NVIDIA vs. Yahoo: How NVIDIA Flourished by Sticking to the Basics & Yahoo’s Board Killed Yahoo

There are times when I truly wonder if boards are staffed with idiots. The contrast between NVIDIA and Yahoo is stark. NVIDIA is a hardware-based company in an internet world and Yahoo is one of the founding internet companies, yet NVIDIA is the fastest growing company in the Fortune 500 and Yahoo may not be around by the end of the year.

At the heart of why NVIDIA is doing very well and Yahoo is failing is the application of common business practices and excellence in execution. In short, things we learn in business 101. This isn’t to say what NVIDIA has accomplished is easy—far from it—and like every company in this space the near rabid and ultimately pointless move to mobile almost did NVIDIA in but it never faltered or lost focus on what it is. At the heart of all of this is the bad idea that you don’t need subject matter experts at the top of a company—something that this comparison should disprove definitively.

Let’s talk about that this week.

NVIDIA vs. Yahoo

The last 10 years have been problematic for both firms, but NVIDIA’s founding CEO remained in place while Yahoo became a place where CEOs came to end their CEO careers. NVIDIA never lost sight of what it was and what it was good at while Yahoo seemed to drift between strategies of the moment and in the end, were trying to be a media company without a media CEO at the helm.

This is like having someone captain a ship that doesn’t know anything about the ocean. Worse, given the skillset mismatch, Yahoo was like having an Army Colonel captain a ship. What was particularly troubling is that Ross Levinsohn, who had been placed as interim CEO of Yahoo was actually qualified to run a media company and yet he was forced out to make way for Marissa Mayer who was not. As a result, Mayer struggled through making text book mistake after text book mistake and was never able to truly get the company focused on the right direction. Currently the firm’s core assets (except Alibaba Stock) are being sold to Verizon who may back out of the deal given the frequency, lack of disclosure, and damage of a number of security breaches. And Mayer has not been asked to stay on with either part of the firm.

Jen-Hsun Haung, on the other hand, weathered a near disastrous mistake with the Tegra effort as it failed to gain traction with either phones or tablets. This was a massive effort and NVIDIA wasn’t alone in believing that this was the future of its technology. But not only didn’t NVIDIA get any market penetration, the tablet market nearly collapsed and smartphone sales stalled—showcasing that it was a bad market to enter. NVIDIA didn’t slow down, pivoting immediately back to PCs and moving to adjacent markets like Deep Learning/Analytics and autonomous vehicles which were—and still are—just getting started. In effect, it missed the mobile wave which started dying out anyway but was able to almost instantly change focus to the huge coming waves and thus NVIDIA was able to avoid the kind of failure that Yahoo experienced.

Wrapping Up

This once again showcases how important it is to have experienced leadership at the top of a company. Jen-Hsun understood NVIDIA deeply—having created the firm—and had a deep understanding of the company’s strengths and weaknesses, so was able pivot from a bad opportunity to a good one and execute. Marissa Mayer lacked either experience as a CEO or experience in media—which was where Yahoo was focused—and instead of creating the next FOX, tanked the company so that shortly it won’t even have an independent identity anymore. So, the contrast is strong strategy and execution against weak strategy and execution and it isn’t like either CEO was a slacker. The Yahoo board had someone capable in the job in Ross Levinson and it is through their actions that this advantage was lost and billions in stockholder value was lost.

In the end this contrast showcases how important a subject matter expert is at the head of a firm. But, I expect another board will make the same mistake Yahoo’s did with Mayer shortly because boards just don’t learn this one critical lesson.