The Yahoo!/ Microsoft Culture Clash

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Includes: AABA, MSFT
by: Roger Ehrenberg

Yahoo! (YHOO) vs. Microsoft (NASDAQ:MSFT). Developers vs. Businesspeople. Baseball players vs. Football players. It's just a matter of culture. With the exception of baseball players and football players, the others have to get along in order for their teams to be successful.

Michael Lewis penned an article in yesterday's New York Times Magazine section that provides what I believe to be a useful metaphor for thinking about the some of the most important cultural disparities facing today's technology arena. Yahoo! and Microsoft coming together, the Web 2.0-savvy, Internet-fueled 10-year old vs. the desktop-heavy, software-based 20-year old? A rapid, web-based development culture vs. the slow, millions-of-lines-of-code software development culture?

But even if the metaphor holds, it is the ways of facing into and dealing with these differences that separates the great from the merely good or, more often, the abject failures. It is a hard thing to do, and only the companies that create a unifying culture beyond those of its distinct groups will convert its talent and intellectual property into shareholder value. And this is what building and running a successful business is all about.

The Metaphor

Michael Lewis compares and contrasts the private sanctums of baseball and football players, conveying what I believe to be a pretty instructive framework for analyzing the cultural issues facing both established and start-up technology companies:

In their private sanctums, baseball players behave as if someone might walk in at any moment and ask them to leave; they’re a bit like starving dogs who have just stumbled upon a slab of raw meat. Not all of them, of course — the effect is atmospheric, produced by the sum of the personalities. Give 25 professional baseball players a place to call their own and they give it a forbidding name: clubhouse. If you aren’t a member, you don’t belong.

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Professional football players aren’t like that, as a rule. They don’t have clubhouses; they have locker rooms. If you happen to wander into one, no one tries to make you feel bad for being there. The football player doesn’t resent you for being in his private place any more than the elephant resents the fly for setting up camp on his tail.

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There’s a reason for this: In a football locker room, there is no question who really belongs. In a baseball clubhouse, the reporters, at least the younger ones, can be the physical match of the players; in a football locker room, there is no debate to be had about which bodies belong and which do not. There’s no doubt who could beat up whom, if it came to that. This clarity has the effect of putting everyone at ease.

In short, baseball players are clique-ish and insular, while football players are more open and inviting. And in Mr. Lewis's conception, it is pretty much due to the self-confidence and security of football players vs. baseball players. Football players are self-confident, knowing that they are a distinctly different species than the rest of human-kind, and comport themselves with a degree of security and esteem not found in the baseball locker room. Baseball players have the skills, but their gifts aren't as readily apparent upon first glance than the distinctive physical superiority of football players. And this makes them edgy, defensive and more apt to keep to themselves.

The Bold Statement

Now I am certainly not a technology-lifer and haven't spent my entire career observing the developer/business person dichotomy, but I've seen quite a lot of it over the past three years as both the leader of a technology company and as one who has invested in 20 such companies. And I have been a keen observer and analyst of corporate culture since I joined the work force over 20 years ago. From my own observations, it strikes me that within technology companies, developers share many of the characteristics of baseball players while business people are more akin to football players. Why?

The Developer culture: A baseball locker room

The developer is producing something that is very concrete, almost like a work of art. Give the code x input and it generates y output. The code's efficacy is pretty clear. Coding against a time line is a lot of pressure. It is intense, and requires both creativity and attention to detail. And only certain types of people have the psychological and spiritual make-up for this kind of work.

And at the highest levels they are, in fact, a rare and valuable breed. Further, developers also know that their efforts are often at the center of what the company is trying do, and this is where much of their job-related esteem comes from (along with elegant, economical, tightly-written code). That said, they are often not interacting with customers and are seldom part of the revenue generation process.

And it is this distance that can often make developers insecure and feel under-appreciated. So they support themselves as a unit and a kind of "we-they" dynamic can emerge relative to non-developers, sometimes fueled by a perceived intellectual superiority that goes along with their own distinct developer culture. [NB: for those from Wall Street, this is very similar to the Sales vs. Trading dynamic, where traders feel themselves to be the principal creators of value and look down at salespeople, while salespeople see traders as tempermental, spoiled egotists that couldn't close a deal with a human being if their lives depended on it]. Developers. Baseball players. The metaphor pretty much holds for me.

The Business culture: A football clubhouse

The business person, conversely, isn't writing code. They are trying to monetize the code. This is done by working closely with customers, hearing what they want, bringing the feedback to the developers via product management, and leaning on the developers to make sure they deliver against a customer-driven time line. Once the product is ready to ship (be released, publish an API, etc.) given customer requirements, it is the business person's responsibility to get payment and to keep existing customers happy and new ones coming in abundance.

Business people can only be successful with the help of others - developers, operations professionals and product managers, to name a few - and are therefore outwardly-focused and desirous of help and assistance. Their confidence and esteem is built through the successful mobilization of the team and results in business getting done, often requiring far more collaboration and extra-group interaction than developers cranking out code. Business people can generally speak the language of many different types of people - except developers - while developers generally don't speak the breath of languages given their intense focus, job requirements and mind-set.

Clearly I am making some sweeping generalizations but I think I'm capturing the character of the compare/contrast of these two different, yet critical competencies necessary for making a technology-based company achieve to its full potential.

The Yahoo!/Microsoft deal: A cultural train-wreck

Now think of what might happen through a Yahoo!/Microsoft merger. Two vastly different companies with vastly different DNAs. One has been about creating and delivering value via the Web since inception, while the other was and still is largely a software company. One has a long had a whimsical, hyper-creative, Silicon Valley culture, while the other has had a much more restrained, process-oriented software engineering culture. One has been built upon short product release cycles, the other on multi-year release cycles. One has been trying to optimize its core offering against a ferocious competitor, while the other has been involved in trying to re-invent itself and diversify away from its core product for the past decade.

In short, Yahoo! is running a football locker room while Microsoft is operating a baseball locker room. Yahoo!: Extroverted, open, trying to figure out how to enhance the business in a ever-changing market. Microsoft: Introverted, we-know-best, buy our way to the answers in an ever-changing market. I can see the logic for the acquisition on paper, but when the cultural disparities are considered, it is difficult to imaging how two such distinctly different companies could come together and win. And I am not alone in my concerns.

Is a Successful YHOO/MSFT Merger Possible: Yes, but don't hold your breath

So how can a combined Yahoo!/Microsoft win? The same way a technology-start up can win - by creating a new and unified culture that respects the skills and talents of each group without forcing each group to completely lose its identity. Easier said than done. This is clearly possible in a start-up, where the healthy and positive behaviors arising from a "company first" mantra can be inculcated before the problems of "we/they" thinking, and insular, group-based cultures infects the firm's DNA.

In two established companies with over 30 years of combined legacy and tens of thousands of employees across dozens of locations spanning the globe, the issue is obviously much more difficult to address. Each firm already has its own DNA and is dealing with its own demons, and I'm not sure that the genetic engineering required to meld them is even possible. And even if it is, the probability of success is woefully small. I know that Microsoft has the best of intentions going into this deal. But my concern is that even the best of intentions can end up in failure, and in light of the cultural hurdles required to make this deal a success my heart goes out to Microsoft shareholders. Because if even if they win they lose. And my bet is that it won't be pretty.