Is This Disruptive Thinking?

The just announced Microsoft unsolicited offer to acquire Yahoo! for $44.6 billion is all over the news. Analysis of it cover the spectrum. One question I have is, "Is this disruptive thinking on Microsoft's part?". One thing is certain, the fear that Microsoft has of Google appears to be reaching a paranoia state. This is almost an admission from Microsoft that they did not get the software as a service (SaaS) right. SaaS appears to be outside of its 'core competencies' even though they have invested billions in the Internet.

This take over offer appears to be an admission by Microsoft that they have failed in their efforts to transform itself from a desktop Windows applications centric company to a software as a service company that leverages the web. This evolution has been an ongoing objective for the past 7-years with nothing but a 44% drop in stock value.

Google's revenues and influence on the web keep climbing while Microsoft and Yahoo keep declining. The combination of Microsoft and Yahoo will only yield about 20-30% of the web search market. Google currently owns about 60-65% of that market and keeps increasing its share.

Microsoft's achiles heel appears to be its goal to tie everything (software applications) to Windows. Yahoo and Google on the other hand are internet service based companies whose goals are to make all their services available to anyone, anywhere, using any operating system or web browser. "Is Microsft Saving Yahoo! Or is Yahoo! the Savior".

I think that a merged Microsoft and Yahoo! will encounter several cultural issues. They have vastly different cultures. The cultural intertia of both companies will be difficult to grasp and refocus into a convergence. It will be a daunting task.

There is a significant technology overlap that would cause a lot of internal disruption and team dynamics issues that are not evident on the surface. Look at how the TimeWarner-AOL deal turned out. These two distinct cultures clashed and resulted in the decline of AOL. Orchestrating a successful merger of Microsoft and Yahoo! will take some extremely well calculated and organic management decisions in a timely manner.

Google is not sitting still. It appears that the Microsoft merger's strategic goals are addressing the services for which Google is already successful. Knowing Google, they are moving on to the next thing whatever that is. We will find out sometime this year in the typical Google fashion, they will just drop it onto the world.

Basically, Microsoft is playing follow the leader. If Microsoft has failed so far in competing with Google, the merger will only complicate things for them because of all the internal reorganization that is required to make it successful. Overcoming the structural interia in Microsoft and Yahoo! is a complex strategic management undertaking. These internal tasks will be a distraction for the new combined Microsoft-Yahoo corporation. This distraction if not resolved quickly will give Google more time to innovate and pull further ahead. "Fitting the Pieces Together in an Internt Mega-Merger".

One thing is certain, 2008 is already full of suprises and it is only February!