The Xbox Kinect shows that Microsoft is still capable of shipping innovative products -- why can't they do the same in other business groups?
If it had been a product with the potential to affect any of the cash cows such as Windows or Office, no doubt the leaders of those groups would have felt the need to delay or distort the product to ensure that their sub-empires were adequately protected. These were the kind of tactics that have impaired Microsoft's ability to deliver an online version of Office for almost a decade.
Make no mistake, engineering a master company strategy is more expensive and prone to failure than crafting a single product success. Take Microsoft's Online division. As Business Insider points out, Microsoft has invested/lost more than $2.5 billion in its online operations in just the past year, and more than $7 billion since the division last saw a meager profit in 2005. That's mind-blowingly deeper than the hole Xbox dug before it started to turn a profit.
The big difference between Xbox and online is that, despite its massive investment, Microsoft doesn't seem to have any clear path to online profitability in the foreseeable future. Whether profit is possible or not, they seem to think they'll find success by going toe-to-toe with Google on just about every type of service: search, chat, email, maps, webmaster tools, advertising, documents, and mobile devices, plus corresponding developer APIs for all of the above.
Microsoft is swinging for the fences with this strategy; very little of it can succeed unless all of it succeeds because it is so interrelated and interdependent. Yet none of the individual products or services seem that exciting or innovative.
I doubt that Microsoft will abandon its boil-the-ocean strategy any time soon, but it would have an easier job with its reputation by getting a few more high-profile wins that don't depend on the success of a complex strategy.
Perhaps they could take advantage of Kinect's cool factor in PowerPoint by using it to control a presentation using Kinect-style gestures while onstage. Maybe they could make something like Word Lens a standard feature on all Windows Phones. These are things that users want, are incredibly sexy to demonstrate, give Microsoft positive buzz, and increase demand for the entire stack of Microsoft services.
Finally, Microsoft shouldn't forget that consumer successes can be turned into enterprise business successes if they're played right. Sure, enterprise businesses are conservative, and aren't willing to throw out their technologies every year to get the latest thing.
Yet Apple has been able to get many businesses to use iPhones and iPads for example; every time that happens it moves one more user further out of Microsoft's sphere of influence. If Microsoft can focus on making a few successful products and ignore their complex strategy for a moment, they might be able to make some progress.