Yahoo's Jeremy Zawodny says Google Finance makes him sad, since it shows how Yahoo's Finance group let their products stagnate for years. Now Google builds a Finance site from scratch which does much of what Yahoo could have done years ago. Once again, Yahoo is in catch-up mode, trying to copy a Google innovation.

Henry Blodget applies Jeremy's story to all of Yahoo, calling it a "fossilized old media company," and Jeremy objects to the generalization.

Jeremy's surely right, there is still good innovation happening at Yahoo. But after Sue Decker cried Uncle and said Yahoo was satisfied with a diminishing #2 position in search, you don't have to be an insider like Jeremy to see that Yahoo has lost its edge, and allowed innovation to lag in order to juice profits. I don't know about "fossilized," but certainly lagging.

The same thing happened at Microsoft. By allowing their core products to get stale while they milked their cash cows, both Yahoo and Microsoft gave Google the opportunity to grab the lead in innovation and push them into defensive catch-up mode, while their market shares got shredded.
Paypal co-founder Max Levchin summed it up nicely, arguing that rapid innovation is an incredibly potent competitive weapon:

Can you strike the fear of God into your competitors by releasing every two weeks the features that takes them three months to write?

And by the time they're done copying the features that you built last week, you've got three more months on them? It's really all about execution....

If you can go fast, no one will ever catch up.

Even though Google has gone fast the last couple years, they're going to go even faster. Google CEO Eric Schmidt promised to accelerate the rate of innovation in 2006.

This is gonna be a fun year! I can't wait to see what Google has for April Fools Day.