Co.Design

Why Open Innovation Could Be Marissa Mayer's Downfall At Yahoo!

The real lesson that Mayer should take from Google is the failure of its scattershot innovation strategy, argue Jens Martin Skibsted and Rasmus Bech Hansen.

Most business pundits share the opinion that Marissa Mayer, the newly appointed CEO of Yahoo! and a former Google engineer, will bring an open-innovation agenda to the struggling Internet giant. They have good reasons for thinking that. Mayer has been an advocate for openness. As a fellow “young global leader” and a co-panelist at Design Life Digital, we’ve had a firsthand chance to hear her thoughts on the virtues of open innovation.

She praises quick releases over perfection, ideas from everywhere—not just from the top—freedom for employees to pursue own projects (the famous one-day-a-week rule), sharing of information, the primacy of the users, and the value of liberating data.

All this probably sounds like heaven if you are a young, recently graduated engineer from a top school considering where to start your career (and to be fair, this might be the real target audience for those remarks). But as a shareholder of Yahoo!, this is surely not the journey you would want your new CEO to take. The stock has been low since the company dodged Microsoft’s $47.5 billion offer ($33 per share), in May 2008, trading below $20 since September 2008. If Mayer’s beliefs became the guiding principles of Yahoo!’s future, it could go even lower.

Yahoo! has a number of troubles, but closed innovation isn’t one of them. If anything, Yahoo! has listened too much to everyone. The company has done way too much, over-innovated, tried to be everything for everyone, buying up companies here and there based on user feedback. What the company has lacked is a clear direction forward from stubborn, single-minded visionaries at the very top, who make the right calls and focus on what strategically matters. Open innovation, in the broad sense that Mayer promotes, is more the cause of Yahoo!’s problems than the cure.

But Mayer is smart. If she takes the right lessons from Google’s success, she’ll recognize that open innovation isn’t much more than a PR tool. Why? First of all, Google’s real success has very little to do with open innovation—and since Larry Page took over as CEO again, the company has moved further away from that approach. Bear in mind that the vast majority of Google’s revenue is from search-related advertising, an idea Google’s founders thought up during their university years. Despite its phenomenal success, Google remains a one-trick pony. Its strength is the ability to keep its main focus on its search engine and search-related services. None of the beta experiments, the free-thinking Fridays, and all the other innovation-yielding exercises has resulted in significant new revenue streams. It surely has improved the services and been good for the Google brand at computer science faculties around the world, but it hasn’t been that good for business—at least, not yet.

Marissa Mayer speaking about open innovation, alongside Jens Martin Skibsted and Fast Company’s Linda Tischler.

Plus, most of the new services that came out of all this were closed down after Page reclaimed the helm. Since then, Google seems to be going back to its roots of setting ambitious disruptive goals from the top. Google Glasses is a good example of one such strategy; disrupting the pay-TV market is another. Page is focusing the entire organization on those projects in an effort to elevate the company.

On the other end of the spectrum, there’s Apple, a company that has made its mark by being fiercely focused. And Apple, of course, has significantly outperformed Google in recent years—the company is now about twice Google’s size. And contrary to Google, most of Apple’s revenue comes from products and innovation that didn’t exist just a few years ago. Apple is, in other words, undisputedly much better at innovation than Google is.

In an earlier post, “User-Led Innovation Can’t Create Breakthroughs,” we described how this top-down innovation method is similar to how most creative companies—Ikea, fashion companies, and movie studios—operate. So if you are a shareholder at Yahoo!, do yourself a favor and compare the revenue from Apple and Google and decide whether you want Mayer to pursue open innovation or not. It’s really a no-brainer. What Yahoo! really needs is a razor-sharp focus on very high-potential areas that can generate $10 billion+ in revenue within a five-year horizon. That’s the sure-fire way to get the stock price back up. And that focus should be directed only from the very top.

Written by Jens Martin Skibsted and Rasmus Bech Hansen.


Rasmus Bech Hansen
is the London-based strategy director at venturethree, a global brand consultancy. He writes on how brands can do well by doing good and has helped to relaunch the United Nations Global Compact brand, the world’s most successful CSR initiative.

[Image: wellphoto/Shutterstock]

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22 Comments

  • Well, my own Yahoo downfall came today when seeing that they closed My Yahoo in Germany (and France). I now found an alternative ( http://www.start.me if anyone else needs one as well) so I guess it's bye-bye Yahoo.

  • Raj Madhuram

    "Apple is, in other words, undisputedly much better at innovation than Google is." - Really? You lost me there...

  • A H Ayoade

    On problem, while Apple is has greater revenues, if you hear comments from those at Apple their focus is not driven by stock price or revenue, they focused on great products, the things they believed they would be the best at building. So while Yahoo needs focus, that should be based on the building the best product, not the one to generate most revenue or high stock price, that is short sighted approach that will hurt the company further.

  • Stiven Kerestegian

    "If she takes the right lessons from Google’s success, she’ll recognize that open innovation isn’t much more than a PR tool."
    This comment illustrates your surprisingly superficial understanding of open innovation, it's process, and application... Open innovation is not only about democracy in decision-making but more about knowing how and when to tap into outside feedback as another strategic resource in your strategy and business decisions. Apple, as closed as it seam from the outside has a very proactive, independent and open community of sophisticated users that are very close to the company and brand… and believe me the company does listen. Google is probably one of the largest "open" networks on the planet and as a company Google probably integrates user data into their strategy more than any other company independent of what initiatives they are launching or closing down.Bottom line is that you can't blame failures on how open or closed a company is. The key is how you apply the intelligence of the crowd into your specific strategy & business.

  • Guest

    How can you by right sense make a compairison between revenue of apple and google. In no dimension that makes sense. Comparing groth rates of revenues is a different story.

    Not very scientific this article...

     

  • Guest

    " It’s really a no-brainer. "
    Right you are, sir.  A no-brainer strategy that some might say _requires_ no brains to seriously suggest.

    If you're trolling with this post: congratulations and well-played!

  • Alois S

    I don't appreciate the empirical approach of “User-Led Innovation Can’t Create Breakthroughs,”. On the one hand scientists like Serhan Ili found quite the contrary, that User-Led innovation is indeed a source of Breakthrough innovation.
    On the other hand, use your mind, not statistikts (its fakts, not knowledge!)! Why should user led innovation not be a source of breakthroughs?
    In my mind a lot of minds create more ideas than the few! Simple, logic. The only thing you need is a technology to harvest those thoughts!

  • Guest

    I assume this article is just a troll piece designed to spark a lot of comments and page views. The "failure" of Google's innovation strategy? Wow.

  • Gisle Larsen

    Are open innovation and focus mutually exclusive?

    Can't open innovation be a source for future focus?

  • Winski

    So she's been in the job less than two weeks and you're already calling her a failure.. No wonder NO ONE pays attention to clowns like you anymore.

  • Jk

    zero mention of how the Culture at a place like Google, with the open innovation time, free food, relaxed dress code and office environment helps them attract and retain the absolute best of the best in terms of employee talent.  I doubt the same can be said for Yahoo at present.

  • Wize Adz

    ...Teamwork, communication, and getting things done are fundamental -- regardless of what you wear to work, or whether you call your boss duuude or Sir.

  • Wize Adz

    Those are hallmarks of the dot-com work-environment, not just Google.  But make no mistake: there is still rigor and formality where it really matters to the work at hand in the dot-com culture.

    When you focus on what's different about the dot-com work-culture from a more traditional work-culture, it's easy to focus on the differences and miss the fundamentals.  Teamwork and communication are fundamental, no matter what you wear to work.

  • RobertDavidSTEELEVivas

    When in doubt, "none of the above."  Yahoo was finally compensated with
    $1 billion from Google for the theft by Google of Yahoo's search
    engine.  Both Yahoo and Google have never gotten the potential of the
    Alta Vista folks that HP foolishly let go.  So here's the killer combo: 
    Yahoo buys WordPress, makes it into a true open source everything
    platform, invests in OpenBTS and Open Spectrum, throws itself solidly
    behind open autonomous Internet, and it is game over.  Any questions? 
    Here are three Tiny URLS:  the daily Open Source Everything Highlights
    (http://tinyurl.com/OSE-ALL); the book just published, only $10 at
    Amazon, THE OPEN SOURCE EVERYTHING MANIFESTO: Transparency, Truth &
    Trust ( http://tinyurl.com/OSE-Steele), and Who's Who in Collective
    Intelligence: Robert Steele (http://tinyurl.com/Steele2012).  And for a
    really good time, check out the $2B Open Source Agency that has been
    approved by OMB but just needs one Cabinet Secretary to ask for it
    (otherwise the secret world will continue to resist): 
    http://tinyurl.com/OSA2011.  Have brain will travel.

  • RobertDavidSTEELEVivas

    PS.  This article is in tonight Open Source Everything Highlights at Phi Beta Iota the Public Intelligence Blog.  If Yahoo STOPS competing with Apple, Microsoft, Oracle, and Google on doing the wrong things righter, and instead gets a grip on doing the right thing--the 21st Century clarity, diversity, integrity, sustainability open source everything right thing, Yahoo will be where AOL was in 1994 when Compuserv was at 10%.  -- this is about the five billion poor, NOT about the one billion rich.

  • RobertDavidSTEELEVivas

    When in doubt, "none of the above."  Yahoo was finally compensated with $1 billion from Google for the theft by Google of Yahoo's search engine.  Both Yahoo and Google have never gotten the potential of the Alta Vista folks that HP foolishly let go.  So here's the killer combo:  Yahoo buys WordPress, makes it into a true open source everything platform, invests in OpenBTS and Open Spectrum, throws itself solidly behind open autonomous Internet, and it is game over.  Any questions?  Here are three Tiny URLS:  the daily Open Source Everything Highlights (http://tinyurl.com/OSE-ALL); the book just published, only $10 at Amazon, THE OPEN SOURCE EVERYTHING MANIFESTO: Transparency, Truth & Trust ( http://tinyurl.com/OSE-Steele), and Who's Who in Collective Intelligence: Robert Steele (http://tinyurl.com/Steele2012).  And for a really good time, check out the $2B Open Source Agency that has been approved by OMB but just needs one Cabinet Secretary to ask for it (otherwise the secret world will continue to resist):  http://tinyurl.com/OSA2011.  Have brain will travel.

  • Connor

    Let's go ahead and give Mayer a chance to get settled before attacking, shall we? 

  • railingk

    "The stock has been low since company dodged Microsoft’s $47.5 billion offer"

    I bet the shareholders don't think they "dodged" anything. "Missed out" seems more accurate.
     

  • Me

    I have to agree, that statement is super overloaded!  Apple was better at remaining uber focused over the past 5 years but that lollipop is just about done.  I would argue that Google was not aiming for the same target as Apple was.  You're treating it as though they are both swimming in the same race - I would argue that they are swimming in different races.