Peanut Butter Manifesto

The Wall Street Journal describes today an internal paper being circulated at Yahoo called The Peanut Butter Manifesto (subscription required).  The paper covers a lot of ground, but one key point generates the name.  Yahoo, according to senior vice president Brad Garlinghouse, is spreading its resources evenly across activities:  "… a thin layer of investment spread across everything we do and thus we focus on nothing in particular."

Corporations do this on both the upside and the downside.  Moving up, everyone gets some resources for new projects.  If Al and Betty and Chuck all have their projects funded, then it seems unfair not to fund David and Evelyn.  On the downside, cross-the-board budget cuts treat all activities as equally overstaffed.

I want to both agree and disagree with this concept.  (The Lord gave me two hands, and I’m going to use both of them.)  Agreement:  obviously.  Some projects have to be more important than others.  Some projects have the potential to be blockbusters.  Fund them commensurately with their potential, and their risk.  This is so obvious, why does any successful corporation have a problem here?  The challenge is in executive decision making.  Picking winners means telling others that they are not winners–which means "losers" even if we don’t use those words.  Who wants to tell a loyal, talented subordinate that his or her project just isn’t worthy of large support?  When times are good, the corporate leader often defaults to giving some money to all half-way decent projects.

Corporate executives deserve to be paid big bucks–but only if they are making the hard decisions.  If they are expending large amounts of cash just to avoid a confrontation with a subordinate, they are not doing their job, do not deserve high pay, and actually drain the resources and future of the company.  Buck up, walk like a man (or whatever the gender-neutral version of that saying is), do th job you’re paid to do.

Here’s the disagreement:  lots of small, low-potential projects should be funded.  I’m not saying to spread the peanut butter evenly, but make sure that every bit of the bread has at least a little bit of peanut butter on it.  Here’s why.  Nobody does a great job of seeing the future. Take it from a professional forecaster, the world is very complicated, with huge changes in technology and society that no one can accurately predict.  The way to thrive in such a world is to be have a little bit invested in many different activities.  Microsoft has been a master of this strategy.  See a new technology or market area, laugh at the oversized goals of the little players in the little arena–but buy a piece.  Keep an eye on it.  Check in to see how the technology is developing, how the market is growing.  Occasionally you’ll find that one little crumb has developed into a whole loaf of bread.  You want to own that loaf, not stare at it in someone else’s parking lot.

Business Strategy Implications:  Do not spread your resources evenly over all activities.  But in avoiding that mistake, don’t neglect small projects that could possibly, even if unlikely, develop into major profit centers.