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134 PART 3: THE PERSONAL SIDE OF LEADERSHIP
Leaders at Google, as well as other organizations, strive to create mental
models that are aligned with organizational needs, goals, and values. However,
personal values, attitudes, beliefs, biases, and prejudices can all affect one’s men-
tal model. A leader’s assumptions play an important role in shaping his or her
mental model, but leaders can examine their assumptions and shift mental models
when needed to keep their organizations healthy. 11

Assumptions
In the previous chapter, we discussed two very different sets of attitudes and
assumptions that leaders may have about subordinates, called Theory X and The-
ory Y, and how these assumptions affect leader behavior. A leader’s assumptions
naturally are part of his or her mental model. Someone who assumes that people
can’t be trusted will act very differently in a situation than someone who has
the assumption that people are basically trustworthy. Leaders have assumptions
about events, situations, and circumstances as well as about people. Assump-
tions can be dangerous because people tend to accept them as “truth.” A good
example of faulty assumptions comes from Pets.com, a classic example of an
early Internet company that was based on a fl awed business model. Leaders
assumed that people would start buying all their pet supplies online, but basic
goods like dog food and cat litter are much easier to pick up at the local gro-
cery store along with the regular shopping. In addition, the clever sock puppet
commercials just didn’t work. Leaders assumed that owners would “get” the
idea of a puppet talking directly to their pets, since many owners see their pets
as members of the family. But the approach of treating pets rather than people
12
as the buyers fl opped. As another example, consider leaders at Ford Motor
Company, who assumed that their way of doing business, which has kept the
company profi table for decades, would continue to be successful in the twenty-
fi rst century. Finally accepting that the old way was no longer making money,
Bill Ford resigned as CEO in the fall of 2006, acknowledging that the company
needed someone with a new mental model based on different assumptions. 13
One organization that found success by bringing in a new leader with a different
set of assumptions is Yahoo Inc.

IN THE LEAD Yahoo Inc.
Yahoo Inc. was started in 1994 by engineers Jerry Yang and David Filo while they
were still graduate students at Stanford University. The company grew quickly and
became a darling of the high-tech bubble of the late 1990s. But then the bubble
burst. Like many Internet companies, Yahoo faced a crisis, and some observers
even expected it to fold. That’s when Yang asked Terry Semel to replace Tim Koogle
as CEO of the struggling company.
Lots of people, both inside and outside the organization, thought it was a hor-
rendous mistake. Up to that point, Yahoo, like other Internet start-ups, had been
run by leaders under the assumption that the technology should come fi rst. The
company was run loosely, with little concern for structure or control. Semel came
in with a mental model based on the assumption that solid business practices
focused on distribution of content was what Yahoo needed most. As an “old media”
executive whose most recent job was co-head of Warner Bros., Semel knew almost
nothing about the digital world—he had barely even used a PC or surfed the Net. He
didn’t have a clue what a buddy list or a protocol was. He spent his fi rst months on
the job in marathon sessions just getting up to speed on the technology. Yet, while