Inside Microsoft's innovation crisis
Ideas not a problem
The debate on how Microsoft is losing its innovative edge is as perennial and comfortable as how the summers were warmer and drier when you were growing up.
Windows not only seemed dull, but over the last decade, Microsoft either ignored its rise or made things harder for itself thanks to some stunningly arrogant management decisions that had huge ramifications - such as the decision not to build any new standalone versions of Internet Explorer.
It couldn't be more different to the 1980s and 1990s when Windows unified the PC ecosystem and Microsoft rolled out tools and initiatives that won developers.
The discussion is on again, thanks to Wednesday's op-ed in the New York Times by former vice president Dick Brass, who'd labored on the still-born Bill Gates' dream of tablet computing. Gates predicted in 2001 that the tablet would become the most popular form of PC within five years. Microsoft's tablet launched in 2002, and by 2005, the tablet was nowhere but niche.
Brass slammed Microsoft's dysfunctional corporate culture for stifling innovation. His writing juxtaposes Microsoft's fumbling with Apple's Jesus-like entry into tablets last week with the iPad. Apple or, more precisely, Stalinist chief executive Steve Jobs has a track-record of picking up and refining existing ideas in things like music players and smart phones and turning them into must-have items. Can he do the same with the tablet?
Such was the blow to Microsoft's pride delivered by Brass through the pages of the NYT that its head of PR felt obliged to issue a rebuttal.
Contrary to what those trading in accepted wisdom might think, Microsoft is not down and out when it comes to coming up with new ideas. Microsoft has an industry busting RD budget of $9bn, it's rolling out a new cloud architecture based on a new computing fabric, it's noodling about with a managed code operating system with Midori and a browser-cum operating system concept called Gazelle. Early signs are that the billions Microsoft is pouring into Bing have produced a clean search experience that - as with most things Microsoft - is clearly targeted as business partners.
Other ideas have emerged without Microsoft really knowing what it was on to: Silverlight was just a subset of Windows Presentation Foundation, Microsoft's new graphics layer, but it has quickly eclipsed WPF in terms of its interest among developers and become the company's challenger to Flash. There are even questions about just how many features Silverlight will get and how far Microsoft will take it on the desktop.
The real question when it comes to Microsoft is how it turns these new ideas into success stories, fiscally and in terms of developer support and numbers of partners and customers. Certainly in the past, Microsoft's work has produced results from building and refining a server operating system to putting Windows on handhelds, integrating a set of productivity applications to create a single Office suite to building a games console.
In the past, and even with some of the new ideas like Bing and Azure and a hosted version of Office, it's been a case of Microsoft following others. One of its strengths, like Apple, has been in taking an existing idea and making it work better as it did on Windows and Office in the 1980s and 1990s. Not so much innovating the new, as innovating the existing.
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. ®