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Meg
and the Machine It's a drizzly, steamy mid-July morning in To tell their story, they're speaking English, but really they are using
the international language of eBay managers: statistics. Out comes a dizzying
array of PowerPoint slides detailing user numbers; S-curve regression
analyses of site performance; and even the relationship between sunlight and
auction bidding.
Whitman chews on a pen and scribbles notes on a white legal pad. She's
dressed in dark-green slacks, a yellow checked shirt, and a beige sweater
thrown over her shoulders, sorority-girl style. If the Germans are worried
that the boss will explode, there's no need. When the slides are done, she
asks everyone else's opinion around the room. The managers blame the slowdown
on the maturing of the German auction market and on "Our destiny is completely in our hands," she says, jabbing the
air with her pen for emphasis. "There are lots of dials we can turn. I
mean, look at the U.S., where we've just had five quarters of accelerating
growth over a billion-dollar base. They said that it couldn't be done." The group is relieved, but they'd better not have missed the challenge.
Whitman has built a powerhouse in the As eBay has rocketed (it ranks No. 8 in FORTUNE's
100 Fastest-Growing Companies list), so have the reputation, stature, and
influence of its soft-spoken CEO. Yet get Whitman
talking and she delivers a message that often comes off as counterintuitive.
Her explanation for her success is almost always some version of the mantra
she tosses out in meetings with managers from Deflecting the spotlight is born of humility, though not just the personal
kind. It comes from an awareness of something that slightly spooks—and
humbles—eBay's management from Whitman down: the suspicion that eBay runs
itself. The company's formula is so incredibly simple (provide a worldwide
market and collect a tax on transactions as they occur), and its growth is so
organic (buyers go where the sellers are, who in turn go where the buyers are
...), that a saying has become part of eBay lingo: "A monkey could drive
this train." Maynard Webb, eBay's chief operating officer and the
technology guru who saved the website when a traffic overload threatened to
collapse it in 1999, summarizes the resulting ethos: "Most of us say, 'Man,
we've got something special. Don't screw it up.' "
Founder Pierre Omidyar, 36, who as chairman
has no day-to-day role, thinks of eBay not as a traditional company but as
what physicists call a "complex adaptive system," like the
financial markets or the weather. Translation: It's pretty much unstoppable. Making that kind of claim is easy for a founder-philosopher like Omidyar, but Meg Whitman has a business to run. In
September 2000, she set a revenue target of $3 billion a year by 2005, which
eBay should achieve easily. Since then she has stopped making bold public
predictions. Instead Whitman talks about building a global enterprise in which vast
amounts of merchandise change hands and cross borders continually. How vast?
Whitman has started to benchmark the company's gross merchandise sales
against the giants of retailing. Right now eBay would rank in the 20s—still
puny compared with Wal-Mart or, say, Sears—and she won't reveal where she
wants it to be. "There is no industry in which we compete, really," she says.
"There is no online marketplace industry. We are pioneers." And
like all pioneers, Whitman is figuring out how to run this business as she
goes. Another saying around eBay's headquarters is, If it moves, measure it.
Whitman personally monitors a host of barometers. There are the standard ones
for Internet companies: how many people are visiting the site, how many of
those then register to become users, how long each user remains per visit,
how long pages take to load, and on and on. Whitman also closely eyes eBay's
"take rate," the ratio of revenues to the value of goods traded on
the site (the higher the better). She measures which days are busiest, the
better to determine when to offer free listings in order to stimulate the supply
of auction items. (Mondays in June are slow; Fridays in November rock.) She
even monitors the "noise" on eBay's discussion boards, online
forums where users discuss, among other things, their opinion of eBay's
management. (Level 1 means "silent," and 10 means "hot"
or, in Webb's words, "the community is ready to kill you." In other words, eBay is a fire hose of business data. And no group of
professionals loves being soaked in data more than management consultants.
Whitman is a consultant to the core. She hopscotched
from When she joined the company in 1998, it was a collection of geeks
handpicked by the ponytailed Omidyar.
He recruited her to give the startup some blue-chip cred.
It didn't take Whitman long to transform the place in her image. She has
peopled many of eBay's senior management posts with ex-consultants. Jeff
Jordan, who runs eBay's Understanding management-consultant culture is key to understanding Whitman's style. Get your arms around
the data, the thinking goes, and you can decide where to spend money, where
more people are needed, and which projects aren't working. "If you can't
measure it, you can't control it," she says. "Being metrics-driven
is an important part of scaling to be a very large company. In the early days
you could feel it, you could touch it. Now that's more difficult, so it has
to be measured." The people who do the measuring tackle their mission with intensity. Of
eBay's nearly 5,000 employees, 2,400 are in customer support and 1,000 in technology.
The most important group are what eBay calls
category managers, a concept Whitman took from her P&G days. Instead of
Tide and Crest, managers carve up eBay's 23 major categories (and 35,000
subcategories), such as collectibles; sports; jewelry and watches; and
motors. They spend their days obsessively measuring, tweaking, and promoting
their fiefdoms. Category managers have only indirect control of their products, of course.
They can't order more toothpaste onto store shelves. What they can do is
endlessly try to eke out small wins in their categories—say, a slight jump in
scrap-metal listings or new bidders for comic books. To get there, they use
marketing and merchandising schemes such as enhancing the presentation of
their users' products and giving them tools to buy and sell better. It's
classic needle-moving. And because of that, say ex-eBayers,
the place can be ultracompetitive. To gain
attention for what can seem like simple steps, managers send around
PowerPoint slides, most of which have been honed, re-honed, and then honed
some more before being presented up the corporate ladder. The result can be glacial change in a company built for speed. Lily Shen, a senior category manager for fashion—which
accounted for about $900 million of transactions in 2002—noticed this spring
that women's shoes were accounting for an increasing share of her traffic.
Getting them their own category took two months: Every division—from
technology to merchandising to marketing—had to sign off before the change could
be made. When women's apparel wanted to add a way to narrow down shoe
searches—say size 5 blue pumps for less than $50—the change took ten months. To Whitman, the measurements and the delays are signs not of creeping
bureaucracy but of a system that's developed rules and processes. The more
stats, the more early warnings and the more levers to pull to make things
work. Yet she's aware of the danger of analysis paralysis. "You have to
be careful because you could measure too much," she says. It's a fine line between observing and obsessing. Recently, to ensure eBay
hasn't gone overboard on rules, Whitman brought in—surprise—even more
consultants. The benchmarking firm measured eBay against peers to see how
fast it adds features to the website. The result: eBay's performance was
middle of the pack, at best. Says Whitman: "We have some work to do on
time to market." Speed defined Whitman's life early on. The youngest child of a Wall Street
dad and stay-at-home mom, she raced through high school in suburban That's probably the last time Whitman was intimidated. With her MBA in
hand she went to Procter & Gamble and became a brand manager, working
alongside future Microsoft CEO Steve Ballmer and Scott Cook, future founder
of Intuit. After two years she and her new husband, neurosurgeon Griff Harsh, moved to It wouldn't be easy. eBay was pushing the limits of what was then called
Internet speed, growing from 34 million auctions in 1998 to 265 million two
years later. She moved fast to beef up Omidyar's
gangly marketplace, opening a customer-service center for the thousands of newbies who were signing up daily, increasing fraud
detection, and installing a new technology team, which was given carte
blanche to remake eBay's infrastructure. Whitman knew that the eBay idea was
powerful; she wanted to make sure it could thrive. A hugely successful business model, though, has a way of masking errors.
And there have been a handful of tactical and strategic missteps during
Whitman's tenure. In 2002 she pulled eBay out of Her costliest mistake also offered the biggest lessons about how much the
eBay community determines the company's success. In 2001, eBay unveiled a
checkout procedure for completing transactions. The initiative, spearheaded
by The train kept on rolling, it seemed, whether eBay was working the levers
or not. The company quickly made the checkout function optional, and in 2002
eBay bought PayPal for $1.5 billion, hundreds of
millions more than it might have paid a year earlier. "Our best decisions have been the ones where we've seen where the
community was going," says PayPal chief Matt Bannick. "Some of our biggest mistakes occurred when
we put on our consultant's hats and got in a room and made decisions." Whitman describes such missteps as learning experiences, and doesn't dwell
excessively on them; she preaches the art of moving on. "Most of the
time we've made the right decisions, and when we haven't, we've fixed
them," she says. Besides, how can you obsess about mistakes when 10,000
of your customers are screaming your name: "Meg!
Meg! Meg!"? It's late June, and Whitman is in Orlando addressing the
crowd at eBay Live, the second annual real-world meeting of people used to
communicating with one another strictly through bids and BuyItNows.
The scene is a mix of kitschy Whitman strolls to center stage amid cheers, dressed in khakis and a
bright blue eBay button-down shirt, just like every other employee at the
conference. She smiles, giggles nervously, then quiets the crowd. Her message
is humility: "We don't always get it right the first time, but we try
our best to get it right. We succeed when you succeed." Later, as she
walks the convention-hall floor, she chats with everyone from UPS CEO Mike Eskew—whose company is a partner of eBay's—to
autograph-seeking sellers of antiques. She hands out and signs trading cards
of herself and other eBay personalities like Omidyar.
The cards are a classic eBay prop because they're collectible. They're also a
way for Whitman to connect with ordinary people. "It creates a
dialogue," she explains later. "Then I can say, 'What do you sell?
Where are you from?' " Whitman, 47, has as blue-blooded and blue-chipped a pedigree as any CEO,
but she has perfected a common touch that comes in handy running eBay. Her
unassuming way, including that nervous giggle, puts people at ease. As a
small child, she took two summer-long camping trips with her mother, her
mom's best friend, and seven other kids. The group set off from Understatedness may be bred, but marketing is
learned. At Procter & Gamble, Whitman kept a journal of the lessons she
was learning as a brand manager. She still has the journal and consults it
periodically. An early lesson she scribbled down way back when at P&G:
"It's all about the customer." At eBay, that's truer than at almost any other company. For all the
monkeys driving trains and other gremlins pulling levers and turning dials,
the customers are the ones who decide what works and what doesn't. New eBay
board member Tom Tierney, an ex-CEO of Bain and Whitman's boss when she was a
partner there, says he studied eBay intently before joining the board and was
transfixed by the attitudes of eBay's customers. "It felt to me almost
more like a movement than a business," he says. Adds Howard Schultz,
founder of Starbucks and until recently an eBay director, "To Meg's
credit, the focus has always been on the community. That's all Meg."
Whitman knows everything that's going on in the community, in part because
the community talks to her. Her e-mail address, meg@ebay.com, is constantly
being posted to the discussion boards by eBay staff. How much of this community bonding is done to keep eBayers
from jumping ship to another site? Ask Whitman, and she freely points out
that's impossible. "Here's the contrast," she says. "When I
was at Hasbro, we asked, 'What is Mattel doing?' When I was at Disney, it was
'What's Warner Brothers doing?' Here there is no X to ask about." Not that others haven't tried to steal eBay's
market. When Whitman joined the company, Onsale was
the upstart competitor. Yahoo and Amazon had both started auctions. At one
point Microsoft and extinct Web portal Excite even built a consortium to
challenge eBay. Now only Yahoo still has auctions; the rest have disappeared
or abandoned the fight. Today, niche competitors remain: Amazon does a brisk business in used
books, Yahoo has captured auctions in Analysts raise other potential factors that could stunt eBay. Newer
markets, like scrap metal, don't necessarily lend themselves to the same
fervor that eBay users once brought to Beanie Babies. And with most—if not
all—collectors fully aware of eBay, the company will have to spend more and
more to attract new users, its primary engine of growth. Whitman says she's confident about growth. She and her team are constantly on the lookout for competitive threats,
especially in international markets, a 31%-and-growing share of eBay's revenues.
Says Bob Kagle, the venture capitalist who made the
sole outside investment in eBay and helped recruit Whitman to the company:
"She has seen others break their pick on her, and she doesn't want to
break her pick on anyone else." As the many MBAs and ex-consultants beneath her focus on what to cram onto
eBay, how to keep users happy, and what competitive threats to worry about,
Whitman finds herself increasingly thinking about what the company will look
like in the years hence. That includes considering for the first time what
kind of CEO she wants to be remembered as and the legacy she'll leave when
she pushes off. She changes her answer from time to time on when that'll be,
sometimes saying she intends to stay at eBay for a total of eight to ten years—stretching
her tenure to 2007 at the latest—other times saying she's committed to no
timetable. After a grueling week in Her goal: to develop leaders capable of maximizing growth in eBay's weird,
nearly competition-free world—leaders who can stand the fact that there's
only so much any eBay boss can, or should, do. "Why have we gotten such
great public relations?" she asks rhetorically. "Why does 'Weird
Al' Yancovic write a song about eBay?" Her
answer: "It's not because of the management." True. But it's not
entirely because of some monkey driving some train either. |
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