask him to step down in lieu of further aid to GM. Wagoner represented brawns; the man who had worked for 32 years at GM, ever since he earned an MBA degree, represented GM. [For the critics, under Wagoner, GM had more cars that exceeded 30 miles-per-gallon than any other automaker in the world!]

To many, Akio Toyoda, the President of Toyota Motor Co., represents nothing but a meteoroid. Toyota surpassed GM in 2009, to become the world’s largest producer of automobiles for just a year before it got off to the worst possible start to 2010. To many more, he still cuts that sorry figure who apologised before the US Congress for his act of recalling 8 million vehicles this year, while taking home a $16.4 million slap. To most, the only picture that comes to mind when you imagine what Toyota is, is its three ellipsical logo. Toyoda was a character unknown to the world; no doubt, even when he testified how the company was committing to recalls in all good faith, he failed. You don’t believe a CEO whom you’ve never seen before – neither as a customer, nor as a Senator!

“If you get your face and your name out there enough, people will start to recognise you,” says this flamboyant CEO of over 200 branded companies. Over the years, he has launched costumes to amuse his business partners, customers and the media. He has thrown himself off tall buildings, hung off bridges and taken deep sea dives – all to grab attention. He had the gall to drive a tank into Times Square and fire at the Coke signboard to launch the challenge against the big cola maker. His bet – Virgin Cola. The CEO – Richard Branson, who’s flamboyant smile represents his group of over 200 companies – the Virgin Group. “A young girl once came up to me and told me I could be famous because I looked just like Richard Branson,” says he. That’s the power of being a CEO brand.

Larry Ellison, the highest paid CEO of 2009 is the poster boy of Oracle. Not easy to become a recognised face amongst the masses, especially when your company has a B2B business structure, but Ellison, born out of wedlock to a 19-year-old Jewish mother, had managed his public image quite well, despite having been married four times! He started Oracle in 1977 (the same year when Wagoner joined GM), investing $1,400 of his own money. Today, it is worth $131 billion on the bourses, and Ellison is the sixth richest man in the world. Ellison has suffered a series of personal mishaps, but has managed to cover it up well, for the sake of his corporation, which has grown in leaps by the years. Today, he is known for his extravagant lifestyle, his $200 million real estate, his fleet of exotic cars and his personal aircrafts. What he is known for most widely is for being the poster CEO of Oracle.

Jeffrey Immelt is another name that has earned a huge critique following –for converting GE into more of an Automated Teller Machine that a manufacturing giant (close to 50% of GE’s 2009 revenues came from GE Capital Services). The slowdown hit it hard, washing away close to $100 billion of its Mcap. It wasn’t an easy task to become the GE ambassador to the world, but Immelt, minus all his shareholder wealth destroying acts, has done his bit to play it to the galleries. Some blame him, some praise him, but everyone knows him.

Larry Ellison’s good friend Steve Jobs is no different. From being the brand ambassador at the launch of every iconic Apple product to fi ring employees at will, his fame has grown over time, at manifold the rate at which he has lost pounds. If it’s not Steve, it’s not Apple!

The list of CEOs who have led from the front, both in the boardrooms and outside in the open isn’t short. From Warren Edward Buffett (of Berkshire Hathaway) to Rupert Murdoch (of News Corporation), from Larry Page and Sergey Brin (who are known for their product Google, unlike the founders of Orkut, LinkedIn and Twitter) to Mark Zuckerber (the 24 year-lad founder and CEO of Facebook and the youngest selfmade billionaire in the world), from Indra Nooyi (“The Iron Woman” who is not just the most powerful woman in the world on many lists, but also one who has transformed PepsiCo’s portfolio, and publicly so, leading the aggressive expansion of PepsiCo into nations like Brazil, Russia, India and China; not many would recall who CocaCola’s CEO is!), the list is long.

Think about it, American CEOs, you’ll know a dime a dozen. But if I were to ask you to name a few Japanese CEOs, apart from Akio Morita (and perhaps Toyoda too), you would know none. Is that the reason why for the past many years, Japan is suffering from a debilitating recession? I don’t have the answer to that, but what I can surely say is that Japan lacks CEOs not only at the corporate level, but even at the country level (for example, the US has Obama) who would be able to jumpstart the economic growth by individually becoming the face of change. Clearly, the term ‘leading from the front’ was not made for no reason. on. 4Ps

Minggu, 18 April 2010

Lessons From the Fall of Palm

What went wrong?

Palm is now apparently prepping itself for a remainder sale, or new sugar daddy, or some other sort of deal that will change its current trajectory. I wish them well, and I hope they can remain independent and go on to accomplish great things in the future. But whatever happens, it's clear that the current incarnation of Palm has failed. Almost everyone I talk to in Silicon Valley is already speaking of the company in the past tense.

Most of the comments I've seen online blame the company's failure on the high marketing costs associated with selling hardware:

--Ed Snyder, an analyst with Charter Equity Research, told the New York Times: “They poured all their resources into developing a killer product. But they didn’t have the resources left to go to market.” (link)

--Engadget called Palm "a company that has more talent, history, and bright ideas than it has cash and customers." (link)

--Charlie Wolf of Needham & Company told Bloomberg: "It can't get scale. It doesn't have the resources to market the Palm OS and the Pre in a way that would break through the noise." (link)

--Even Palm CEO Jon Rubinstein blamed the problem on marketing challenges: "Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today....However, driving broad consumer adoption of Palm products is taking longer than we anticipated." (link)

The quotes reflect the tech industry's stereotypical view of hardware businesses: They require huge marketing budgets, making them incredibly high-risk, high-cost investments. That's why you see thousands of software startups in Silicon Valley and only a handful of hardware ones.

I think that's nuts. Hardware companies like Pure Digital (maker of the Flip camera) succeeded with virtually no marketing budget. Why? Because they made appealing products that filled a particular customer need. If you do that, hardware is easy to market virally. I think the lesson from Palm's failure isn't "making hardware is dangerous," it's "lack of focus in a small hardware company is dangerous."

I don't want to turn this post into an anti-Palm diatribe. As I said, I hope they survive, and I have enormous respect for the people who work there. But in the spirit of helping everyone learn from Palm's situation, here are the five lessons I think we should all take away from Palm's struggles:


1. Understand what problem you're solving. I asked this question when the Pre was first announced, and I'll ask it again now: What compelling problem does the Pre solve for what customer? (link) It's easy to answer that for successful devices:

--BlackBerry = great e-mail on the go for mobile professionals

--iPhone = the best entertainment and browsing on the go (later extended to include apps)

--Flip = the easiest way to capture video and share it online

What's the short pitch for Pre? Go check the Palm website. As of April 18, it featured three different positionings right on the front page: "Social networking at its best," "Advanced 3D games," and "Work smarter, stay connected." So it's a business / social networking / gaming tool. For all of those millions of people who want to do serious business, 3D games, and Facebook posts all at once.

This isn't a recent problem. At the time of the Pre announcement, Palm advocates described it as a device for people who want better e-mail than the iPhone and better entertainment than the BlackBerry. The implication was that there's a big center to the smartphone market that's frustrated by the lack of a keyboard on an iPhone and the lack of a music player on BlackBerry. Re-read Jon Rubinstein's quote above: "webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today." The assumption there is that millions of customers are looking to buy a "smartphone experience," as opposed to a tool that solves a particular problem.

If that unsatisfied center existed, Pre would have sold like hotcakes.


2. Take care of your friends. When Elevation Partners took control of Palm, the company wasn't just a famous brand. It also had a fairly large base of loyal customers and developers who had stuck with the Treo through a lot of angst and adversity. The new Palm did very little to keep those people loyal. The developers weren't given any way to bridge their existing applications to the new OS. Faced with starting over on webOS or starting over on the much larger iPhone base, guess what they chose. And Palm, which once prided itself on simplicity, made the Treo to Pre migration process into the sort of marathon experience that we used to tease Microsoft about. Here are some of the instructions from Palm's own website (link):

Decide where you want to move your Calendar/Contacts

The Data Transfer Assistant moves your info out of the desktop organizer and onto your phone. From there, your phone sends the data to the web account of your choice.

Your choices: Google, Microsoft Exchange, or Yahoo!.
Need help deciding where your info should go?

Skip this step if you already have an online account where you want to move the info from your old desktop organizer.
Create an account for one of these web services:
Google

1. Go to Google.com: Create a Google account and set up a new account.
2. If you've never used Google Calendar, you'll need to sign in at least one time before proceeding. Go to google.com/calendar, and follow the login & activation steps until you see your calendar.

Microsoft Exchange for corporate users

Ask your IT Helpdesk for these four pieces of information.

* Incoming mail server name
* Domain name (if it's different from your incoming mail server name)
* Exchange username
* Exchange password

Yahoo! Calendar & Contacts

Contacts are transferred from Yahoo.com to the phone, but not from phone to Yahoo!

1. Go to Yahoo.com: Sign up for Yahoo! and create a new account.

Or back up your info to your online Palm profile

Ready to go - you already created an account when you set up your phone.

Set up the account on your phone

After creating an online account, add it to your phone. This ensures that your info moves correctly to the account.

1. On your phone, open Contacts.
2. Open the application menu and tap Preferences & Accounts.
3. Tap Add An Account and select the account you created above.
4. Enter the username and password for that account.

Sync your old device one last time

Skip this step if you do not have a previous Palm device.

To make sure you have the most up-to-date version of your info in Palm Desktop or standalone Outlook, synchronize your previous Palm device and your computer one last time.

Export your info using the Data Transfer Assistant

For fastest results, turn on Wi-Fi (if available) and plug in the charger before proceeding.

Download the tool: Data_Transfer_Assistant_1e.exe

After the download is complete, double-click Data_Transfer_Assistant_1e.exe in the location on your computer where you downloaded it.
Follow the onscreen instructions.
Note: When you connect the phone to your computer, some applications may launch automatically, moving the Data Transfer Assistant to the background. To return the Data Transfer Assistant to the foreground, click the Data Transfer Assistant icon on your computer's taskbar....

You can find some more discussion here.

This in itself wasn't a disaster. Any company has to set priorities, and Palm just didn't make the links to its legacy customers and developers a priority. But it meant Palm couldn't draw on a pool of friends to help it get sales off to a quick start. That put even more pressure on Pre to be a knockout hit from day one.


3. Move faster and slower. After the Elevation deal, Palm went through a very strange management transition. Jon Rubinstein was installed as Chairman and head of product development, Ed Colligan remained as CEO (so he was Jon's employee and boss at the same time), and Jeff Hawkins was supposed to remain as product guru. Palm said at the time that Jon would be the execution person and Jeff the visionary. "The combination of those two guys is one of the most dynamic... combinations on the planet," Palm said. Yeah, right. The real process was a creeping reorganization in which Rubinstein replaced the old Palm executive team in stages. I think Palm would have been better off with a single quick transition in which the new team was put in place all at once and given time to coalesce.

But if Palm moved too slowly on organizational change, it probably moved too quickly on product shipment. The Pre shipped without a finished development environment, frustrating the developers who were most motivated to create interesting software on it. And it had an OS that hadn't been tuned properly for performance, so even its most enthusiastic users had to apologize for its lack of responsiveness. Although there was a lot of pressure on Palm at the time to ship, in retrospect the company would have been far, far better off if it had waited a few more months and shipped a product that delivered a great user and developer experience.


4. What you do, do well. The old Palm's "zen" design principles said: "Find a problem, find the simplest solution, punt the rest." It was an appliance design philosophy translated into computing. The new Palm tried to boil the ocean. Its ambition to create a smartphone platform superior to iPhone forced it to compete on a very broad range of fronts, everything from OS to SDK to app store to hardware. Inevitably, Palm wasn't able to execute equally well in all areas, and some of the Pre's features were compromised due to lack of resources. Apple can get away with a flawed version one product because it has the financial resources to go back and fix its mistakes. Which brings me to the fifth lesson...


5. You're not Apple. Trying to beat Apple head-on is a rich man's game, the computing equivalent of fighting a land war in Asia. There are effective ways to compete with Apple on a budget, but they all involve avoiding or neutralizing its strengths, and targeting segments or tactics that Apple can't or won't pursue. Instead, Palm attacked head on. I'm picturing that Warner Brothers cartoon where Black Knight Yosemite Sam charges at full speed into the wall of a castle and bounces off flat as a pancake (link).


What it means for the rest of us

You'll notice that I didn't say anything about Palm's bizarre ads featuring a Borg hive queen (here and here). That's because they were a symptom, not a cause. When your product is right, the message will be simple and you won't need creepy ads to stand out. Often you won't need ads at all.

The mistakes highlighted by Palm are common in the tech industry. Here's what I think we should do about them:

--I know there are device companies out there right now where the employees are whispering to each other, "we've committed to shipping on a certain date, but the product won't really be ready." You know who you are. Don't let your company pull a Pre; speak up. If nothing else works, print this post and send it to your boss. The Board of Directors might fire you if you delay the launch, but they definitely will fire you if the product fails.

--I frequently talk with companies that are creating bundles of technologies rather than coherent solutions to problems (anybody want to buy a Verizon Droid? link). Ask yourself, who is my customer, and am I solving a problem that they care about deeply?

--I know investors who say, "I'll never touch hardware, it's too risky." Understand that you're missing opportunities where you could invest with a higher return, because valuations aren't being bid up by competing investors. The fault, dear investor, is not in our product category, but in our execution.


That's my take. What do you think? Where did Palm go wrong (if at all), and what do you think the lessons are for other companies?

Rabu, 07 April 2010

FIRST LOSER’S ADVANTAGE

EVERYBODY TOLD US WHY HAVING THE FIRST MOVERS’ ADVANTAGE WAS MOST CRITICAL FOR SUCCESS. THEY WERE ALL WRONG!

The global business acumen is populated with a multitude of mildewed and hollow adages that fail to equip companies with knowledge to reap extraordinary benefits; First Movers’ Advantage is one such hogwash. Over decades, there have been entrepreneurs who have been washed away by this cliché, that once promised them a blue ocean. And most often than not, they ended up wasting truckloads of dollars in inventing the next unimaginable business bet, and building the platform for the late coming slumber-jacks, who eventually walked away with all the goods – the revenues, the profits, and in most cases, even the innovator’s future!

Henry Ford, who himself was a first mover (having pioneered the automobile), had once proclaimed, “I believe that the best strategy for the first per son is to be second!” He was right. Today, Ford Motor Company, his brainchild has not only slipped from being the world leader in automobiles, which it was some decades back (Toyota, GM & Volkswagen with respective market shares of 13.7%, 12.2% & 9.5% are the top three as per the December 2009 World Motor Vehicle Production OICA Survey), but has also become the champion of automobile recalls, globally! If you thought that the $16.4 million fine imposed on the late-mover Toyota Motor Co. by the US government, following its monstrous recall of 8 million vehicles since January 2010 was a fair punishment, how much would you recommend for the first mover Ford, which in 2008 recalled 14.1 million vehicles, after recalling 8 million in 1996?

What’s common between Vivola, Erwise, Midas and Mosaic? All four, individually claimed that they created the browser market. Their hard work translated into a business idea for late-mover Bill Gates. As of February 2010, Microsoft’s Internet Explorer commanded a 65% control over the global browser market (data by Janco Associates Inc.).

Being the first to stake a claim on a new territory doesn’t ensure sustainability. Sadly, it doesn’t even guarantee advantages as was originally believed. Take the case of the lesser known Prodigy Communications. It was an early bird in the business of online connections, which it entered in 1984, along with huge brand names to guarantee it success: there was IBM leading technology for its operations, Sears Roebuck heading its online retail and CBS was roped in for news coverage and selling of ad-space. Twelve years later, it was sold to a private investor group for just $250 million. Similar was the case with the Graphical User Interface, which was developed by the Xerox Corporation at their Palo Alto Research Center (PARC) in the 1970s. Steve Jobs, co-founder of Apple Computers, visited PARC in 1979 and was impressed by the Xerox Alto, the first computer with a graphical user interface feature. He offered Xerox a chance to invest $1 million in Apple pre-IPO stock, in lieu of two visits to PARC with his engineers. Today, none remember that the Xerox Alto was the first computer with a GUI; for the world, it is the Apple Lisa, which simply “copied” the technology which Jobs saw at Xerox. It’s interesting how one man can prove the case for the late movers so well. Steve Jobs didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed right! His iPod, iMac, iPhone have become bestsellers.

There are many examples of how the first mover lot has been one which has been long forgotten. Names like King Kullen Grocery Inc. (which pioneered supermarkets in America in 1884), Minnetonka (which produced the world’s first liquid soap), Ampex (maker of the first VCRs, which lived for just two decades), Chux (from J&J, which was the first disposable diaper brand), Micro Instrumentation & Telemetry Systems (which pioneered personal computing with the Altair), Visicalc (the first desktop spreadsheet program), Atari (which brought to market the first video game), Dumont (which led the way in selling television sets), and many more, have been relegated to the dust-laden history books. And to talk about the new age champions, they are all those which learnt from the mistakes of the early birds.

Walmart was not the pioneer of retail. Excel was not the first spreadsheet to hit desktops. Commercial aircraft were not the brainchild of Boeing or Airbus. Neither did Disney start a theme-based park, nor was Starbucks the first to sell gourmet coffee. It’s true: they were not the first, they had learnt well and did better!

The criticism is supported well by research too. Researchers DavidMontgomery (Stanford University) and Marvin Lieberman (University of California), in their paper titled ‘First Mover Advantages...’ stated that the ability “to ‘free ride’ on first-mover investments and resolution of technological and market uncertainty” comes as an advantage to second movers.

“Pioneers often miss the best opportunities, which are obscured by technological and market uncertainties. In effect, early entrants may acquire the ‘wrong’ resources, which prove to be of limited value as the market evolves,” added the duo. And to talk about numbers, the fi nal nail is hammered in by Richard B. McKenzie of the University of California, who proved through an extensive study how failure rates across traditional industries for pioneers, was a 71%, with their lot controlling just a pathetic average market share of 6%.

A research by professors Markus Christen (INSEAD) and William Boulding (Duke University) also testifies thus, “We found that pioneers in consumer goods had an ROI of 3.78% lower than later entrants. And the ROI of first movers was 4.24% lower than followers in the industrial goods sector. Bottomline: Pioneers were substantially less profitable than followers over the long run…

Once upon a time, long long ago in Bethlehem, the wise men said that competition was like a 100 meter race – the first off the blocks is the one who has the biggest chance of winning the race. What they unfortunately forgot was that competition was more like a 40 kilometer marathon, where it matters more how well would you last the whole distance and learn from the mistakes of those ahead of you. Imagine driving a car at 120 miles an hour on a completely pitch dark highway in the middle of the night. Now, wouldn’t you give a king’s ransom to have another car ahead of you tasting the bumps and ditches first?

Why focus ?



Confucius says: “Man who chases two rabbits catches neither!”



“I’d rather be strong somewhere than weak everywhere”.



When managers know they have only one battle to fight it concentrates their minds wonderfully.



Companies that broaden their line, for whatever reason, are vulnerable to narrowly focused competition that takes advantage of division.



Nobody loses business just because they have a broad focus. To lose business you have to run up against a competitor with a narrow focus.



What’s needed for success is focus, which sometimes can be achieved with a full line of products, but with sacrifices' made in other areas. Distribution could be one such area. Dell Computer deselected retail distribution and direct sales force with success.



Some managers equate size with power. Is a large company more powerful than a small one? Not necessarily. A highly focused company is more powerful than a less focused company.



What provide an organization with its power is its degree of focus and its share of market. Size is only important if it contributes to an increase in market share.



Power gives a company the ability to “control” an industry, taking it in a direction that will only increase the company’s power and domination.



Wouldn’t it be easier to increase the share of a business you know than to get a share of a business you don’t know?



A focus is not forever.

At any point in time, a company has 3 kinds of products. (1) yesterdays products, which are candidates for disposal; (2) today’s products, which are producing the bulk of the company’s profits; and (3) tomorrow’s products, which are the company’s future.



Nothing stays still long enough for a company to be perfectly focused.



Sooner or later even the most powerful focus becomes obsolete. That’s when a company must refocus itself.



Focus, the future of your company depends on it.





Abstracts from: “Focus, The future of your company depends on it”, by Al Ries



If you are a BtB-unit manager and you are interested in some practical DIY-tools on strategic focus maybe you will enjouy visiting my blog: Strategy On-line



Regards

Peter

Kamis, 01 April 2010

A dissenting view on the Yahoo - New York Times merger

The reactions to the New York Times - Yahoo merger announcement this morning were predictably brutal. "The best corporate merger since AOL-TimeWarner," TechCrunch wrote. On the radio this morning, one of the commentators talked about "the blind leading the crippled," and joked that they should both merge with General Motors so we could "get all the deadwood together in one place." The impromptu picketing of Yahoo headquarters by angry Flickr users probably didn't help.

I have a different take on the deal, though. After years of failed "new media" ventures based more on hope than synergy, I think this one might actually make business sense. Here's why:

No more paid content fantasies. The Times had been headed down the road toward making its content paid-only for anyone reading more than a few articles a month. In my opinion, this was a huge roll of the dice that could have destroyed the company's long-term prospects. The Times online edition is the most popular newspaper site in the US, and has been very gradually closing the gap with CNN, the US online news leader. Moving to a paid model would have cut the Times audience very substantially, leaving some other news operation to seize the number one position. As we know from other areas of the web, there are very strong network effects online. Once the Times surrendered the online traffic lead, I think its role as the newspaper of record in the US would have gradually been lost.

No more Yahoo search fantasies. Yahoo has had a terrible time deciding what sort of company it wants to be. For a long time it was supposed to be a "new media" company, which apparently meant it had the business practices of a film studio without the cool movie premieres. Many people in Silicon Valley still think of Yahoo as the failed Google wannabe, which is kind of like criticizing Sweden for failing to be Germany.

Unfortunately, Yahoo has been feeding that comparison lately with radio ads touting the benefits of Yahoo search. One was a scenario about a woman who was able to use search to find where a movie was playing, but not the actual showing times of the movies. Let's do a reality check, gang. Have you ever looked up a movie online? Do you know how hard it is to confirm where a movie is playing without also finding the showtimes? The effect of the ad is to position Yahoo as the search engine for stupid people.

And besides, it put the focus back on search, where Yahoo is destined to be an also-ran forever. The company shouldn't drop that business (it generates a lot of cash), but it's not the future engine of Yahoo's growth.

So, what is Yahoo's future? I think its biggest strength, what we used to call in business school its "core competence," is its ability to pair brand ads with content. Yahoo is world class in its ability to work with major brand advertisers to match their online ads with words and pictures that attract the people they want to target. It's not as sexy a business as search advertising (because the revenues and growth rates are not as good), but it's a real business and Yahoo does it better than anyone else I know of.

Yahoo's challenge, in my opinion, has been that not all of its content is top quality, so some of its sites are not as attractive to advertisers as they should be. In places where Yahoo has great content, such as Yahoo Finance, the engine seems to work very nicely. In other areas, Yahoo's content is very me-too, and so are the results.

The synergy. The New York Times' challenge is that it has great content but can't make the online audience large enough to pay for its huge editorial staff (the Times currently reaches 1.25 percent of global Internet users each day, according to Alexa). Yahoo's challenge is that it has huge reach (27% daily reach of global Internet users) but inconsistent quality. Pair the Times' outstanding content with Yahoo's reach and advertising expertise, and maybe you could make the world's most powerful online publisher.

Anyway, that's what the merger's going to test.

Next steps: Clear the decks. To make the merger work, both companies are going to need to focus on what they do best, which means paring away the other businesses they've added in the past as diversification experiments. In the NYT's case, that means letting go of a lot of other media properties the company has picked up over the years. There's going to be just one national news leader, not three, and it doesn't make sense to keep on paying full editorial staffs at several different places, many of them duplicating each others' work.

And at Yahoo, that means stepping back from being an internet conglomerate. Search is important as an on-ramp to quickly get eyeballs to the content of the new Yahoo, but it's not the long-term goal in itself. A friend at Yahoo told me the other day that a third of the company would probably quit if Yahoo decided to focus on publishing. My thought: that might be better than gradually bleeding the best and the brightest throughout the company as they lose faith in Yahoo's overall direction.

A human resources executive at Apple once listened to employees complaining about a reorganization, and then said, "when the caravan starts moving, the dogs all bark." It was a heartless comment, but he had a point. In that spirit, the picketing by Flickr users is probably a sign of healthy change.

Or it would be if any of this post were true. But it's April 1, and I'm indulging in a little bit of tech industry fantasy. In this case, though, I'd call it a dream.

Memories of past April Firsts:

The tech industry bailout (link)
iPhones worn as body piercings (link)
Spitr: Twitter meets telepathy (link)
Sprint and Google, a match made in Kansas (link)