Wednesday, April 26, 2006

How McKinsey "Helped" EBay Ignore Google

Last week's Wall Street Journal contained an article discussing how EBay had, to its chagrin, ignored Google as a competitive threat. Of note was a passage noting that McKinsey produced a report for EBay in 2003 which allayed the latter's fears of Google moving into ecommerce.

So much for relying on one of our country's most expensive consulting firms' strategy advice. I think there is an important lesson to be learned from this situation.

When I consider which are the current leading technology firms which dominate and shape the business landscape, five names come to mind: Google, EBay, Yahoo, Apple and Microsoft.

What disappoints me is that EBay, with corporate veteran Meg Whitman at the helm, would honestly think McKinsey could possibly teach her management team anything, when her firm is already at the vanguard of business experience. Along with the other four I mentioned, EBay is virtually changing and writing the rules as they go along.

It would seem sensible for Whitman to choose 3-4 wise "greybeards" of her acquaintance to come help role play some of the other four companies with her management team at their offsite meetings. I could see EBay learning how others would think to employ the assets of Google or EBay in various scenarios.

But asking McKinsey for a "report" on Google's probable moves and intentions? I can't understand it. If Whitman and her team aren't the best-positioned people to provide these answers, with a little perspective from a few carefully-chosen individuals, how is an outside consulting firm going to do it?

My partner and I, in chatting about this story, unexpectedly swapped identical McKinsey anecdotes. He was at Merrill Lynch some years ago, and I was with Chase Manhattan Bank. We both witnessed McKinsey come in about every 4 years and recommend changing some organizational aspects of our respective firms to what they were 4 years earlier. I'm not joking about this. At Chase, McKinsey reorganized Corporate Lending between market segment and product lines about three times while I was there. They are legendary for creating revenue streams on the thinnest of rationales.

If you were the CEO of EBay, would you really have ignored Google for the last three years? In an industry sector rife with boarding house reaches such as Microsoft grabbing browsers from Netscape, and Apple jumping into applied digital music devices and online content systems, would you truly expect Google to restrict itself to search engine product/markets?

I wrote a few months ago that I believe Google understands the vulnerability of its, and any, temporal search engine. That is why they have been extending their brand like crazy onto anything remotely addressable from their current competence.

In a way, though, this WSJ story might be very good for the US business community. With such a glaring gaffe by McKinsey, on behalf of a technology leader like EBay, perhaps other companies will be more judicious in their use of, and choice of, consulting "help" when they deliberate on their strategic directions and threats thereto.

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