Creative Destruction: Why Microsoft Can't Innovate Part 1

If you’re wondering why Microsoft is no longer bringing us the future like it once did, read the Dick Brass op-ed, “Microsoft’s Creative Destruction,” in the February 4th New York Times.

Brass, a VP at Microsoft from 1997 to 2004, provides a great insider’s view of an innovation environment that continually stymied innovation. He describes the problem relative to Apple.

“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….”

It’s a good question. Why isn’t Microsoft coming out with breakthrough innovations? Brass gives us part of the answer.

Microsoft had a tablet in its pipeline almost a decade ago. But they killed it. “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… he refused to modify the popular Office applications to work properly with the tablet.”

Brass explains that the huge profits that flowed from Office and Windows “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.”

Dominic Basulto picked up the New York Times piece in his Endless Innovation blog. He attributed the problem to a cultural shift at Microsoft. As the company grew, it built layer upon layer of middle and upper management. Those layers created barriers for information flow, “so that creative ideas never quite made their way down through the organization.” To illustrate his point, Basulto brought in Suw Charman-Anderson’s tongue-in-cheek take on how middle management stops information flow by creating an impenetrable layer of suck.



Although I can’t deny the appeal of that phrase, I think they have it wrong. Innovation ideas don’t trickle down from the top, they bubble up from the bottom—and even the middle—of the organization. The image of a “rain” of ideas falling on senior management is all wrong.

In an effective innovation organization, senior management establishes a culture where empowered employees can focus on understanding problems in their customer's lives and creating solutions. The role of the top brass is to nurture the creative environment, allow ideas to develop and percolate, and champion the best of the bunch.

Leadership following best innovation practice doesn’t allow fiefdoms to prevail and snuff out potential rising stars that might someday become cash cows. Part of senior leadership’s role within the innovation process is to do the organizational blocking and tackling and protect the ideas, the team, and the opportunity from the broader mature organization.

I’ll talk about how to create that kind of organization next week.

[Image - The Impenetrable Layer of Suck - Strange Attractor]

Creative Destruction: Why Microsoft Can’t Innovate Part 2

So, how do you organize your company for innovation? You need to match the organizational structure to the innovation strategy. Microsoft failed to do that, and that was a big part of the problem.

Let’s take a look at the company’s lifecycle.

In the late 1980s, Microsoft was a fast-growing, high-energy, risk-taking enterprise. They needed a certain management style to implement and create value from their breakthrough innovation. But as the business grew and eventually matured, it needed a different type of management.

By the late 1990s, Microsoft had a hierarchy of managers running its large, complex business. The structure reflected to company’s vested interest in the status quo: They need the Windows and Office cash cows to keep generating cash. If those cows want to graze on the occasional newly-sprouted idea, so be it.

The problem, of course, is that other, more nimble growth organizations started nurturing those new ideas, and finding success.

Strategic Intent: Incremental or Breakthrough?

A key question corporate innovators need to ask is how to nurture ideas so you can create rising star innovations, bring them to market and capture their value, while maintaining the cash cows. How do you foster innovation in a way that’s in line with your strategic intent?

At GE, P&G, Coca Cola and many other successful companies with mature businesses, the intent of innovation is to continue the success of the core business. Although they develop new products, and occasionally new platforms, most of their innovation is incremental. It provides as much growth as the market expects.

With that strategic objective in mind, these companies organize within their existing functional structures and establish cross-functional teams, with management oversight and a phased-review innovation process.

Successful senior managers provide strategic focus and balance the resources for innovation based on their higher level portfolio perspective. They pace the resources based on the progress of the team relative to other innovation investment opportunities.

On the other hand, when the strategic focus is on breakthrough innovation, the goal is to disrupt the market place and gain competitive advantage, drive growth and capture substantial value. Companies successful at this higher level of innovation take a different organizational approach. Some refer to it as Tiger Teams: separate organizations outside the core business.

Tiger teams are fully dedicated, with control over their own resources and process. They may be physically located outside the walls of the parent business, and their leader may be at the CEO level with full budgetary authority. They are not vying for resources with managers responsible for sustaining a huge business like Microsoft Office. They have different decision criteria, performance standards, pace of innovation, and risk environment.

The interesting question is why one of the most successful innovation companies of the past 30 years structured itself for incremental growth in an industry full of breakthroughs. Why did they force start-up growth businesses to compete with internal 800-pound gorillas? It starts with leadership. What drives Bill Gates and Steve Ballmer compared to Steve Jobs? Where are their companies in the business lifecycle?

Steve Jobs is the super product champion driving a growth business by pursing a breakthrough innovation strategy. That’s not what Microsoft is all about. If they want to go in that direction, they need to organize for it.

[Image - Crabapple.net]

The Internet of Things – Disruptive Technologies that will Transform our Lives

A few years ago, I visited a commercial printing firm in the United Kingdom to conduct a Voice of the Customer site visit. While interviewing a senior executive, I introduced the topic of emerging technologies and the future of the “printed piece,” and started to listen.

Not surprisingly, he said the writing was on the wall for printers. The Internet was changing everything. With customers moving toward digital media in place of print on paper, demand for the “printed piece” was way down. Printers were scrambling to survive. The competitive environment was, in short, “scary.”

While listening to his story of low demand, reduced revenues, and layoffs, I was struck by the surprisingly positive energy in his voice. I probed. Our conversation turned to RFID and the possibility of using radio frequency to track products as they moved through their lifecycle. RFID was opening up a whole new world of substrates to print on. They were thinking of creating supply chain helpers by printing RFID tags on various products to facilitate routing, inventorying, and loss prevention. This executive felt RFID represented a growth business that would transform his company. He was right.

Since that time, technology has evolved. The trajectory and merging of technologies such as geo-positioning, miniaturization, power management, software, and sensor networks along with RFID tagging presents us with a fascinating scenario. A new buzz phrase, the “Internet of Things,” is being used to describe a world in which everyday objects are readable, recognizable, locatable, addressable and even controllable via the Internet.

According to the National Intelligence Council , the “Internet of Things” is one of the 6 disruptive technologies that will transform our world over the next 15 years. View the full report here.

So what are some possibilities when the Internet of Things becomes reality?

• Vehicles will collaborate with each other to avoid collisions.


• Prescribed medicines will detect when (or whether) they are consumed, providing feedback on compliance or the need for refills.


• Hospital beds will detect biological indicators in patients and alert medical staff as needed.


• Soldiers will rapidly determine maintenance needs on devices by scanning them.


• Foods will communicate their entire lifecycle, redefining quality and food safety systems.


• Smart golf balls interacting with smart golf clubs will help players optimize their shots.


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  Appliances, furniture, entertainment systems, machinery, and more will be networked, locatable, communicative, and controllable.

When will we see the changes?

We are starting to right now. We already have cell phones as geo-location web devices. They will morph into “windows on everyday things” and become our primary personal interface for control, monitoring, and locating things. By 2015, the ubiquitous positioning of people and everyday objects will be available. By 2020, we will monitor and control objects through the Web. By 2025, Internet nodes will reside in everyday things.

This new world will create vast opportunities in every industry. As innovators we need to ask, what are the possibilities? What new customer needs will emerge? How can we create advantage for our firm as these technologies evolve?

How will you take part?