Managing For The Street.Com

Over the last five years those who (like me) prefer to see businesses managed for the long term, based on tangible measures like profit and return on investment, have been hammered in the Internet Economy.

We’ve been called Clueless, we’ve been called old fogies, we’ve been called stupid, and most important, we’ve been called poor. (The last one hurts.) Instead of managing for the future, we’re all supposed to manage for the Street, by which I mean Wall Street. Those who master the game become gazillionaires. As for everyone else the question is simpler – would you like fries with that?

We all know the satire of what it means to manage for the Street. Profits mean nothing. Deals and momentum and alliances mean everything.

One point that isn’t made often enough is that managing for the Street also means being a slave to fashion, in this case financial fashion. ISPs had their first heyday in 1995, along with toolmakers like Open Market. That crashed, and attention moved to content sites like When that faded everyone wanted e-tailers like or brokers like E*Trade. Now that’s fading and the fashions favor infrastructure companies like Cisco Systems or b2b portals like Internet Capital Group.

There’s one thing even we fogies have to admit is true. When the lights strike you right and you’re on the catwalk you’d better move quickly. Fashion is fickle, and the key is to buy, buy, buy, using that stock as currency. The aim is to build an unassailable position, a guarantee of dominance. That’s why the Healtheon-WebMD merger looks so good to the Street. Neither outfit has shown a profit, and their sales numbers aren’t good either. But look at those alliances!

Managing for the Street also means managing for expectations. Profit doesn’t matter so much as whether “the number” for profits (losses), and to some extent sales, meet the expectations of analysts. At the first failure stocks are “taken out and shot” (my wife’s employer recently suffered this fate even after they moved her unit to Dilbert’s Wally World.)

The point here is that the music always stops. When you get on the catwalk (or near it, as you do when you approach an IPO) you have to strut your stuff. You can’t waste those 15 minutes of fame. And anyone can make that mistake. Anyone can think those stock millions belong to them, not the market, and fail to take advantage by buying up rivals and building market share.

That’s the real lesson in Chris Byron’s recent story on Jim Cramer’s Instead of buying out rivals with his fashion show profits, Cramer actually tried to build his business. He plowed his money into marketing and content. He tried to manage his business the way, say, I would. But now the song’s over, everyone’s gone home on the content story, and he’s still bleeding cash. The gamesman, in other words, has been gamed by his own game.

In my world, the wheat is separated from the chaff after the music stops. It will be fun to see if Cramer has (or can hire) the management it takes to succeed in the real world. If he fails that will be fun, too, at least for those of us in the fry line.

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