As Google Shows, Innovation Is No Picnik

While most investors know when a company has lost its innovative edge -- think Eastman Kodak Co. or BlackBerry (Nasdaq: RIMM; Toronto: RIM) -- it's harder to say which companies actually have it. If you say "innovation," most people will probably answer "Apple." But is Apple Inc. (Nasdaq: AAPL) still innovative, or just coasting on the success of a limited line of winning products?

And what about Google? Everyone loves to love Google (Nasdaq: GOOG) -- the hip, cool, and, dare I say, innovative giant of the Internet. But what's Google done for you lately, in terms of something exciting and unique? Earnings drop aside, Google has done little recently but annoy me. (See Google Gets Gutted on Earnings.)

It created a new Gmail format, but that's just change for the sake of change. While it looks a little different -- there are a few new options for email themes and mailbox layouts -- there's no big leap in functionality.

But here is why I'm really ticked off at Google. Last Friday, I got an email from Picnik, an innovative online photo-editing site. Picnik has simplified my work life since it launched in late 2007. The site, basically a scaled-down, cloud-based version of Adobe's Photoshop, makes it a breeze to crop, resize, and touch up images for Websites and print publications.

In March 2010, Google bought Picnik. And now, despite the fact Picnik's founders boast that they have continued to build "the easiest, most fun and awesome online photo editor out there," Google is shutting Picnik down.

"Alas," the Picnik team explains, "it is time to focus."

Google has decided it's time for Picnik to go, much the way Apple decided it was time to take Siri out of the app store about a year after it bought the company that created the now infamous voice recognition software. (See iPhone Users Don't Like the Siri Switcheroo.)

Are they intent on making something better, or are they carefully editing the competition?

Contrary to what you may think, corporations don't always embrace innovation. In fact, many companies do just the opposite: going out of their way to quash inventions and block innovation.

One of the best known cases involved David Sarnoff, head of the Radio Corporation of America. Sarnoff proved neither friendship nor innovation mattered as much as getting rid of competition when he launched a vicious battle against Edwin Howard Armstrong, the father of FM radio. Sarnoff apparently "won" when Armstrong took his own life.

But I digress. Back to Google.

Google undoubtedly has plans to incorporate Picnik into its ever-widening suite of products, which are basically designed to keep users contained in the Google universe (which thereby gives Google greater control of the Internet). And when it does, the new incarnation of Picnik will be lauded as something bigger, better, and more innovative than before.

But here is the thing: It will probably just be Picnik in Google clothing. So who wins? Does this model of growth really make Google any different than, say, Microsoft Corp. (Nasdaq: MSFT), the big bad monopoly everyone loves to hate? Google gobbles up innovative companies like Picnik -- and silences them -- while Microsoft messes with once sacrosanct entities like Skype. (See Making Sense of Microsoft's Skype Deal.)

Google is looking more and more like a cloud-based Microsoft, using size and brute strength to get what it wants. Maybe people would like Microsoft better if it followed Google's lead -- and created a daily doodle to appease its cult-like following.

In the past few days, I asked about a dozen people -- young and old, tech savvy and borderline Luddites -- to name an innovative company. And without exception, each one was stumped.

It's not surprising. At the 2012 International CES (formerly known as the Consumer Electronics Show) in Las Vegas earlier this month, nothing jumped out as amazingly innovative: There was no single Oh-My-God gotta have this, how did they create this product.

That says something about the state of innovation. And while not everything innovative is electronic, there seems to be a dearth of innovation at the consumer level all around right now. Think toys, for a moment. Was there one product -- like the Cabbage Patch Kids or Furby or Talking Elmo of years past -- that all the kids on your holiday list had to have this year?

Didn't think so. Maybe consumers aren't buying because companies aren't creating anything really new.

Ford Motor Co. (NYSE: F) was the most innovative company I saw at CES, and not for any reason you might expect. The innovations had nothing to do with fuel economy or design. Rather, the company earned innovation gold stars because it's integrating medical devices -- like heart monitors and blood pressure sensors -- into some models of its cars.

That's innovative. And because the US has an increasingly older population, it's also something else: potentially profitable. Odds are, more aging Baby Boomers will want advance warning of a heart attack more than they'll want a new sound system to listen to classic hits from the band, Heart.

(Tomorrow: Defining innovation)