An interesting debate i’ve been having for a while is trying to understand if employees (i.e CEO’s) ever run a company as well as owners (good, astute owners).
Why even ask? Well I think our current financial ‘crisis’ is directly attributable to how we operate our companies. I take exception to the finger pointing that has been directed at the CEO’s of some of the failed companies. Those guys do carry some of the blame, but what isn’t acknowledged is that they are employees. Yip recruited and incented to do stuff by company boards or executives.
While not in these words, i am willing to bet that up the run up to the big crash, these very same CEO’s were having conversations with their EMPLOYERS that went something like “ how are you going to deliver more growth to keep the share price up” . Which would have created some debate where the said CEO’s may or may not have voiced their concerns over the companies exposure (risk) or the cost of doing such short term initiatives. End result is that the long term viability of the businesses were jeopardised.
Back to the debate, Its my belief that private companies can make better long term decisions because they have to deal with the long term impacts AND don’t have to worry about short term bonuses and the counter intuitive behaviour it drives. Rumour has it that Rupert Murdoch is the supreme example of this (love or hate him). Case in point, the New York paper price wars. His companies took the position that they needed to increase their readership, so they cut slashed the price. The resulting years of financial loss were offset against that growth. The questions are, could an employed CEO 1) even make that decision 2) achieved their bonuses in doing so? Logically the answer is no.
Another Murdoch legend (which i cannot source) goes something like this. He wanted to put the prices up for his paper in a specific location. His competitor didn’t follow suite, so he identified those geographies where his competitor had a large market share advantage and gave his paper away free until the competitor took his hint & put their prices up in line with him. Again could a CEO who is an employee make these kind of plays? I don’t believe so in the majority of cases.
Our CEO’s have bonuses and employment tenure (which effectively drive medium term thinking at best)
I’m not a CEO, and i’m not saying that they turn up to work to deliver a bad outcome, but it does seem to me that current practices and behaviours are counter intuitive. I know of at least one ex CEO who reads this blog, I'd love to hear his perspective.
I attended a workshop yesterday at MS which covered off a number of things including MS’s virtualisation pricing, their Service Provider license Agreements (SPLA) and their BPOS (MS online services).
Things I was particular struck with in these sessions
- The way MS is treating licensing is deliberately stopping users moving from on prem (enterprise licensing) to Service Providers (SP). For instance, if you transfer your licenses to a service provider, that service provider cannot put you on a virtual server farm. They have to put you on a physically isolated server (and of course ) with its own server license. Implication; SP’s are inhibited from cannibalising due to the lack of price difference
- The way they are licensing there server products is by CPU & virtual machine. Implication; Even if you don’t use Hyper-V (Zen or VMWare for instance) to do your back end virtualisation, they will get their pound of flesh for server licenses. In my opinion they need to be real careful here otherwise they may drive SP’s to use other OS’s.
- MS will bill the end company directly. Not negotiable. Implication; massive channel conflict is in the offing here. Essentially they are outsourcing the sales function of BPOS and in doing so are setting this sales function in direct competition with their Service Providers (who sell to end customers) and installed product (who sell CD’s). Chaos ….absolute chaos
- Their online services start at a minimum of 5 users and its not that cheap. You would have to wonder why that is so? I think i know the answer (see point 5)
Overall, I wasn’t that impressed. The S+S strategy is being poorly implemented. It clearly demonstrates an incumbent grappling with a legacy revenue problem. It also highlights some true technical naivety .
when our children start to have influence the world
I had a conversation this morning with my 3 year old son that was a straight out ephiphany.
It kind of went along the lines of "mum's hair is getting long", "yes Danny we need to ask get auntie Suz (who lives in Australia) to cut it" (and here is the kicker) he replied " we should video her on the computer to ask her".
In his world telephones are old news, they don't even make his top of mind communications needs. Makes sense as what is the point if you can't see the person on the other end? The whole 'wow' factor that I went through when video technologies like Skype became free and mainstream never existed.
The question is, what will wow him & what impact will that have?