Sack Ballmer? Break Up the Company? How Microsoft Could Innovate

2/5/10Follow @gthuang

Outside of official circles in Redmond, WA, the term “Microsoft innovation” is often thought of as an oxymoron, sort of like “Army intelligence.” People have been actively debating the issue of whether and how Microsoft can truly innovate in the tech world for at least the past decade.

Enter Dick Brass (great name), who was a Microsoft vice president from 1997 to 2004. His op-ed in the New York Times yesterday sharply criticized Microsoft’s lack of innovation and has stirred the pot considerably, even prompting Microsoft to post a response. But I haven’t seen many people talking constructively about how to fix the problems. And Microsoft doesn’t seem to admit that there are any problems, at least officially.

Brass used the peg of Apple’s iPad tablet announcement to highlight what he sees as Microsoft’s failings in tablet PCs, e-books, digital music, and mobile software. He calls Microsoft “a clumsy, uncompetitive innovator” that is “failing, even as it reports record earnings.” And he points to two problems with the company’s culture—problems that threaten Microsoft’s future, if not its present.

One is widespread political infighting that can doom innovative people and products that compete in some way with existing product groups. (The current Ray Ozzie situation comes to mind.) I’m sure there are benefits to this kind of competition, but you have to wonder whether the volatile mix of personalities and agendas at the company is stifling some of its more creative projects.

The other problem is a software mindset that Brass says is stuck in the 1970s. “Part of the problem is a historic preference to develop (highly profitable) software without undertaking (highly risky) hardware,” he writes. “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.”

In his response, Frank Shaw, Microsoft’s vice president of corporate communications, gave the usual spiel about “innovation at scale”—the idea that the company reaches a huge number of customers with almost everything it does. Shaw writes, “We think about innovation in relation to its ability to have a positive impact in the world.”

Trying to dismiss Brass’s claims, Shaw cites the widespread availability of Microsoft products and features like ClearType (as part of Windows), OneNote (part of Office), and Project Natal (an upcoming part of Xbox 360). But frankly, these examples pale in comparison to how far behind the company seems in areas like mobile software and devices, social networks, Internet services, and digital media.

Overall, Microsoft’s official response leaves a lot to be desired. It doesn’t address any of the deeper issues Brass raises. But part of the problem is communication: the term “innovation” largely has lost its meaning and has become a buzzword for big companies to use whenever they want to sound competitive and forward-thinking. Whereas it should reflect the most creative, surprising, and specific game-changing ideas a company has to offer.

So what should Microsoft do? Maybe it’s simply too big to be truly innovative anymore. Some people, like 10-year Microsoft veteran Hillel Cooperman (now at Seattle startup Jackson Fish Market), would suggest breaking up the company. Others undoubtedly want to see CEO Steve Ballmer replaced—but by whom? It’s not clear who within the company could conceivably succeed Ballmer, but perhaps an outside candidate might emerge.

It would be quite telling to compare and contrast the way other tech giants like Amazon, Apple, and Google deal with similar issues as they grow, and to examine their leadership style, corporate culture, and product world view as compared to Microsoft. Then maybe we’ll get somewhere with all of this.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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  • http://MSprague.com Mark Sprague

    Army Intelligence? Indeed! Can’t you come up with a stereotype that is actually true? It’s clear that you use the metaphor loosely without any personal experience to support your comment.

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  • Blue Swan

    I would spin off all business units into separate entities.

    Microsoft would then become a conglomerate like the old ITT.

    I would end dividends entirely and instead use profits to invest in Web 3.0 startups.

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