Or the buck doesn’t seem to stop at the CEO’s desk anymore. Ran into this on linked in:
Now I am not a heavy Patch user. It was one of those things that just sort of showed up. I think that I discovered Patch when the Branford CT contacted me about some pictures I shot of a kid that fallen off some rocks on the trolley trail in Stony Creek. But I always thought that it was a good thing. I never thought about the business side. Well now I know and boy is it a sad story of a big ego that needs to be deflated. Tim Armstrong is a perfect example of how everything is wrong in business today. Here’s his speech.
He starts off by saying he takes full responsibility for what happened at patch. That’s right, he is responsible. So instead of saying, well I’m turning in this years stock options and taking a huge pay cut he fires his creative director. Ok maybe there were reasons, but it looked, to everybody in that room as if it was purely spontaneous and just plain nasty. The fact is that everybody in the call had to know that layoffs were coming. The worst part is that the reason for the layoffs were not something the overworked, underpaid editors did, but Armstrong’s bad business decisions.
Armstrong is right that there needs to be some sort of calendar, collection of events in places like Riverside. I live in Southern Ct and I, unless I know its coming, frequently don’t find out about stuff until it’s over. He should, though, have started small. Maybe with just Greenwich, Stamford, Darien and Norwalk, say. Keep the budget small until you have a valid business model. Start making money before making the big bets. Find out how to incorporate Patch into existing users’ AOL pages. Develop the business. Don’t go crazy big with a huge chunk of the stockholder’s money with no idea how to get a return on your investment. That’s just plain stupid. I’m not surprised that there was a proxy fight. The big surprise is that the stockholders didn’t give Tim the boot.
Another issue is how much goodwill AOL lost over this. And what will be the long term consequences for AOL. The patent sale was one shot. Actually considering the age of most of the patents, Armstrong is incredibly lucky that there was any value to sell. At best Facebook only bought a year or two before the patents expire and become irrelevant. So Armstrong got lucky once. But he’s still creating problems for himself. AOL needs to build, but how can anybody start to build anything if they know they are one bad quarter from the boot. How can they be creative and inspired if they know that there’s nobody to back them up.
This isn’t a healthy corporate culture for AOL, or for that matter any company. With the kind of executive churn that Armstrong is creating there’s never going to any team making. Everybody is going to be looking at the next guy and saying why should I invest in him or her because the might be gone after the next earnings call. And each earnings call is only going to increase the tension. In the end AOL is going to probably be another one of those business cautionary tales, told in MBA classes.
The problem is worse than Armstrong or any other CEO. It’s as if the entire corporate culture here in the US has lost it’s perspective. The typical corporation spends far too much time looking at the earnings calls and too little time investing on building the business. Too many people have forgotten that great businesses take time to build. Everybody on Wall St is focused on the flash and not waiting for the bang. That’s what happened to Armstrong. He probably feels as if everything has to happen right now or it won’t happen. Those big ten money managers aren’t helping.
Patch was good thing. Had it stayed small until the business model developed it could have been a real asset to the communities in Southern New England. New businesses need time, time to evolve, time to figure just what the revenue path should be, to develop customer relationships, to fail at things. That’s crucial to a business’s success. It’s better to keep things small, so that the consequences of failure don’t soak up a huge amount of resources.
That’s just how things are and by going big so quickly all Armstrong did was waste resources AOL didn’t really have. It would have been better to start a bunch of smaller apps and see which ones flourished. I bet that there were a bunch of people with ideas at AOL that didn’t get funded. Maybe his creative director could look for them. Oh wait, he was fired. Too bad.