Microsoft Corporation is an American multinational software corporation that develops, manufacturers, licenses and supports a wide range of products and services related to computing. Microsoft is the world’s largest software maker and affects millions of users worldwide every day. The company recorded all-time high revenue bringing in $73.7 billion for fiscal year 2012.
After analyzing this case, I have concluded that the main problem for Microsoft is that their deep silos are inevitably hindering its ability to produce products and/or services to compete with current computing trends in the industry. While Microsoft continues to dominate the computing world, it cannot be attributed to their innovation strategy. To address these problems I suggest that Microsoft alter their environment to better simulate innovation. Microsoft should create an environmental culture in which employees are encouraged to venture outside their tasks, minimal time pressure, and high job security give positive feedback for initiatives taken.
These recommendations are based on specific concepts from the book. Current environment inside Microsoft does not currently provide positive feedback. Their current environments sets commitments for each division and employees are faced with performance evaluations. When employees failed to meet designated commitments, employees were penalized. Additionally, employees are penalized for taking on activities unrelated to their commitments. First in chapter 6 we saw that in an industry where growth is slowing and competition becomes stronger, an organization’s success requires innovation. This is why it is recommended that Microsoft focus on simulating innovation.
We saw that innovators derive from individual developers and thereby can be considered the true source of innovative products. While an organization system model and creative individuals are key stakeholders in the business, it is not enough to drive innovation. Per chapter 6, there are several effective ways to simulate innovation- of which are the recommendations suggested above.
Innovation Strategy at Microsoft: Clouds on the Horizon
ACC – Applied Carbon Corporation (large environmental technology conglomerate) EBC (Executive Briefing Center)
Innovation team- Gates was engaged with the engineer and the algorithm, he talked about how the algorithm that could increase the speed of the search This suggestion by Gates reduced time used on massive server banks Later he proposed an innovation to monetization model that would save corps millions of energy time. Innovation at Microsoft: Top-Down or Bottom-Up?
Innovation drivers: Product groups, Microsoft Research labs, Innovation teams generating grassroots innovation Innovation at Microsoft really was a “one-man show”, vision and drive of a senior leader, i.e. Gates, then would work its way down Gates would send out memos calling for dramatic change in products, services and technologies Microsoft offered Extensions on existing products & services – result of product groups New products & services accounted for 1/3 Microsoft Rev
Grassroot innovation- attempt to tap into diverse ideas of Microsoft employees & turn into profitable new businesses Participated in ThinkWeek, Quest, IdeAgency & Innovation Outreach Program ThinkWeek- technical papers submitted once a year directly to Gates who reviews them for a week & makes comments Quest- Similar to ThinkWeek but involved Microsoft’s most senior & accomplished technical minds Thinkweek & Quest tapped into minds of senior technical staff- ignored other employees IdeAgency- to full realize potential in grassroots innovation by all Microsoft employees Executive sponsor (most likely product group leader) identified a prb that needed a solution & all employees through an IdeaExchange tool would submit solutions Learning by doing- needed more adjustments- submitting ideas wasn’t enough.
Therefore top ideas of IdeAgency were selected (ie. 300 first session), form groups, were given a budget & resources to develop a prototype within 8 weeks. ThinkWeek, Quest, IdeAgency- all internal request for info, IOP implemented to include public Chief innovation officers from 10 Microsoft largest accounts for two-day innovation brainstorming conference- asked to look 5 years ahead (LT ignore ST) Steep believed this would drive innovation b/c had two critical flows of information done in product groups & Microsoft research labs 1. Top-down guidance
2. Bottom-up expertise
The Information Technology Industry: Clouds on the Horizon Grassroots innovation initiatives response to increased competition from all sides (apple, amazon, google, linux and others) Microsoft generated most rev from consumer & enterprise licenses for software products ’08 operating income $22.5B on rev of $60.
4B (15% growth rate) New technologies threaten importance of Windows operating system as a universal platform, undermining traditional licensing model used by Microsoft for so long Microsoft business model relied heavily on product groups within divisions while each group tailored its software development process to its core technology & market Product groups worked closely with Sales, Marketing & Service division to deliver on customer needs Again, licensing model has been successful for Microsoft but many business analysts that shrink-wrapped software method of generating revenue will be obsolete and lose to cloud computing items 2000 Apple launched MobileMe
Yahoo implemented online advertising business model
Amazon online service & transaction business model
Google online info search leader
Grassroots Innovation under Microscope
Product groups focus on ST & Research labs on LT
So many processes running concurrently with lots of capital tied into them – is Microsoft delivering on its process? The ThinkWeek & Quest relied heavily no Gates- so what if he departed? IdeAgency great on paper- while delivered many successes, few drawbacks- immense time required to facilitate Too many hurdles trying to make fruitful collaborations in resistant environment Too much effort to get anything going across the product groups Many employees refused to work on projects beyond their defined objectives and commitments out of fear of receiving poor evaluations Organization Structure & Design
Three divisions: Platform Products & Services, Microsoft Business & Entertainment & Devices Deep silos that barely communicated or collaborated
Three business divisions, seven business groups & 27 product groups were told to focus on its own individual profit/loss. Business groups didn’t have time or incentive to participate in collaborations away from their own group Culture & Beliefs
Developer-centric company b/c most employees possessed extraordinary amount of tech expertise- every employee (even senior mgmt.) had small office with a closed-door policy to concentrate better Culture a result of Gates behavior and mgmt. system driven by 3 core beliefs- 1) individual excellence (believed they had brightest employees in the world) 2) competitive behavior
3) accepted to never accept 2nd best (Go Big or Go Home)
These believes lead to extreme intra- and interfirm competition intensity Competition amongst each other for positions
Personal meeting with Gates & his lieutenants in which major employees are dissected & reviewed (can make or break your career at Microsoft) Culture & Beliefs
Individual & group incentives were primarily influenced by “commitments” tied to each employees output- detailed objectives stated in form of a contract between employee & supervisor. At beginning of year commitments set in stone & couldn’t be changed.