Microsoft and Innovation

I just read a fascinating articled by Dick Brass*, who was a vice president at Microsoft from 1997 to 2004. He wrote the article on the occasion of Apple’s release last week of the iPad, a tablet computer. Many people are probably unaware that Microsoft has been advocating tablet computing for about ten years. Dick Brass was the guy in charge of tablet computing at Microsoft, so it’s fascinating to read his account of why Microsoft failed with their tablet PC, with a ten-year head start over Apple. (Of course, we don’t yet know whether Apple will also fail or not…but Apple has certainly got far more publicity in one week than Microsoft has in ten years.)

According to Dick Brass, it’s bigger than just the tablet computer–the real issue is a culture and organizational structure at Microsoft that repeatedly blocks innovation. Brass gives a second example to prove his point: he also turns out to have been in charge of an e-book project at Microsoft, also ten years ago and thus far ahead of Amazon’s Kindle.

Well, you might say “if Dick Brass failed twice, then maybe the problem is Dick Brass.” I don’t know enough about Microsoft to evaluate whether his account is the right one or is self-serving, but it has the ring of truth. After all, his projects aren’t the only ones at Microsoft that have failed to generate innovation–it’s widely known in the industry that Microsoft is quite bad at innovation. They report record earnings each year, but the money all comes from the Windows operating system and the Office productivity suite: products that are about 20 years old. Almost all of their new products come from their acquisitions of other companies that came up with the innovations.

Brass writes “Microsoft has become a clumsy, uncompetitive innovator.” And that it’s not a cool place to work; “There has been a steady exit of its best and brightest.” What happened? “Microsoft never developed a true system for innovation…Despite having one of the largest and best corporate laboratories in the world.”

How did the Tablet PC get blocked? “The vice president in charge of Office at the time decided he didn’t like the concept…he refused to modify the popular Office applications to work properly with the tablet….so even though our tablet had the enthusiastic support of top management and had cost hundreds of millions to develop, it was essentially allowed to be sabotaged.” And last year when everyone knew Apple was about to release a tablet computer, Microsoft eliminated their tablet group.

Another part of the problem is that Microsoft focuses on software and prefers not to develop hardware. It’s not a bad strategy because software is extremely profitable, and hardware is much riskier. But this sharp divide makes it harder to develop “beautifully designed products” like the iPhone–these depend on the new discipline of “design thinking” (formerly known as “concurrent engineering”).

Brass’s conclusion? “Unless it regains its creative spark, it’s an open question whether it has much of a future.”

*New York Times, Thursday Feb. 4, 2010, p. A25

5 thoughts on “Microsoft and Innovation

  1. I wonder…

    First, Microsoft, as you said, has never succeeded in being innovative. Even its lead products are imitations of pre-existing products that where known to the market. So I wonder whether the Microsofts’ failure with eBook and Tablets can be really linked to middle managers who don’t like a certain innovative direction. It seems that it is a deeper issue of strategy and culture.

    Second, to their defense, in the past few years they did came with few innovative software products. the OneNote package (especially useful for academics and tablet users) is a very good and innovative products. The first that comes from microsoft which I really like. So maybe they are, after all, more of a software company rather than hardware. Is it intrinsically bad not to diversify?

    Third, the argument that they contemplated tablets and eBooks long ago, but failed the compteition is weak. We really don’t know when Amazon started working on the Kindle and to how much failures they had along the way before they went into the market. Similar argument can be made for Apple. Maybe the started working on tablets 10 years ago, but the technology they developed seem to fit more the cell-phone, so they made the i-phone first?

    1. Those are all great points. And after all, there are plenty of people out there who will point out that Apple didn’t invent anything, either. The windows and mouse user interface that we associate with the 1984 MacIntosh actually was developed in the 1970s at Xerox PARC (and in research labs before PARC was formed). When the iPod was first released, there had been portable MP3 players on the market for years already. My old Palm Treo did almost everything that my new iPhone does: web browser, email, calendar, phone, MP3 player, the ability to purchase and install software from third parties, and it was available three years before the iPhone (although the iPhone does it all better). Microsoft seems pretty committed to their strategy of sticking with software and staying away from hardware, and it’s been hugely profitable. Apple has been a hardware-plus-software company since the 1980s…and it could be that difference alone that results in Apple’s recent successes, apart from any cultural or organizational issues.

  2. Microsoft always remind me of P&G – a fearsome marketing machine without much commitment to exploring radically new ways of doing things.

  3. In general, I’ve found that powerhouse brand oriented companies (Kraft, Mattel, Hachette Filipacchi) have trouble with organic growth. Instead, they grow by acquisition and licensing deals; it works, but the profit margins aren’t great.

    But I’ve been impressed with the movements P&G has been making, such as their Connect and Develop strategy…that’s fairly radical, isn’t it?

  4. Keith – Actually my above comment is inaccurate (it was going to be much longer but I got distracted, doh). Based on what I’ve read, P&G have been going some smart things. My understanding is they’ve recognised what their strengths are (marketing & brand mgt) & have let others do things like new product research that they are less good at.

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