The market is a tough place, even for the strongest of competitors. The rise and decline of companies tell us much about how leadership, innovation and long-term visions contribute to the survival of a venture. What factors make even the most promising of companies falter as they mature? What wise decisions allow other companies to remain leaders in their industry year after year? And what can their failures and successes tell us about how the industry is changing? 

A recent article in the Economist analyzes the “diverging fates” of three of the largest and oldest internet companies – Yahoo, Amazon and Ebay. 

A basic summary: Yahoo! used to be the biggest game in town, but then it hired a CEO out of Hollywood, and its portal became cluttered with flashy, competing services while Google outpaced Yahoo! by focusing on simplicity, functionality and user interactivity. Ebay grew because it was the first to offer online auctions, but its monopoly faces tough competition from Google product searches and social networking markets. Amazon is the only one out of three with much potential for growth; it now competes directly with Ebay by offering third-party sellers, and has added the new and lucrative service of online data storage rentals. Diagnosis? Yahoo! is hurting, Ebay is stagnant, and Amazon is great.

From the business practices summarized in this article one can conclude that certain factors in a company’s management are important to its long-term survival: 1) understanding and adapting to the changes in the industry 2) having a clear company vision and 3) incorporating new technologies and services into the framework of that vision.

But hindsight is 20/20, and I think the matter-of-fact tone of the article misleads the reader into thinking that Yahoo and Ebay’s problems could have been avoided with better foresight. Could Yahoo and Ebay have anticipated their present challenges and responded appropriately to them, even with consideration of these factors? Should Yahoo have known that its personal “portal” model would be less attractive to internet users than Google’s interactive, broad, information-sharing model? Can shifts in internet culture and trends really be predicted and acted upon accurately? More broadly, is it possible for any company to continually to adapt to changes in its industry without compromising its initial appeal or vision?

What are your thoughts on the “Three Survivors” and on the other questions that I’ve posed? 

This entry was posted on Wednesday, June 25th, 2008 at 2:32 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.