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Inside Microsoft's innovation crisis

Ideas not a problem

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The size challenge

However, there is a challenge - and it comes down to size. The question for Microsoft is how to turn these innovations and products into success stories on a scale of Windows and Office, which continue to dominate the business - accounting for almost half annual revenues.

Some of Microsoft's ideas from the last two decades, while growing, have failed to rival Windows or Office. Meanwhile, two business units jockey for title of worst performer: entertainment and devices, home to the soar-away Xbox and the market-share losing Windows Mobile, and online business, which suffered years of neglect and is now home to Bing.

The question is "why?". The reasons are open to debate: sheer market share of Office and Windows, and their potential as generators of renewable revenue.

Over the years, we've heard the horror stories. We've heard about the culture of meetings about meetings, people in different parts of the company independently working on the same idea in an uncoordinated way, an unwillingness to admit failure or kill dying or struggling products (except during the most extreme of situations, such as recession as during the last year or so), the fact some great ideas have just seemed to disappear or got subsumed into the overall platform.

There's a whole layer of management that self justifies with PowerPoint, producing some curious licensing and tactical decisions, such as killing IE development. As the business has grown, so have products, prices, and licensing that have added layer upon layer of complexity, making it harder for customers dealing with the company.

Survival of the fittest

Sure, there was even a dose of US corporate Darwinist politics inside Microsoft, as Brass said. It ensured ideas died for lack of a powerful corporate patron, not because they were bad ideas.

Microsoft is just like any other 30-something tech giant, trying to diversify.

Shortly after Steve Ballmer became CEO, there was much smoke blowing in the business press about how he was looking to General Electric for lessons on how to run the world's largest software company. Today, Ballmer has his GE: a company with products that span multiple markets - in this case consumer electronics, games, search, desktop productivity, databases, operating systems, business intelligence, and media.

Years of expanding into these markets has also produced a standing army of a workforce, with 90,000 staff. Microsoft has hot areas of innovation but also a cadre of bureaucrats. Plus, the new products have not lived up to the potential of the existing software - or the certainty and politics of the old.

Microsoft's challenge is not to come up with new ideas and innovation. Its challenge is overcoming the inertia, conservatism, and politics of a large company, reducing its reliance on the old certainties of the past - Windows and Office - and exploiting new ideas. ®

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