DAN FARBER:
Now Yahoo! is definitely one of the companies that’s been pioneering the web as a platform innovating in many areas along with the rest of the industry. So, in your mind, you do you think of innovation? How do you define it?
LARS RABBE:
Innovation is really, for me, the ability to make people do great things. You want to be able to create an environment that allows people to innovate and allows people to break out and to do things that are not necessarily part of the day to day work. Make it possible for them to go away, think great thoughts, do great things and actually bring these things to market without putting too many constraints around it and without actually confining them in terms of having to use certain things or having to work with certain other products and so on.
DAN FARBER:
You’ve worked at Redback Networks, at Fidelity Investments and even at NeXT with Steve Jobs, I guess that was a pretty innovative environment. How is Yahoo! different from those other experiences?
LARS RABBE:
I think Yahoo! is different in a number of different ways. I think the biggest way is really that the ability to reach millions of people almost instantaneously makes it possible for us to try things, experiment with different ways of doing things and really know very, very fast what works and what doesn’t work. One of the developers I sat close to stated that one of the reasons he came to Yahoo! was that he could make a system, write a system and within minutes millions of people would have seen what he had done and he would never have that opportunity anywhere else in the world. So having that asset of the enormous user base and the ability to reach many people world wide really makes a tremendous difference.
DAN FARBER:
Now when you speak about that developer and that culture of innovation, you have ten thousand employees, you have five hundred million customers I guess you would say. How do you create a culture of innovation around that when you’re so dispersed and maybe it happens in pockets but how do you make it something that’s really in the DNA of the company?
LARS RABBE:
I think one of the biggest things is that we constantly challenge people. We push the development constantly to keep up with the best and the brightest out there so if there is something that is happening in industry or there are ideas that come out of nowhere we want to be able to move fast and take this base of users and show them new things and see how they react to new things and then start leveraging that into greater products by combining with some of the other things we have.
DAN FARBER:
Now you recently have been investing heavily in hiring an R&D staff.
LARS RABBE:
Yes
DAN FARBER:
Spending a lot of money, hiring really bright people. Do you expect that most of the innovation is going to come out of that group?
LARS RABBE:
I don’t think so. I think that having a research department is great because you have the ability to take really hard problems and put them up as challenges to the researchers and have them work on completely different solutions. I like to think of really great researchers as people who can think differently from the rest of us, that they really have the ability to look at problems in a different way and come up with solutions that are totally different from what is conventional wisdom. And adding all these great people to the roster really has given us the ability to do that. And we already have many examples where we’re working on really difficult problems and we’re asking these people to come up with totally different solutions.
DAN FARBER:
So what are some of those examples? Some that are in actual products and some that you’re working on, such as, I’m really interested in how you’re focusing on data centers given that you have all those customers and, let’s say you want to go from five hundred million to two billion customers. That’s an incredible amount of scaling.
LARS RABBE:
So, let me just mention one example that actually was mentioned in the article in the Wall Street Journal that we hired an economist. And what he’s thinking about is, ‘what is people’s behavior in relation to products and in relation to communities on the internet?’ And how can you actually understand and predict how people will react to certain things which is just taking the discipline of economics and people’s behavior and applying it to people’s behavior on the internet in relation to products. I think that’s a great example.
DAN FARBER:
And the innovation there is figuring out, which products to build or how to…
LARS RABBE:
How people react to the products and what makes a better product in terms of what is it that appeals to people inside the product and how the product interacts with you. On the side of data center innovation we are really working on expanding, let’s say, the processing footprint worldwide. We’re at the point now where the data center industry has really been left behind by the growth of the internet companies and we, along with other companies, are now building our own data centers. And we’re taking the opportunity while we’re building these data centers to really think about “is the conventional data center really what fits our needs�, and it turns out in a lot of areas that it really doesn’t, that we can do things much better if we design our own data center from the ground up. We’d recently broke ground on a data center in the Pacific Northwest and we’re going to be applying a bunch of new technologies there, some of which we’re actually inventing ourselves in terms of how do you put together the data center, how do you take best advantage of the power because that is one of the biggest issues when you are running a data center. The cost of power, so saving power is a big deal.
DAN FARBER:
Of course.
LARS RABBE:
And, in general we’ve got to save power. So the ability to make a much more power efficient data center is what will make a big difference.
DAN FARBER:
Now it seems that every company that’s reaching large scale is building new data centers and building them more efficiently in the areas where the cost of electricity is much cheaper. But it seems to me that that’s an opportunity for shared innovation as opposed to each company doing it on its own and inventing its own kinds of innovations to drive those data centers. Do you see that as a possibility?
LARS RABBE:
I think there are some competitive advantages in some of this and there are certainly some of these things that we will patent because we consider them to be significantly different. But I also agree that if we come up with ideas that as such will make the industry more power efficient we absolutely will share those and we are using the same contractors also. I’m sure those contractors in turn will leverage those ideas for future construction and future concepts of data centers.
DAN FARBER:
Now another aspect of Yahoo! is the fact that you’re very much focused on the social aspect, not just of search but of just people interacting online which I think is how Tim Burners Lee, who founded the World Wide Web really defines the web. What are some of the challenges especially around innovation in building a so-called social network, social media type of website?
LARS RABBE:
I think, probably, the biggest challenge is what companies usually call “abuse�, which is how do you make sure that the quality of the interaction is the best possible? The whole concept of social networking is putting together a number of different things. So, for instance, social search, social interaction, the ability to rate and share information with others. So, the concepts of ratings, the concept of reputation, the concepts of communities, the concept of search, all come together supporting this. And it really is a way to, not to use to much of the industry jargon here, but Web 2.0 is really the ability for a lot of people to produce content. And the social network really has all the elements that will allow you to discern the quality of the content and actually find the right content meaning the content that’s relevant for you and that you can be sure that it actually has the quality you expect. So I think one of the big challenges and one of the big differences between accessing information is, for instance, CNET and Yahoo! produce content where you know the producer and you know the quality of the content to, and take that and make sure that you have an equal amount of assurance for the quality of what you see in this web of millions, tens of millions of producers. That, really, is the big challenge.
And we’re working on a number of different products and some of these are beginning to come together and integrate into this whole concept of the social network so that you can find the information, you have an overlay of reputation and ratings and community that allows you to know exactly what it is that you’re looking at.
DAN FARBER:
What are some of the tools and technologies that are enabling you to innovate, especially given the pace of innovation that’s required today? I think the users, you talked about how the users are basically your alpha and beta testers, but even so the competition is very fierce and it seems like products have to change not on a yearly basis but almost on a daily basis.
LARS RABBE:
So, back to the whole concept of what is innovation. I think that as another, there are a couple of elements that we didn’t talk about. One element is that there’s always the influence from the outside. We talk a lot with VCs, we talk with people that are thinking of starting companies, we talk with people that are starting young companies and you know we have acquired a lot of companies. Some of the great companies in this particular area are companies like Flickr and del.icio.us and we’re using those assets and integrating with what it is that we already have. So taking some of those basic concepts and then making them available to the hundreds of millions of users that use Yahoo! ongoing really broaden the concept and bring all these new elements in. So, if you look at it from the point of innovation, what we do is combine assets that we bring in from the outside with the development that we’re doing and with, leveraging with the assets we already have. So, I’ll give you another example which is that we made this new version of our mail system which uses AJAX and dhtml. So a lot of interaction on the client, that was really technology we brought in from the company we bought. But we have applied that very, very broadly inside the company and AJAX is very rapidly becoming a standard for a lot of things we do. So the breakthrough that came in through the acquisition is being reused extensively inside the company and having the ability to seed these things into the environment really fosters a lot of innovation inside the company.
DAN FARBER:
Now what do you see as some of the risks in terms of innovation? If you’re out there on the edges all the time putting new products out there, testing new products, is there a risk at some point of just having too much stuff out there, getting too disorganized and having a culture of innovation but out of control?
LARS RABBE:
There’s definitely that risk and we’re absolutely trying to balance it. I said earlier that one of the inhibitors of innovation is too many standards, too many constraints and so on but it has to be done in moderation. You absolutely need to have standards and as I just mentioned, AJAX is rapidly becoming the internal standard for the applications we’re deploying so what it means is that, yes, we are trying to help. And we were actually trying to leverage by making these things into standards. There’s absolutely a risk that if you allow people to do whatever they want that these things are just not going to integrate. They’re just not going to play together and one of our biggest assets is our ability to offer these things to all of our registered Yahoo! users and all of the people coming to Yahoo! every month. If we can’t do that, then the innovation would have been for naught. So absolutely we need to catch all of these great ideas, we need to bring them together, we need to make sure that we can leverage across our existing products and we need to make sure that as we infuse these new technologies into the environment that we actually leverage them and apply them to the existing products.
DAN FARBER:
Now what kind of communications infrastructure do you really have in place to drive innovation because so much of it is about communication, people coming up with new ideas and sharing them, getting teams together, probably smaller teams to execute on those ideas. Blogs and wikis and some of…
LARS RABBE:
Yes, all of the above, absolutely and really, the interaction. I personally believe that very seldom do great ideas come from just the original idea. It’s really the ability to leverage the idea and for other people to understand the original idea and the original breakthrough and really work on that, improve it and leverage. So, the interaction subsequent to the original idea becomes incredibly important.
One of the big challenges we’ve had for many, many years and one of the last great frontiers of CIO-dom is the ability to organize and retrieve unstructured information. We’ve been great at structuring information into databases and retrieve things from databases – we can have petabytes and petabytes of information in databases and you can get at it but we still haven’t really broken the issue of unstructured information. There are lots of content management systems around and lots of document management systems around but it still doesn’t give you that assessment of quality and direct search into what it is that you need. And I think that the tools that we’re developing here for social networking, for Web 2.0 are really going to be very applicable within the enterprise to solve this problem. So, it’s a great example of the crossover and how you take these problems and leverage them inside the enterprise.
DAN FARBER:
As a CIO, what’s a good example of a idea that didn’t seem like much but actually blossomed into something that was really a big game changer?
LARS RABBE:
The company we bought recently is a good example of this. They started with a relatively simple little concept and it’s changed the way people actually access photos and tag content on the internet and I think the whole concept of tagging is going to be much, much broader and really change a lot of the things we do on the internet in the future.
DAN FARBER:
In terms of overall innovation at Yahoo! Or any other company, do you have a set of recommendations you could offer?
LARS RABBE:
I think as a CIO, one of the things I’ve experienced in several companies is you absolutely have to have the interaction between IT and the engineering, the R&D, the researchers and so on. And usually that interaction only happens if you can establish a reputation for the IT department that creates the credibility, that creates the basis for that interaction. That really comes out of IT creating great products that then demonstrate that they can do the innovation just as well as the R&D people. And I’ve managed to make IT groups do that in other companies, and I think that we’re doing that at Yahoo! as well. And once that is established there will be back and forth between the external product and the internal use of it and so on. One thing we’re working on right now is taking our Yahoo! calendar, the Yahoo! email Go product on PDAs, wireless PDAs and deploying that for internal use and in the process influence the development process for the consumer product. So that is absolutely the first step, you get that interaction and we actually help develop the product and we help influence the direction of the product that way.
DAN FARBER:
Now it seems to me that innovation is often driven by competition – that you just feel that you have to run fast and out-run your competitors and even internally you have internal competition – you were mentioning about R&D and the people not in R&D and trying to innovate out. From your assessment, in periods where competition is less, where a company is more in a dominant position, that innovation doesn’t happen as often?
LARS RABBE:
Well I’ve certainly seen companies where if they get a dominant position they get complacent, they allow it to slow down. But I’ve also seen other companies where they see that as an opportunity to innovate and if they have the excess capacity to actually renew. I think today Yahoo! is in a position where this is not an issue. We are pushing ourselves, we are being pushed from all angles. And also, because our business is so broad, we’re not in one narrow business, we’re in many businesses and because of that there’s constantly somebody nibbling at our heels in one area or another that really creates a good natural paranoia about the ability to maintain a good leadership position and I think that really fosters a lot of innovation – people are constantly looking to improve as well as creating new products that elaborates what it is we already have.
DAN FARBER:
Now one of the areas of innovation is organizational management, and you’re in so many countries do you find that innovation across the globe is different depending on what location?
LARS RABBE:
I actually believe that being in many locations is great way of creating additional innovation. We’ve seen a lot of ideas come out of other markets where we may have thought about things back here but never thought that they would apply to our marketand then we see them blossom in other markets. I’ll give you one example, Yahoo answers that was launched recently was originally developed in the Far East and became wildly successful there. And the team in Taiwan developed this originally and worked on a number of angles of the product and really shook down the product from a usability point of view and then we took it back here and applied it to the US market and subsequently rolled it out significantly internationally and it probably wouldn’t have happened without the condition of the Taiwan market originally – that they could launch this and make it successful in that particular market. There are many other examples of this where a product is born in one market and because of market conditions they become very successful and we can then take that experience and apply it elsewhere.
DAN FARBER:
Well finally I’d like to ask about where you see the next big innovations coming from --in terms of what areas of technology or business process or organizational management.
LARS RABBE:
Well what we talked about with Web 2.0, social networking, I think a lot of innovation will come out of that. I think that we’ve only seen the beginning of it so far. I think that the ability to really make this content useful – because there’s a lot of non-useful content being created out there – and the ability to discern between that and when you search to know what the quality is, is really going to be significant. So, I think a lot of things are going to change there and we going to see this a lot. I also think technology is going to continue to help in a lot of different ways. We talked about the data center technologies, there’s definitely processing technology, I’m very hopeful that storage technology will develop so that we will not have to back up to tapes in some not too distant future. And these are things where there’s an absolute need, the technology is definitely getting there and we just need for some company to come up with that product that really gets the traction and really becomes valuable to us.
DAN FARBER:
Well Lars, thanks very much for speaking with me today.
LARS RABBE:
Thank you.
DAN FARBER:
I’ve been speaking with Lars Rabbe who is the CIO of Yahoo! For CIO Sessions I’m Dan Farber, thanks for watching.
