Business The AOL Way

by David Stauffer

Excerpts from “Business The AOL Way” by David Stauffer.

AOL’s mission “to build a global medium as essential to people’s lives as the telephone and the television – and even more valuable”.

There’s nothing visionary about AOL, [Case] submits. Its success results from simply paying better attention to what consumers want than technology-obsessed rivals do. Consumers want a central location where they can find good content. And they want someone to make it easy for them.

It can be argued that AOL’s rise within a new competitive landscape resulted in large measure from its display of what business professors David Yoffie and Michael Cusamano call “the three main principles of judo strategy: rapid movement, flexibility and leverage.” Explaining judo strategy in a 1999 article in the Harvard Business Review, Yoffie and Cusamano expand on the three principles and their execution:

1. Move rapidly to uncontested ground to avoid head-to-head conflict. Move to new products, move to new pricing models, move to new testing and distribution models – all to keep out of the way of bigger, stronger competitors or to move where those competitors (usually owing to size) can’t go.

2. Be flexible and give way when attacked directly by superior force. Mesh flexibility and tactical adjustments with ongoing strategic plans.

3. Exploit leverage that uses the weight and strength of opponents against them. A competitor’s weight and strength, for example, in the form of strategic commitments and investments, can be confining in the face of nimbleness.

The means by which AOL rose to prominence in the 1990’s exemplifies these principles. To vault past Prodigy and CompuServe, AOL delivered a product that most new users regarded as more valuable, and it dared to introduce a flat-rate pricing model. As for flexibility, AOL’s is regarded by some as extreme, but by all as effective (see “Reshaping Everything but Your Vision” Chapter 1, p.30). And AOL is among the most effective firms in forming alliances with best competitors of all sizes.

AOL’s association with Time Warner includes numerous new and extended cooperative agreements (that were largely ignored when they were announced at the same time as the blockbuster merger plan). Among these are alliances that venture into largely unchartered territory; for example, AOL members gain access to Time Warner promotional music clips, broadband CNN news content is distributed on the “AOL Plus” service available to subscribers with broadband connections, and AOL will deliver instant messaging, MovieFone, and other brands on Time Warner’s Road Runner broadband cable service (which itself is a five way joint venture that includes Compaq Computer and Microsoft.

Alliances can be an ideal vehicle for companies to enter new markets and lines of business because they:

 spread the risk of new ventures among two or more companies;

 can speed time to market to an extent that no company working alone could match; and

 tap the cumulative expertise and creativity of numerous firms required to adapt complex technologies functionally in practical products.

The prospects include the enormous potential of Time Warner’s millions of cable customers, who watch programs produced by its own Warner Brothers studios and news shows on CNN, which it also owns. In the future, analysts expect the companies to take advantage of the cable system that is in place to sell telephone services and higher-speed Internet connections. According to Jones, “They are one of the earliest businesses to meet this trend”.

In other words, AOL and Time Warner are ahead of the curve, the first couple to arrive at the much anticipated Convergence Ball.

At the beginning of the 1990’s, America Online existed only as a struggling online service, owned by an obscure company called Quantum Computer Services, that provided limited games, e-mail, chat rooms, and news articles to computer owners. By the end of that decade – after a corporate name change and 1992 initial public offering – AOL’s stock market value placed it among the world’s largest companies. The CNN network’s “Moneyline” program named AOL “Stock of the Decade”, with a best-in-the-US appreciation of almost 69,000 percent.

How has AOL achieved such remarkable results? A thorough examination of reports and commentary on the company since its inception points to the 10 keys to success described in preceding pages. Here they are again, with brief explanation intended to guide you in taking your firm or unit to AOL-like heights.

1. Go into everybody’s business

You can no longer soar to success in buggy whips and similar anachronistic lines of work, so it’s smart to offer customers something you can reasonably expect they’ll need. If you do, the principal early challenges are to overcome early discouragement, learn from initial failures and triumphs alike, and be willing to make course corrections in everything but your dream.

2. Give your business a human face

Steve Case, unlike most other leaders of the technological revolution, understood from the outset that his business, like all others, is ultimately a people business. He proves the tremendous value of recognising that all of the company’s stakeholders – employees, customers, shareholders, and oneself – are individuals, and their overriding aim is to feel connected with others.

3. Never be dissuaded from pursuing your dream

Steve Case’s excellent adventure with AOL has been no cakewalk; rather he’s been doubted and second-guessed every step of the way. His experience and AOL’s history demonstrate that you can come out a winner by staying firmly fixed on achieving your vision.

4. Kiss

Too many businesses get so caught up in their own prowess and sophistication that they fail to KISS: keep it simple, stupid! A large measure of AOL’s success can be simply attributed to simplicity, which the company maintained while so many others made things too tough on customers. The difficult challenge of making things ever-easier on all users is the smart way to go for every enterprise.

5. Ignore “irrelevant” experts – customers rule!

We’re experts in what we do for a living – who else knows as much about our products and services? The urge, therefore, is to give customers what we think they should want. It’s a mistake companies make again and again, but AOL has avoided like the plague. The company’s success from doing so is a dramatic illustration that customers know best what customers want.

6. Don’t shy from a fight…

Steve Case’s leadership shows that nice guys don’t finish last, but first, provided they fight their business battles under today’s changed rules of corporate competition. That means selectively choosing where and how to take a stand, staying focused on business aims rather than competitive foes, and employing the natural advantages of the company’s size – whether its small or large.

7. …Or hesitate to sleep with the enemy

In this Internet age, no company can keep up on its own with the knowledge explosion, changing markets, or shifting customer demands. AOL shows the way things have got to be done: you can purchase and partner as required – even in league with your presumed chief competitor – to grow your company, advance its mission, and succeed in these challenging times.

8. Leverage successes, build your brands

AOL’s relatively short corporate existence vividly demonstrates that even a high achieving company can’t let down its guard or take a breather to enjoy its accomplishments – old and new competitors are always gunning for you. You’ve got to extend and solidify your brands, leverage past success with new initiatives, and win an increasing customer share and share of customers.

9. Admit mistakes and grow

AOL hasn’t grown despite mistakes, it’s made mistakes that are part and parcel of any ambitious growth e

Date Posted: 26-Jun-2001