Amid the media world's shock over Amazon founder and CEO Jeff Bezo's Washington Post purchase, there's plenty of speculation. Why did he do it? What will happen to the paper? Is this good or bad for journalism?
As the opinions fly faster than the facts, it's worth looking at another aspect: Are entrepreneurs making smart moves when they buy mature businesses? Although many assume that a big success is proof of a golden touch, there are many examples of start-up royalty who turned long-established businesses into dross. For example, when AOL founder Steve Case was in charge of the company, he led it into what became a legendarily disastrous purchase of Time Warner. Here are some of the issues that come up when entrepreneurs dabble in takeover madness.
Company Culture Clashes
When you've started your own successful business, chances are that you have strong opinions as to what works and what doesn't. An established company also has strong opinions that have been baked into its culture over years, if not decades. And that can lead to problems.
The entrepreneur who buys the established business might decide what is necessary for growth or for the company to meet the new owner's needs. However, the established culture has enormous inertia. You can kick, scream, and hammer away, but chances are often good that you'll never be able to divert the train into the direction you want it to go.
It takes a lot of time and patience to rework an established culture. You may eventually be able to move it where you'd like it to go, but that will take many small corrections, not a handful of large ones. Bezos could have the perfect answer for the Post to ultimately regain the financial ground it has lost over the years, but it doesn't mean he knows how to make the company go where it should any more than previous managers have.
Misunderstanding the Business
It helps to thoroughly understand the type of business you're about to take over. Not to say that an outside view can't be helpful. Far from it. Companies have often gained great value from recruiting insight from another industry. When it was in a slump, IBM benefited greatly from recruiting Lou Gerstner after his experience at American Express and RJR Nabisco.
And yet, outside expertise can be a danger. Just ask Apple what happened when Pepsi executive John Sculley took control. It was ultimately an unqualified disaster until Steve Jobs returned. An executive must be able both to rely on sound principles of business and the ability to see the unique ways they must work in a given context. Gerstner had experience in vastly different industries and had developed that conceptual shift. An entrepreneur must remember that what seems to work at one company and in one context might not in a significantly different type of company, where sales models, customers, and other dynamics may be unfamiliar.
Speaking of Steve Jobs, when he took over at Pixar, he tried using a sales model he had developed for the hardware business at Apple and NeXT. Ultimately, though, Pixar wasn't successful until Jobs realized that its future was in developing movies, not in delivering tools to animators.
Radical Change Can Be Good--or Bad
Businesspeople like to put their personal stamps on what they do. Who can blame them? Doing an impersonation of someone else would seem a dull task. Entrepreneurs, being used to blazing a trail and doing things their way, can walk into a new situation and want to undertake a major renovation.
But it may be that the business doesn't need a big overhaul. It might be relatively strong and only require some redirection. Or it might be that without a new approach, the company will be doomed. Success in taking over an established company means being able to discern what it really needs and how to best deliver the required change.
Will Bezos do great things at the Washington Post? It's hardly a given. Perhaps the biggest thing he and other entrepreneurs can do is to take time to really see what is happening inside the company and then to develop a strategy that can take the business from where it currently is to where its potential lies.