Microsoft’s Creative Destruction

[rdowns]

A good read. My apologies to *LTD*.

NYT Link

AS they marvel at Apple’s new iPad tablet computer, the technorati seem to be focusing on where this leaves Amazon’s popular e-book business. But the much more important question is why Microsoft, America’s most famous and prosperous technology company, no longer brings us the future, whether it’s tablet computers like the iPad, e-books like Amazon’s Kindle, smartphones like the BlackBerry and iPhone, search engines like Google, digital music systems like iPod and iTunes or popular Web services like Facebook and Twitter.

Some people take joy in Microsoft’s struggles, as the popular view in recent years paints the company as an unrepentant intentional monopolist. Good riddance if it fails. But those of us who worked there know it differently. At worst, you can say it’s a highly repentant, largely accidental monopolist. It employs thousands of the smartest, most capable engineers in the world. More than any other firm, it made using computers both ubiquitous and affordable. Microsoft’s Windows operating system and Office applications suite still utterly rule their markets.

The company’s chief executive, Steve Ballmer, has continued to deliver huge profits. They totaled well over $100 billion in the past 10 years alone and help sustain the economies of Seattle, Washington State and the nation as a whole. Its founder, Bill Gates, is not only the most generous philanthropist in history, but has also inspired thousands of his employees to give generously themselves. No one in his right mind should wish Microsoft failure.

And yet it is failing, even as it reports record earnings. As the fellow who tried (and largely failed) to make tablet PCs and e-books happen at Microsoft a decade ago, I could say this is because the company placed too much faith in people like me. But the decline is so broad and so striking that it would be presumptuous of me to take responsibility for it.

Microsoft has become a clumsy, uncompetitive innovator. Its products are lampooned, often unfairly but sometimes with good reason. Its image has never recovered from the antitrust prosecution of the 1990s. Its marketing has been inept for years; remember the 2008 ad in which Bill Gates was somehow persuaded to literally wiggle his behind at the camera?

While Apple continues to gain market share in many products, Microsoft has lost share in Web browsers, high-end laptops and smartphones. Despite billions in investment, its Xbox line is still at best an equal contender in the game console business. It first ignored and then stumbled in personal music players until that business was locked up by Apple.

Microsoft’s huge profits — $6.7 billion for the past quarter — come almost entirely from Windows and Office programs first developed decades ago. Like G.M. with its trucks and S.U.V.’s, Microsoft can’t count on these venerable products to sustain it forever. Perhaps worst of all, Microsoft is no longer considered the cool or cutting-edge place to work. There has been a steady exit of its best and brightest.

What happened? Unlike other companies, Microsoft never developed a true system for innovation. Some of my former colleagues argue that it actually developed a system to thwart innovation. Despite having one of the largest and best corporate laboratories in the world, and the luxury of not one but three chief technology officers, the company routinely manages to frustrate the efforts of its visionary thinkers.

For example, early in my tenure, our group of very clever graphics experts invented a way to display text on screen called ClearType. It worked by using the color dots of liquid crystal displays to make type much more readable on the screen. Although we built it to help sell e-books, it gave Microsoft a huge potential advantage for every device with a screen. But it also annoyed other Microsoft groups that felt threatened by our success.

Engineers in the Windows group falsely claimed it made the display go haywire when certain colors were used. The head of Office products said it was fuzzy and gave him headaches. The vice president for pocket devices was blunter: he’d support ClearType and use it, but only if I transferred the program and the programmers to his control. As a result, even though it received much public praise, internal promotion and patents, a decade passed before a fully operational version of ClearType finally made it into Windows.

Another example: When we were building the tablet PC in 2001, the vice president in charge of Office at the time decided he didn’t like the concept. The tablet required a stylus, and he much preferred keyboards to pens and thought our efforts doomed. To guarantee they were, he refused to modify the popular Office applications to work properly with the tablet. So if you wanted to enter a number into a spreadsheet or correct a word in an e-mail message, you had to write it in a special pop-up box, which then transferred the information to Office. Annoying, clumsy and slow.

So once again, 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. To this day, you still can’t use Office directly on a Tablet PC. And despite the certainty that an Apple tablet was coming this year, the tablet group at Microsoft was eliminated.

Not everything that has gone wrong at Microsoft is due to internecine warfare. Part of the problem is a historic preference to develop (highly profitable) software without undertaking (highly risky) hardware. This made economic sense when the company was founded in 1975, but now makes it far more difficult to create tightly integrated, beautifully designed products like an iPhone or TiVo. And, yes, part of the problem has been an understandable caution in the wake of the antitrust settlement. Timing has also been poor — too soon on Web TV, too late on iPods.

Internal competition is common at great companies. It can be wisely encouraged to force ideas to compete. The problem comes when the competition becomes uncontrolled and destructive. At Microsoft, it has created a dysfunctional corporate culture in which the big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence. It’s not an accident that almost all the executives in charge of Microsoft’s music, e-books, phone, online, search and tablet efforts over the past decade have left.

As a result, while the company has had a truly amazing past and an enviably prosperous present, unless it regains its creative spark, it’s an open question whether it has much of a future.

Dick Brass was a vice president at Microsoft from 1997 to 2004.

 

[Consultant]

Summary: The microsoft culture is lack of visionary thinking and repression of innovation.

MS didn't create anything useful in recent years, so it's really not creative destruction.

 

[Eidorian]

I feel bad for the OS X teams...

 

[maflynn]

Good read and does makes sense given the various other articles about MS and what we've seen from them. They've never really innovated anything in their history. They took pre-existing products and made them better or just made them.

 

[GSMiller]

Sounds to me like they have too many bosses running around.

 

[theBB]

I don't know whether this is the exact problem, but it has been obvious for quite some time that Microsoft's corporate culture is in trouble for a long while. Barely any innovation has come out of Redmond in a decade.

Their biggest step was probably the switch from Win98 to Win2000/XP, but that was more about fixing what was clearly broken, not real innovation, at least in term of what is visible to the end user. It is sad really, with that much money and resources, you'd think they would be at least as interesting as Google.

 

[mscriv]

Wow, interesting article. It sounds like a lack of unified vision and too much pride on the part of various internal groups. Kinda sad to tell you the truth.

 

[*LTD*]

So true.

MS = Windows.

That's all. Sadly, that's far from enough.

"As they marvel at Apple’s new iPad tablet computer, the technorati seem to be focusing on where this leaves Amazon’s popular e-book business," Dick Brass writes for The New York Times. "But the much more important question is why Microsoft, America’s most famous and prosperous technology company, no longer brings us the future, whether it’s tablet computers like the iPad, e-books like Amazon’s Kindle, smartphones like the BlackBerry and iPhone, search engines like Google, digital music systems like iPod and iTunes or popular Web services like Facebook and Twitter."

Did they *ever* bring us into the future??

Oh, hold on . . . Xbox and Natal. Yeah, that's pretty cool.

 

[roadbloc]

Oh, hold on . . . Xbox and Natal. Yeah, that's pretty cool.

....and Windows Vista of corse!

"How much do YOU think this advanced operating system is worth?" - Steve Ballmer.

 

[kdarling]

Microsoft does do a lot of research. Unlike Apple, they're fairly open and accessible. They even have a website where you can read much of their results.

Unfortunately, they rarely bring it to market. But then, they're not really a hardware company. They usually expect others to build devices and license the software from them... and modify it as needed.

From what I've heard over the grapevine, a lot of their trouble is that they've moved so much work offshore. From experience, I can tell you that doing that plus hiring a lot of cheap H1B Visa holders, is a sure fire path to lack of real innovation.

Get rid of your experienced engineers, and you end up with kid stuff every time. Look at Apple on the other hand: they listen to the 50 year old guys, from CEO to designers.

 

[GSV]

Very interesting. It reminds me of another article, I think it was on Appleinsider, which talked about how Microsoft had 3 teams developing a mobile OS competing for resources and attention (WM, Zune, and Pink).

Steve Jobs had a good insight in this 1994 Rolling Stone Interview:

Microsoft has had two goals in the last 10 years. One was to copy the Mac, and the other was to copy Lotus' success in the spreadsheet — basically, the applications business. And over the course of the last 10 years, Microsoft accomplished both of those goals. And now they are completely lost.

Source: http://tinyurl.com/yzvtwbn

Another problem is Steve Ballmer. Hearing him talk is like listening to a strategy consultant (nothing against consultants). He's always speaking in terms of new markets, devices, platforms, ventures, partnerships, acquisitions, ect. Now maybe my perception is wrong, but it just feels like he has no real passion for technology. To him it's just a big business to run. Also, like some Mike Myers' characters, he has trouble controlling THE VOLUME OF HIS VOICE.

 

[Rodimus Prime]

Microsoft does do a lot of research. Unlike Apple, they're fairly open and accessible. They even have a website where you can read much of their results.

Unfortunately, they rarely bring it to market. But then, they're not really a hardware company. They usually expect others to build devices and license the software from them... and modify it as needed.

From what I've heard over the grapevine, a lot of their trouble is that they've moved so much work offshore. From experience, I can tell you that doing that plus hiring a lot of cheap H1B Visa holders, is a sure fire path to lack of real innovation.

Get rid of your experienced engineers, and you end up with kid stuff every time. Look at Apple on the other hand: they listen to the 50 year old guys, from CEO to designers.

Sounds like Microsoft became a victim of its own success from internal competition. I have read that Apple is in the early stages of that. It secrecy between departments is starting to cause problems and it suffers from a massive burn out and a common thing I have read is in the end both companies look great on a resume the internal workings are starting to cause problems.

How the companies started and early on worked great and was a great way to work but now they are becoming to large and internal problems will be the undoing. it looks like Microsoft more recently is trying to fix the problem but it is in such bad shape it will take a long time. Apple on the other problems are getting worse but then again the cracks for apple are only beginning to forum and you have to look for them. I hope at for Apple they solve there problems before they get out of hand.

 

[*LTD*]

Sounds like Microsoft became a victim of its own success from internal competition. I have read that Apple is in the early stages of that. It secrecy between departments is starting to cause problems and it suffers from a massive burn out

Where did you read this?

I'm not sure what your third sentence even means.

LOL

Apple has been dictating the future for a number of years now. They're really the only company able to execute effectively and in a timely manner on their strategies. And the results are things like the App Store, iPhone, iPad, etc. There are no internal problems at Apple because the company is run so well and so tightly. During Steve Jobs' absence the industry marvelled at how Cook took the reins so smoothly and how the company didn't miss a beat. Apple is an organization that is a model of effective management, in all its divisions. Why would you even compare them to MS??

But we're all waiting on more of your unbelievably prescient and penetrating "I read it somewhere" insight.

Look at the outward evidence - at the products, when they hit the market, what new ideas Apple is floating and how they implement them. Apple puts great products into people's hands. MS makes a Big Ass Table(TM), followed up with excuses about its Mobile Strategy (or lack thereof), and shows us some HP "damage-control" slate product running some awful version of Windows. Sad.

It's pretty easy to see who's got the bigger problems.

 

[thejadedmonkey]

Apple on the other problems are getting worse but then again the cracks for apple are only beginning to forum and you have to look for them. I hope at for Apple they solve there problems before they get out of hand.

I think that Apple's problems are already out of hand, but they don't realize it yet. All you need to do is look at the recent 27" iMac screens to understand that the marketing team isn't in sync with the engineering team, and the P.R. team is at such a loss for an explanation that they've taken to buying customer's loyalty.

If you go to an Apple store, Apple is so focused on their employee numbers - % who sell Pro Care or Apple Care, that you can't just learn about a computer anymore. It "Just Works", but only with Applecare and procare and mobile me...

At least Microsoft has some decent products like the 360 (even if it is an engineering disaster) or the Zune, they just need to prune everything that's not so important somehow.

 

[Eidorian]

This post comes to mind as well.

 

[*LTD*]

I think that Apple's problems are already out of hand, but they don't realize it yet. All you need to do is look at the recent 27" iMac screens to understand that the marketing team isn't in sync with the engineering team, and the P.R. team is at such a loss for an explanation that they've taken to buying customer's loyalty.

Baloney.

Issues with Apple products now and then are nothing out of the ordinary. Those issues were always there.

http://en.wikipedia.org/wiki/IBook

Quality issues

In late November 2003, a number of iBook G4 users reported display problems with their laptops. In December 2003, a group of users headed by Michael Johnson and Bill Owen sought to file a class action suit against Apple. In response, Apple initiated the "iBook Logic Board Repair Extension Program" in January 2004, which covered the expense of repairing affected iBooks for three years.[2][3]
The iBook G4 seemed to suffer from similar display problems as the iBook G3, but was not covered by the repair extension program. Owners of iBooks that required expensive repairs for these problems submitted new class action lawsuits in December 2006.[4]

Yet Apple still manages to remain #1 in customer satisfaction year after year, as well as customer service.

At least Microsoft has some decent products like the 360 (even if it is an engineering disaster) or the Zune, they just need to prune everything that's not so important somehow.

One of the items in your list can hardly be called "decent" by your own admission, and the other is a failure.

 

[roadbloc]

At least Microsoft has some decent products like the 360 (even if it is an engineering disaster) or the Zune, they just need to prune everything that's not so important somehow.

I'm confused.... you put the words Zune and decent product in the same sentence.

 

[Rodimus Prime]

Where did you read this?

I'm not sure what your third sentence even means.

LOL

Apple has been dictating the future for a number of years now. They're really the only company able to execute effectively and in a timely manner on their strategies. And the results are things like the App Store, iPhone, iPad, etc. There are no internal problems at Apple because the company is run so well and so tightly. During Steve Jobs' absence the industry marvelled at how Cook took the reins so smoothly and how the company didn't miss a beat. Apple is an organization that is a model of effective management, in all its divisions. Why would you even compare them to MS??

But we're all waiting on more of your unbelievably prescient and penetrating "I read it somewhere" insight.

Look at the outward evidence - at the products, when they hit the market, what new ideas Apple is floating and how they implement them. Apple puts great products into people's hands. MS makes a Big Ass Table(TM), followed up with excuses about its Mobile Strategy (or lack thereof), and shows us some HP "damage-control" slate product running some awful version of Windows. Sad.

It's pretty easy to see who's got the bigger problems.

I never said outside to the market it is there. I said they are in the early stages of hurting themselves. Their own secrecy between departments causes lots of problems. Different teams do not know what others are working on and if something group A is working on might be completely set back last min by group B because of secrecy.

Internally apple keeps some pretty insane deadlines and forces it on the different teams and all that pressure on the different teams is causing burn out problems on the employees.

Yeah you get great productivity out of employees for short burst but long term you start killing off your best and they move on to other companies that do not put so much pressure on the employees. The internal workings of the company start doing the damage to the out side.
The internal problems have not started to hurt the business yet but it starts adding up over time. Burning out your employees is not a good.

Apple pressure and secrecy will be their undoing.

 

[*LTD*]

An aging dinosaur that lost its edge years ago

http://money.cnn.com/galleries/2010/fortune/1002/gallery.biggest_losers.fortune/4.html

Meet the market's biggest losers
4 of 10
Microsoft

Loss: $390 billion
Peak market cap: $642 billion (September 2000)
Recent market cap: $252 billion
Ticker: MSFT

Microsoft remains the second-biggest U.S. company by market capitalization (after Exxon Mobil), in spite of the sharp decline of its stock. Microsoft has slumped even though it, like Intel, has spent tens of billions of dollars to buy back shares. Microsoft said in the fall of 2008 it had spent $115 billion over five years on stock repurchases and dividends -- a period during which the stock was flat, even with the company's bid.

 

[MisterMe]

Microsoft does do a lot of research. Unlike Apple, they're fairly open and accessible. ...

Huh! Microsoft--open and accessible? How your figure that?

Even if you were correct--and you are not--then it would be irrelevant to the topic of this thread. This thread is about Microsoft's lack of innovation.

Remember that Microsoft's founding product, Microsoft BASIC, was developed as a result of a Dumpster-diving expedition at the Digital Equipment Corporation where Bill Gates worked while he attended Harvard. Microsoft required access to Apple code to get Windows off the ground. Windows Media is based on stolen QuickTime code. ClearType, Microsoft's proudest innovation of the past 20 years, first appeared on the Apple ][ in 1977.

The takeaway message is that Microsoft's lack of innovation is deeply ingrained in the company's DNA. The fact that it employs individual scientists and engineers who may have good ideas notwithstanding. Microsoft cannot resist its congenital fear that someone somewhere outside the company may have a better idea than anything that its own engineers could ever come up with.

The brilliant ideas by its own engineers are cast aside in favor of a purchase or theft of ideas on the outside. However, I have neither sympathy nor respect for these Microsoft employees. They could leave Microsoft for employment with another company or they can start companies on their own. However, they choose to remain with Microsoft and suckle that teat.

They get what they deserve.

 

[pilotError]

The only innovation coming out of MS is their lawyers.

They've honed the art of pounding any small competitor into oblivion.

Half of the technology was bullied from much smaller players and sometimes outright stolen in their early days.

I have no sympathy for them. They are doomed to mediocrity; on one hand calling for congress to dump money into the sciences since nobody wants to take up computers in school, all the while replacing Local Talent with cheap offshore resources. They are the worlds leader in good enough software...

The industry is quickly bypassing them, but nobody has the breadth of solutions they have. Apple makes cool stuff, MS is boring, but gets the job done. They aren't going away, but they are dying a painful death in the consumer business.