The Lessons in Groupon and Yahoo

This week’s news cycle held two items of note for University students. First, Yahoo CEO Marissa Mayer announced an end to the company’s work from home policy, then, Groupon announced the end of Andrew Mason’s tenure at the company. They fired their quirky CEO and co-founder yesterday.

In a refreshingly candid letter to employees, Andrew took responsibility for the company’s poor financial performance. “…our material weakness [and] two quarters of missing our own expectations and a stock price that’s hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable.”

But what is the root of the problem for a company that was valued by Wall Street at $13 billion just three years ago and is now valued at $3 billion?

For Yahoo, the intent behind the end to their telecommuting policy seems clear. Compared to CEO Marissa Mayer’s former employer, Google, “Yahoo has a productivity problem. Google’s 53,861 employees generate $931,657 in revenue per worker, 170% higher than Yahoo’s $344,758 worth of revenue per employee.” Their goal, as sited in the company memo announcing the policy change, is to create “communication and collaboration” through workplace encounters around the water cooler and coffee machine. The effectiveness of this policy reversal – and the best way to generate productivity and creativity in its workforce – have been debated and discussed at length everywhere from Wired Magazine to Forbes.

I think Philadelphia University’s DEC (Design, Engineering and Commerce) core curriculum can answer both the question of Groupon’s revenue loss and suggest wiser ways for Yahoo to be generating revenue.

The five course series begins with Integrated Design Processes, a course designed to model the process of opportunity mapping. It is here that the lessons can be applied to Yahoo’s policy choices. At the core of all DEC learning is the maxim that metrics should determine outcome, that all businesses should move out of old mindsets and rules and into new opportunities and models. What Yahoo is missing is a fresh way of thinking about old models. We are past an age where a technology company, in particular, can deny employees the flexibility their very innovations have created. As such, Yahoo needs to start with the opportunity provided to them – with their talented work force, the unique models of communication at their disposal, and their cutting edge status as a leader in the communication world – and find new and exciting opportunities to define workplace culture.

From there, the lessons of DEC are clear. Opportunity should create the business model. In our next courses, students transform ideas into service and product delivery systems that are economically sound and create value for stakeholders. Here is where we might offer help to Groupon. Time will tell, but it appears that the company is a terrific idea and a real opportunity but lacks a disciplined and scalable business model. The marketplace is demanding. Customers and investors want value. A business model fulfills both sides of the equation.

I expect we will see Groupon iterate and evolve how it serves customers, just as Yahoo’s policy should go through significant revision and adaption as it finds opportunity in new models and means. Maybe Philadelphia University students can help both understand how to form more durable entities?

 

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