How Microsoft Can Become More Innovative

How could I not love this page one WSJ article about Microsoft-the-innovator

"Throughout its history, Microsoft has been slow to grasp some of the
computer industry’s biggest technology shifts and business changes.
When it decides to embrace an innovation, the company has often
succeeded in chasing down the leaders, as it did years ago with Lotus
Development Corp. on spreadsheets that allow users to organize data,
and a decade ago with Netscape Communications Corp. on Web browsers
that transformed the experience of using the Internet. For years, this
catch-up-and-surpass approach worked well.

Early this decade, however, companies such as Google Inc. and Apple
Inc. exposed holes in the approach. Microsoft was slow to see the
potential in Web search and online advertising, and despite heavy
investments, has so far failed to catch industry leaders Google and Yahoo
Inc. It also was late coming to market with its own music player, and
despite a push, remains far behind Apple. Today, a host of Web-based
software services from Google and others threaten to reduce the
importance of Microsoft’s personal-computer software."

What is the solution? Craig Mundie, the man designated to replace Bill Gates, has quite the challenge on his hands:

"Mr. Mundie says advances in technology that represent "fundamental change" or "whole new business opportunities" are "more disruptive, and so people aren’t as focused on them" at Microsoft as they are on developing new features for existing products. "When they encounter them, they are naturally a bit more skeptical."

Microsoft’s product groups — business units built around products such as Windows and Office that produce much of the company’s cash — have long had enormous clout in its corporate culture. Star product-group managers, the company’s so-called shippers, get the big, profitable products like Windows out the door year after year. For them, meeting deadlines is all-important; longer-term thinking about technology isn’t.

Mr. Mundie is trying to help shift some clout to the company’s long-term thinkers and to gain more attention for new technologies and businesses. He nurtures small groups in areas he considers promising long-term bets for Microsoft, such as health care, education and super-fast "quantum" computers. During the past year, to attract foreign talent, he has opened more than 50 small research centers in such distant locations as Egypt, Chile, Malaysia and Russia."

Essentially, the approach is to tear a page from the R&D wizards at Google, and
encourage greater creativity from the non-product groups (product
groups are Windows, Office, Internet services, X-Box, etc.) to anticipate the next major
shift in computing technology.

In other words, Microsoft, in seeking to become more innovative, is copying Google’s model.

How Classic is that!


Behind Microsoft’s Bid To Gain Cutting Edge: A History of Catch-Up
Mundie Follows Gates As Long-Term Thinker;
WSJ, July 30, 2007; Page A1

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  1. cm commented on Jul 31

    I don’t intend to defend MS in particular, but then —

    I believe one big caveat on this topic is the big lack of product liability and quality standards for software, relative to most other product categories. I’m not suggesting we should have stricter liability, just that its lack creates a disincentive. (I’m a software engineer and I honestly wouldn’t want to be forced to sign off on everything I do and imagine the bureaucracy that would invariably come with it at my expense.)

    Having said that, (initial) innovation and bringing to and supporting known technology in a diverse mass market are two different activities. MS is putting its focus on the latter.

    As soon as a product addressing a non-trivial (and often open-ended) problem area leaves the phase of its initial clean-slate design and prototyping, it will be subjected to feature creep and tweaking beyond what its original design can reasonably support.

    So far I have not seen a single product, proprietary or free software, that has gone through this yet stayed in good and lean shape. Even in the free software world, people will not find the time or interest to do the needed redesign/reengineering (for which BTW they will be denied the fame of the innovator, coming back to the original topic).

    But then look at all other areas of business — how much real innovation is there relative to mundane activities, and at best refilling old wine in new bottles?

  2. cm commented on Jul 31

    I other words, asking an actor like MS to be a major innovator at this point in its life cycle is asking for the wrong thing, or is at best unrealistic.

  3. KirkH commented on Jul 31

    In 5 years Ubuntu Linux will be better than Windows XP. That’ll be a big turning point because XP is better than Vista.

    Microsoft will probably never make a version of Office for Linux so two of their cash cows will slowly die.

  4. Sailorman commented on Jul 31

    Microsoft is in much deeper trouble than people seem to realize. Apple has fostered a generation of kids that adore the brand. When it comes time to buy a laptop or PC, they will buy Apple.

    Add to that the woes of Vista and you have the makings of a major problem, the size of which Microsoft has never seen before.

  5. M.Z. Forrest commented on Jul 31

    In many respects, I think we are seeing the split of tech again. We have consumer and SMB tech, and then we have big business and government tech. I think Microsoft will continue to cede the lower space, most likely involuntarily, and they will further progress in the upper space. It takes a different R&D mindset to make money giving it away practically for free than it does building a big capital product. I think Apple will continue growing the home computer space and Microsoft will be there to pretty much keep them honest.

  6. techy2468 commented on Jul 31

    i wish apple will take some bite out of microsoft.

    * but microsoft will remain the king in business since no one wants to take risk of trying linux for workstations.
    * vista has problem now, but remember atleast 1000 people maybe working at microsoft….they will fix it as they have fixed previous softwares.

    but i dont see a lot of growth for them unless they force their customers to buy a new version every 7-8 years by stopping support.

  7. Kp commented on Jul 31

    Apple will never be mainstream until they loosen their collars and become a little less “too cool”, not too mention compete with value alternatives that currently have A LOT more application availability. Which will not happen while Jobs is driving the short bus, not to mention in case no one has noticed…Apple is not apple without Jobs.

  8. xMSEmp commented on Jul 31

    Actually Google copied Microsoft, who copied some other company who copied some other company. Google is about to hit the same roadblock that hit Microsoft’s innovation. It is the stock options wall.

    Companies that heavily use stock options to pay their employees get crazy innovation, creativity and work hours because the employees focus on improving the company to improve the stock price and improve their net worth. When the majority of employees at a company become multi-millionairse they realize that they can try to become th next Microsoft, Google, Amazon, etc.. Instead of providing innovations for the company they are employed at they start secret projects at home in their garage. Then they leave the company and cash out the options that start their startup. When the stock price flounders its really hard to pick up new employees of the same caliber as before. Sure they get the options cheap but they don’t see their worth grow as fast as those before them. Eventually the amount of employees maintaining the status quo increases and it puts a burden on the company.

    The best thing that Google can do is what Microsoft should have done. Dismantle the company. Incubate each of their ideas into independent products, Google Search, Google Finance, Google Video, etc and start them up form square one.


    BR: Uh, no.

  9. Lord commented on Jul 31

    Well Google has tried copying others too with unsatisfactory results (Google Finance comes to mind.), and some of its largest extensions have been purchases (You Tube). Library indexation is a fairly logical extension to search. It’s mobile initiatives have probably been more innovative, but it is hard when you get to that size.

  10. Norman commented on Jul 31

    One word describes Microsoft’s chances: X-Box. Gates is a good ruthless bully but that doesn’t make him smart.

  11. Tom B commented on Jul 31

    “Microsoft is in much deeper trouble than people seem to realize. Apple has fostered a generation of kids that adore the brand. When it comes time to buy a laptop or PC, they will buy Apple”

    With 5 years and billions in cash, MSFT, apparently couldn’t manage to upgrade the Windows core to UNIX. That’s embaressing. Numerous long-haired LINUX types have written decent UNIX based OS’s in their basements. Steve Jobs oversaw creation of a useful-for-almost-regular people UNIX variant, NeXTSTEP, in the mid eighties–AND successfully grafted a flashier UI on top of it when he returned to Apple. OS 10.5 will presumably nail 64 bit computing– something MSFT hasn’t been able to deliver on in any meaningful way.

    “One word describes Microsoft’s chances: X-Box. Gates is a good ruthless bully but that doesn’t make him smart.”

    Xbox is possibly MSFT’s best product, ever, and they can’t make any money on it. That’s emblematic of how scr*wed they are.

  12. Paul Peachin commented on Jul 31

    It was proposed to break-up Microsoft more than several years ago – an opportunity for both the shareholders and the employees.

    I enter the internet thru – use to anyway – I am still an MSN subscriber. for the e-mail people and searches
    is unstable – has been since they started to announce Vista coming up. They probably move people from one area to another to attack their problems – leaving holes in
    the sectors that the inside people moved from.

    I use Mozilla – google, Netvibes – all very tight providers – they update often – correct problems quickly and thoroughly
    It appears Microsoft – cannot do either.

    Dell, is the next Gateway – it’s in the stars – What’s in the stars for MSFT?

  13. Tom B commented on Jul 31

    “It was proposed to break-up Microsoft more than several years ago – an opportunity for both the shareholders and the employees.”

    It was proposed by Republican Judge Thomas Penfield Jackson, who found MSFT guilty of illegal “tying” with regards to using IE to attack Netscape, Inc. Bush and Thugs essentially voided the verdict on appeal. Ironically, a break up would have forced the company to focus; perhaps it would have beefed up the products.

  14. fred commented on Jul 31

    MS was never an innovator, except possibly Excel. In the early days they took an inferior DOS, knew the right people to get The Big Contract (IBM), and used anti-competitive tactics to force the competition out of business. Such was their playbook for over a decade until the Feds finally decided to step in. Now they’ll tie Linux up in lawsuits to defend server space and the desktop and pray they can catch up to Apple in personal devices and try to find a way to chisel at google’s web services bedrock.

  15. johntron commented on Jul 31

    easiest, though least palpable solution…..breakup the redmond campus. pull a boeing and move the HQ away from the major divisions.

    open up a msft-plex in palo alto….or somewhere in metro NYC for the MSN group.

    Bascially move everyone away from Redmond, except for the Office or/and Windows group.

    my 1 cent.

  16. Jim Bergsten commented on Jul 31

    Those who do not learn from history are doomed to repeat it.

    Those who learn from history are doomed to repeat it too.

    So, if you want to know where Microsoft came from, where they’ve been, and where they are going, learn the history of IBM.

    Nothing more needs saying.

  17. Jim Bergsten commented on Jul 31

    OK, something more needs saying (because nobody is going to go out and actually learn the history of IBM). So, here’s the executive summary:

    Success in business is not based on innovation — it is based on taking advantage of other’s innovation once it has been proven.

    So, MSFT doesn’t NEED to innovate.

  18. Camille commented on Jul 31

    I’m waiting for Microsoft to stop supporting XP and with that, you’ll see an increase in vulnerabilities and instability to the point where users will be forced to upgrade. At that point, I plan on upgrading to Ubuntu or RedHat Linux (both are pretty good.) Vista just isn’t a significant improvement over XP. Microsoft should sell a Linux compatible X Window System front end and focus on what they do best…making good GUI’s.

    MS Office has been overpriced now for about a decade, considering OpenOffice has 90% of the functionality of MS Office, but is free. Moreover, MSOffice hasn’t had a meaningful upgrade in as much time.

    I’ve always been wary of Microsoft and feel that their domination in the PC market has not been good for innovation. We seem to have hundreds of different hardware manufacturers, which drives prices down and competition up. Innovation in computer hardware has given us dramatic performance and quality improvements for decades now. Why haven’t we seen similar improvements in operating systems?

  19. Barry Ritholtz commented on Jul 31

    I love the quality of these comments — thanks for the insights.

    I was expecting 9 posts accusing me of a being MSFT hater . . .

  20. Tom B commented on Jul 31

    “We seem to have hundreds of different hardware manufacturers, which drives prices down and competition up. Innovation in computer hardware has given us dramatic performance and quality improvements for decades now.”

    Performance increases have been primarily the result of advances in chip miniaturization. The plethora of vendors has HURT the PC industry more than helped it, IMHO. Examples: Apple adopted Postscript, USB, wifi, and 1394 faster than just about any PC vendor. They DROPPED floppy discs years before PC vendors did. Why? They didn’t have to sit down in a big room and kowtow to Bill Gates to get support features in the OS they needed. If they wanted to add a hardware feature, they could just write a driver to work it themselves, pronto. Competition only works when you are dealing with a commodity item, like gasoline or paper towels.

  21. johntron commented on Jul 31


    I think that you tapped into a deep, invisible well of disdain for MSFT….especially among “power PC/internet” users, which probably make up a large number of big picture readers.

    Pluses for MSFT: Excel, Xbox. Large number of 3-party apps (though a lot of those are needed to overcome Windows shortcomings).
    OK: Powerpoint, Word.
    Craptacular: pretty much everything else. Windows included.

    I’d love to switch to Mac-based OS, but damn it….I’m addicted to the Alt-F, Windows Button-M, etc. keyboard shortcuts…..which is infinitely faster than the pure mouse based movements on Mac, especially using MS Office and those damn large Excel spreadsheets.

    That’s the only thing preventing me from going Mac.

  22. techy2468 commented on Jul 31

    msft is not going anywhere, not atleast in the next 5-6 years.

    * openoffice maybe cheap….but business will find it very hard to depend on open source….they trust and depend on ms office

    i am surprised that there are so many MS haters…..i wonder why so?? is it because they are big??

    MS has a monopoly in windows OS (95% of PCs use it) now IE is almost become a norm (business write applications targeting IE only if short on budget).

    Linux has been there now for almost 10 years….how many businesses converted to it??

    simply hating something will not make it go away (how many of us have switched to non-ms product???)

  23. Kp commented on Jul 31

    Excel 2007 is….magnificent.(I live and die by Excel)

    As for people that say that office is the only thing keeping them from switching to OS X or *nix….Mr. Softee makes Office for the Mac too!! AND Wine will run it as well.

  24. Michael M commented on Jul 31

    off topic, but what the heck: Outside “reversal” day!

  25. JustAGuy commented on Jul 31


    You can get actual MS Office for the Mac that works the same way you are used to. It really is compatible. And the keyboard shortcuts are there too.

    techy2468, some people might hate MS for their size (any corp that gets big enough gets this view), but mostly people hate MS because of the anticompetitive and illegal practices it has been known for over the years. When you push your weight around as long as, and as brutally as, MS has, you get disliked. Simple as that.

    I switched away from MS products and haven’t regretted it. I use OpenOffice, for instance, and no one I send documents to knows the difference, and I can see no difference in the way I use the product.

    The fact is that with the Web-centric model combined with open source software availability, the hold MS has on the market is slipping. There are perfectly good alternatives in the marketplace that are more secure, cheaper, and easier-to-use. I think that’s why you are seeing more people turn away from MS now: They have that choice. It’s easy.

  26. Mike commented on Jul 31

    Given Microsoft’s efforts to sell to China, there could be over a billion reasons why the company will be around for a very long time.

    Further, Microsoft can afford to lose money driving out the competition. They are cranking out cash like crazy. Their product doesn’t have to be great to dominate, just adequate. Not being a techie myself, I find their products more than adequate (though I completely understand that there are many people out there with far greater needs than myself who would like a much better product).

    I tend to think of Microsoft as the GM of the current generation, only without the union or pension issues.

  27. quick commented on Jul 31

    Is it just me, or is the RSS feed broken?

  28. johntron commented on Jul 31

    A problem with Office on Mac is that you lose the 3rd party macros designed only for Windows Office… 3rd party statistical analysis/technical analysis/stock downloading macros.

    And a lot of enterprise Office users have 3rd party software tied into Office for document management, version tracking, etc.

    IMHO, Windows is kept alive by the network effect.

  29. Tom B commented on Jul 31

    “IMHO, Windows is kept alive by the network effect.”

    Indeed. But, a little recognized fact is that the relative cost of Windows-based “solutions” is increasingly while alternatives are becoming more affordable. Office is more pricey than OpenOffice; securing an inherently extremely insecure OS (Windows) gets costlier every year; maintaining your own sucky Outlook/Exchange ecosystem that nobody likes instead of using something cheap and modern, like Gmail is expensive; buying bigger computers to run molasses-ware like Vista adds to the incremental cost. For my part, I can’t understand why I can’t reliably paste text from a web page into Excel. Surely, one would have thought cut-and-paste was fully worked out in the eighties!

    Dumping product on unsuspecting third world suckers might help MSFT’s books in the short term; in the long term I can’t imagine the Chinese Govt trusting a shady operation like MSFT NOT to be leaving deliberate “back-doors” for other shady operations (the CIA, NSA, etc) in the software. The Chinese aren’t stupid.

    “Further, Microsoft can afford to lose money driving out the competition” Ahh, the XBox. Looks like they (and Sony) hadn’t counted on the Wii. Moreover, this is increasingly looking like Mothra vs. Godzilla. There might not be a “winner” per se…

  30. Eclectic commented on Aug 1

    Put me up a list of Google innovations.

    G’ahead, let’s see the list… Don’t put anything in the list that they didn’t invent.

    Anybody can play, but just be intellectually fair. I’m not saying they haven’t been innovative… but you did say it, so let’s see the list:

    1. – ?

  31. KP commented on Aug 1

    I am not 100% sure that Google was the first in these areas…I’m just pretty sure.

    1. Google Earth
    2. Google Scholar
    3. Google Web API’s
    4. Google Desktop search

    Google’s mission as I understand it is not to be an innovator in specific way other than to be a one stop shopping for info search in all of it’s possible forms…and to collect ad revenue while doing so.

  32. Tom B commented on Aug 1

    I was cool on GOOG initially. Search, who cares? But you gotta love their “numbers”.

    And, web Apps ARE the way of the future. Why run an expensive Exchange server when you can just use Gmail? Of course, for business users, there would have to be redundancy and encryption, but neither of these is difficult to achieve.

  33. Jeremy commented on Aug 1

    Since the earnings are double those of five years ago and the stock price has not moved, the mgmt needs to be changed. Obviously no one believes in the mgmt story any longer: can you say Xbox? can you say windows mobile? can you say windows interactive mobile? can you say Vista?

    This is a company of sheep bolted to the past where any “innovation” (in MSFT-speak this is a clever copy of the work of others with an MSFT skin) needs to “support” legacy systems. Let me see, how can we link this with WORD? If I write a letter, we’ll get MS Live Search to interrupt and open up a map/aerial photo of the address…

    The problem is that all of MSFT is playing CYA so the big Kahunas of Office and Windows are “covered.” So you end up with more and more “support” and more and more expensive and ponderous systems.

    No one, especially Ballmer has the nerve to start over and REALLY innovate.

    In economics, this is the curse of the Monopolist. He spends so much time defending his position (WORD, PPT, Excel, etc.) that he cannot innovate.

    Suggestions: from an MSFT shoreholder point of view, the best that could be done is break MSFT up into smaller parts and force them to live away from the advantage/burden of the Mother Ship.

    Alternatively, over time, as MSFT sinks further into backwardness, it will become a play for the shorts. (Remember General Motors?) Fortunately, when it gets bad enough that even MSFT’s directors cannot hide from the truth, MSFT willnot have the labor legacy that GM has so, cleaning house of the Ballmers and installing real innovation will come quickly.

    BTW: did anyone otice in the WSJ article that Mundie was in charge of gaming software, mobile software and MS TV? Yup, he’s an innovator!

  34. Eclectic commented on Aug 1

    KP, I don’t rightly think so. I’ll address your points with ***my comments:

    1. Google Earth

    ***10 years ago I defeated a subdivision project near my residence all with sat photography provided free of charge by MSFT’s TerraServer project. I’d already measured the project, defined the zoning problems, defined the nearby undisclosed financial risks to the project’s completion (that even the developer wasn’t fully aware of), and provided unequivocal evidence of misleading project advertising. The zoning hearing was a piece of cake. It went like this:

    1)- Opening
    2) – Mr. Eclectic appears with the stuff
    3) – Project voted D.O.A. – Thank you for coming, and good night all.

    2. Google Scholar

    ***sorry, I don’t buy the assumed proprietary aspects of your argument here. Wiki is a pretty good competitor, as is Rupert Murdock when he gets finished with DJ and has a little extra time to f around with ways to get in Google’s face, or space… or, well, you get the idea I’m sure.

    3. Google Web API’s

    ***we’ve had this discussion before. Barringo, you can help us out here. Go ask your legal suits this question: Should the Ritholtz franchise be risked by ever putting a-n-y-t-h-i-n-g critical regarding information about customers, trade methods, analytical methods, or about Barringo, or his family, or about anything associated with Barringo period that once submitted to the ether of online apps can NEVER be completely withdrawn. Come back and tell us if the suits want you using the apps. I’ve got your answer right here… or you need new suits. Johnny may use them for the lemonade stand business, but nobody serious will… not until the privacy rights of this type of information is worked out by Congress, a Congress that find its ass with both hands. Witness 512 of the DMCA, which a well-informed 10th grader could’ve written in a more effective form.

    4. Google Desktop search

    ***aw, c’mon… where have you been in the last 15 years?… I can’t even name them all… Excite, Altavista, and goodness the list must include dozens or more. Google has just been the best but they didn’t invent the concept. Tomorrow a new big popular sugar daddy can start takin’ the search pie away… maybe yes… maybe no, but it could happen tomorrow, just as fast as Google took it. Every even fractional loss of search share risks their entire existence.

    Okay, so… I’ve asked the question about Google’s innovation and I don’t have any good answers from anybody. I even know the one true and only best answer to my own question and nobody has mentioned it yet.

    Barringo, you’re a “no show.”

  35. Eclectic commented on Aug 1

    BTW, that would be:

    “…. by Congress, a Congress that [can’t] find its ass with both hands.”

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