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From the author of Google Docs Vs. Microsoft Office and Office 365

Implications for the Future

One pattern we’ve seen repeatedly from former Internet giants, from AOL’s ultimately bad idea merger with Time Warner to any currently considered acquisition of Yahoo, is that after these companies “go corporate,” they slide into mediocrity and then into obscurity. As the talent pool drains into more exciting new companies, the self-destruction of these former greats is assured. Google may have succumbed to the same fate when its founders gave up executive control—they’ve come back to take the reins more recently, but we have yet to see whether it’s too late.

Sometimes, companies move away from their greatest strength and stop innovating in that area while they begin to fail in an area for which they never had an aptitude. One might argue that Microsoft and Yahoo shouldn’t be involved in the search industry and that Google shouldn’t be in social media. Right now Facebook is seeking that tempting second vocation, whether it’s daily deals (which they tested and then closed down) or the Facebook phone. The best outcome for any company is to either stick to its strengths or be acquired by a smarter company. But the worst thing a smart company can do is buy a dumbed-down company (like Yahoo) unless it’s isolated from the parent company the way a body would wall off an unhealthy cyst. Moves that are made for the temporary approval of Wall Street can later lead to doom.

The only thing we can say with certainty is that innovation will always come from new companies and that each of these companies has a growth cycle that usually dooms it to mediocrity.

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