How To Manage Growth
By Erick Schonfeld

(Business 2.0) – eBay is an amazing growth machine. What were the key decisions you made that set up the company for this kind of hyperthyroidism?

The key decisions can all be characterized by focus, focus, focus. Back in March 1998, we were faced with a decision on what categories we wanted to focus on. We decided to really be a collectibles company. The heaviest users were collectors, the heaviest sellers were collectors. It was a very explicit strategic decision, because part of the group wanted to go into consumer electronics and all of these other categories we are in today. And we answered, "We have only a limited number of resources. What is the best focus that we can have?"

How did you get from collectibles-only to we'll-sell-anything?

Our users took us there. You have to remember that we don't sell anything. We provide the trading platform. Our community of users is our R&D department. We enable, not direct. We help our users be successful utilizing the platform in ways that they would like to use it.

As the CEO of an Internet company, do you motivate employees any differently than you would at an old-school Fortune 500 company?

I think at all good companies, employees are excited by the mission of the company. And at eBay the mission is about creating this global online marketplace where your next-door neighbor's chance of success is equal to a large corporation's. We look for people who are energized by the mission of the company. Once they're here, we want to make sure that they have a chance to understand the company in a really deep way. I said to our head of strategy when he came to work for us: "Don't do anything for three months. Just absorb, understand, get the counterintuitive nature of the business." We give people a chance to settle in, and then we make sure that they are well managed, that they are focused on high-impact projects, and that they understand the results that they are going to be accountable for.

Given how much the company has grown, is it hard to keep people focused on the category or function that they are personally responsible for?

To keep up with our growth over the last seven years, we have reorganized early and often. That keeps people fresh; it brings a new set of eyes to problems. It keeps people excited because they get repotted into new opportunities. That's something we've done since the beginning of the company. Over the last seven years, we've probably made about 10 to 12 changes in how we have structured the organization. Some were major, some were more evolutionary.

What about the other folks who work for you—the entrepreneurs who tap into your software platform and innovate on top of it? How important is that to your future growth?

It's central to our strategy. We'll come up with a lot of good ideas, but we will not be the fountain of all good ideas. Users that have good ideas about how to make the platform more effective can tap into it through our API [application programming interface]. We now have 10,000 outside developers; 18 months ago it was just 400. We think it's important to open up the platform because it makes eBay better, it makes eBay stronger, as other people develop applications to the platform.

And it's not only software. It's also businesses that grow up to support eBay, like AuctionDrop here in the Bay Area. That is another way of supporting and extending the platform in a way that we will probably never get to, at least not in the foreseeable future.

That's a new management challenge. How do you motivate people who aren't on the payroll?

Again, it's enable, not direct. If we open the platform, enable buyers and sellers to be successful, enable entrepreneurs to be successful, then I think the company, by derivative, is successful.

I think we are one of the pioneers of a different kind of business model. And I think the Web has certainly made self-organizing and empowerment of different groups far easier than it was prior to the Internet. But I think we are still at the earliest stages. So we're watching it very carefully. We know it is central to our business. Enabling our customers and our partners to be successful is critical. — E.S.