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Five Years of Stock Value: WebMD Beats Google

If you had the guts five years ago to bet on Google, then you would certainly have done well. But had you bet on WebMD, you would have done better. Since late 2005, while the Nasdaq index has netted little return for investors and Google's stock price gained 68%, WebMD's more than doubled, gaining 105%.

I recently had the chance to speak with Wayne T. Gattinella, WebMD's CEO. My goal was to not rehash the now well-known history of WebMD's founding, but rather to understand how this company has produced such impressive returns over the last five years. Gattinella shared at least three lessons that we should all consider. Over the next week I will lay out these shining principles that have led to such success.

Wayne GattinellaFirst, I will give a brief history for those unfamiliar with WebMD. It is the brainchild of one of the Internet's founding fathers, James H. Clark (, the creator of Netscape. A year and a half after launching Netscape, just as the company was preparing to go public, Clark came up with another idea: creating a central depository for patients' medical records so they would not have to repeatedly fill out forms when they went from doctor to doctor. The company was named Healtheon.

Healtheon went public in 1999 and then merged with an Atlanta-based company called WebMD in a deal valued at $7billion. The company evolved over the years. It expanded into related businesses. Its stock price traded above $100 per share but, in 2001, as the dot-com bubble burst, its stock price tumbled to $3 per share.

Revenue actually kept growing and the company seemed to be moving toward profitability, but the business was clearly playing in a new post-dot-com environment. It needed a strategic overhaul. Gattinella and his team took over in 2001 to engineer that. While we spoke, Gattinella shared how he and his team helped make WebMD one of the world's best performing technology companies. His insights are worth contemplating, whether you are an investor looking to diagnose the trail of a future "WebMD" or whether you are leading your own firm looking to propel your company forward.

Lesson #1 - It's Okay to Run Away

Soon after Gattinella took back over, he began extracting the real WebMD from its non-strategic businesses. While the dot-com bubble was growing, the company had spread itself too thin. As Gattinella said, "It was a situation where the Internet itself had gone through its bubble burst, and like most, like many Internet companies in its time, WebMD was a high flyer and a near flameout."

So the goals changed. Instead of rationalizing all of the acquisitions that had been made along the way, Gattinella and his team decided to focus on restoring the WebMD brand as a highly trusted brand for information. In other words, WebMD had lost its way and it needed to get back to its core: a trusted brand source of medical information.

This was not unlike Steve Job's famous first move, when he retook the reigns of Apple, of dramatically cutting more than half of the company's R&D projects, stopping its license business, eliminating 15 of 19 products, and withdrawing the company from printers, scanners, and portable digital assistant businesses.

Like water withdrawing before a wave, great expansions often begin with contractions. To grow requires that you understand this natural principle, that you appreciate the strategic value of a retreat and not blindly associate it with defeat. By withdrawing your energy from low-potential priorities and redirecting it to stronger parts of your businesses, you then have the real potential to create a disruptive dynamic. What may seem as an apparent retreat is actually a smart offensive move.

Outthinking the competition requires unorthodox approaches and tactics that your competitors do not expect or want to copy. Ask yourself the questions below to see where you can cut less strategic aspects of your business in order to strengthen the core that makes your company strong.

  1. If you had to pull out of half of your strategic priorities, what would they be?
  2. By eliminating less strategic pieces, how could you redirect your energies?
  3. What could a new company focus do to those important strategic priorities?