I am intrigued by the Yahoo business model. Yahoo is a follower in every single area but has still done reasonably well. During most of 2001-2003 period, Yahoo's stock price hovered in single digits and teens at best, it is now trading in the $35-40 range. From less than $1 billion in sales in 2002, the firm had over $3.5 billion in sales last year. So the question is Does it pay to have no competitive advantage but good execution?
So the announcement that Yahoo is launching an online music service to take on iTunes, Rhapsody, and Napster simply shows that a price war will commoditize the music download business within a matter of weeks and the winners will be companies like Yahoo that have the critical mass to market it to a broader base of potential users.
Examples of companies that create value through good execution
There are numerous examples of companies that execute really well and that itself becomes the foundation of competitive advantage. Walmart, Home Depot, Target, Ecolab, EMC, and many others.
Yahoo is doing exactly what these old-economy companies have done, that is, provide what customers need in the best possible manner. Yahoo, which used to be a leader in search, now is the worst search engine among the top three. MSN has much better search than Yahoo but Yahoo still grabs a larger share of the search market because of critical mass. The same applies for email, online entertainment, shopping, etc.
What does it mean for you?
So the announcement that Yahoo is launching an online music service to take on iTunes, Rhapsody, and Napster simply shows that a price war will commoditize the music download business within a matter of weeks and the winners will be companies like Yahoo that have the critical mass to market it to a broader base of potential users.
Examples of companies that create value through good execution
There are numerous examples of companies that execute really well and that itself becomes the foundation of competitive advantage. Walmart, Home Depot, Target, Ecolab, EMC, and many others.
Yahoo is doing exactly what these old-economy companies have done, that is, provide what customers need in the best possible manner. Yahoo, which used to be a leader in search, now is the worst search engine among the top three. MSN has much better search than Yahoo but Yahoo still grabs a larger share of the search market because of critical mass. The same applies for email, online entertainment, shopping, etc.
What does it mean for you?
- Not all business opportunities and value creation require changing the paradigm. If you can execute better than your competitors, you can create tremendous value and even a competitive advantage.
- Critical mass itself is a value creator. When you have critical mass, you can outsource many business process and acquire competencies that you lack.
- Business model transformation is possible. Yahoo, that used to be just another dot-com ceased to be that a while ago, and is now a media company.
Recommended articles