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10/23/2008
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Can Microsoft Innovate In A Web-Centric World?

For all its dominance, the company needs to find a way to prove to the public that it is indeed a masterful game-changer and part of that may come from shifting the way it invents itself.

At next week's Professional Developers Conference, Microsoft will unveil both the next version of Windows and its long-awaited cloud computing strategy. But it's not just Microsoft's products that need to change to keep up with the times.

Despite continuing to rake in revenue and produce reams of research -- 1% of all U.S. patents last year -- Microsoft has been largely an afterthought in some of the hottest recent tech trends. Amazon has captured the cloud computing thunder. Google is a search and advertising juggernaut. Salesforce.com brought software-as-a-service to the fore. VMware got the early drop on Microsoft in virtualization. And Apple has all the cool factor in the world.

In the past, Microsoft's often been a fast follower, rather than being the initial agenda-setter, but competitors have quaked at the mere thought Microsoft would be entering their market, and the public didn't flinch at using any Microsoft product handed its way. That was then. Now, more than ever, Microsoft needs to find a way to prove to the public that it is indeed an innovative company. The public is looking for results, and much depends on Microsoft changing the way it innovates.

So in addition to the hundreds of millions of dollars it's pouring into advertising, Microsoft is making better use of the Web for early product testing, opening a series of applied research labs to more quickly turn research into products, and even toying with more grassroots innovation. By putting itself in the public eye more often, Microsoft also has the chance to shed more light on areas where Microsoft could, in fact, be seen as innovative -- like Microsoft Research, Office OneNote, and Windows Server.

"The perception of the company has suffered a bit, particularly given the emergence of other glamorous companies," admits Microsoft chief research officer Craig Mundie. Turning that around won't be easy. The company faces numerous dilemmas, from important legacy platforms making big bucks to growing bureaucracy. But Microsoft should never be counted out, and Mundie maintains Microsoft does a better job than "any other company in history" of delivering products based on its research. Now, to prove it.

Dealing With Legacy

Microsoft's biggest challenges to paradigm-shifting innovation could be its two greatest successes, Windows and Office.

"They involve huge amounts of legacy code, and that's unique to Microsoft," said Michael Cusumano, an MIT professor who's written several books on innovation in the technology industry. "Microsoft has to test anything with a huge code base and lots of other legacy apps built by Microsoft and the community. It's a tremendous asset, but it's also a disability."

Microsoft is slowly adjusting, updating Windows incrementally via Windows Update and Windows Live add-ons, recently introducing a suite of SaaS offerings in Office Online and is poised to unveil its cloud computing strategy, but it's got a long way to go.

Part of the answer might be to test and release features in new ways. Traditionally, new features were just included in the next major release of Office and often went unnoticed and sometimes went without being tested as a standalone feature. Now, Office Labs is doing small pilots inside and outside the company and releasing some new features online.

"We're more likely to try ideas because the cost of trying each one is much cheaper than building the whole thing," said Chris Pratley, Office Labs general manager. "That means we can go faster because it’s a couple of months to put a test out instead of a couple of years. There's value in getting stuff out in beta and seeing what clicks as long as you set people's expectations properly."

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