On March 19, 2007, Microsoft announced Response Point, a VoIP phone system aimed at the small business market. From a technology perspective, the system is designed for simplicity from both a user and management perspective. The user experience relies heavily on a speech-enabled interaction model with little learning curve – verbal reserved words control system capabilities (e.g., voice mail, call transfer). An integrated PC interface supports additional management functions such as configuring Response Point for directing calls to role-based groups (e.g., a sales or marketing department extension). The PC-based user interface also creates an effective way for users and administrators to manage phone behavior. Users for instance can define settings through their PC rather than learning complex phone commands and navigation sequences.

The system integrates with Office Outlook and Exchange Server as well as Windows Live VoIP services. Response Point relies on OEM partnerships (e.g., D-Link, Quanta, Uniden) to deliver the solution to the small business market. While Response Point shares some “DNA” with Office Communications Server, each product is targeted at different audiences.

The technology around Response Point illustrates the breadth of Microsoft’s efforts in the Unified Communications market. However, what I found most intriguing about the solution has nothing to do with technology and everything to do with the manner in which Microsoft created, developed and launched Response Point. Rather than follow a traditional product research and development cycle within an established business unit, Microsoft incubated the Response Point team within Microsoft Research. The group was structured as a self-contained team. In essence, Response Point became a company-within-a-company. This type of organizational model I felt was quite innovative. Below are several questions I submitted to Microsoft with responses from Xuedong Huang, General Manager, Response Point:

1. What prompted Microsoft to adopt an internal “start-up” approach to the development and launch of Response Point?

Xuedong Huang: As a company, Microsoft has always been trying to reinvent itself. The internal “start-up” has been around across many groups since the inception of the company. We particularly liked the start-up model because we knew it would enable us to not only more effectively understand, but also live and breathe the unique operating conditions of a small business.  We’ve been working as a start-up like a small business within Microsoft, and using Response Point as our corporate phone system for many months now.  Everyone on the team wears many hats; we talk with customers on a daily basis, install systems ourselves and attend beta customer site visits.  We really enjoy this because it gives us all first-hand interaction with our customers to hear their feedback. 

2. What was the thinking behind placing the start-up within Microsoft Research? Was it to avoid the traditional organizational structures of the other business groups? Or to take advantage of the “research community”? Other?

Xuedong Huang: There are a number of benefits to put incubation in Research. The most notable one is that we are able to not only deeply leverage core technologies as we collocate with other researchers, but also address new opportunities that are in the boundary of different Microsoft P&Ls. Response Point runs on Windows XP Embedded, which is managed by Robbie Bach’s team.  It uses building components developed by the Unified Communications Group under Jeff Raikes, and it relies on Windows Live VoIP services under Kevin Johnson.  And of course the core speech recognition technology was developed within Microsoft Research itself.  Like the traditional product groups, we need to solicit advice from experts across the company, while making product, technology and business decisions focused on the precise needs of our target customer.

3. What was the thinking behind the venture capital relationship between the team and Microsoft management (e.g., Series A, Series B) for progress review, funding, direction adjustments and such? Did this result in a more lean approach? More adaptive (not being locked into GTM programs and such)?

Xuedong Huang: Going through series A and B funding means we had very limited resources initially. This was good as we really didn’t know what we wanted to do initially (like most start-ups).  We were forced to talk to our customers, understand their pain points, prioritize what we need to work on, and set a more realistic goal in the short term. This helped the team really focus on delivering “value innovations” for our customers. The phased approach also enabled us to take an end-to-end view of the business early on.  This allowed for maximum flexibility and gave us clear accountability for delivering on the vision we put forth.

We had to think hard about how we would sell and market Response Point, because those costs would come out of our own budget. We had to think about supportability, because beta customers were calling our development and test managers directly. And we had to think about hardware requirements and the needs of our OEM partners too.   We made the deliberate decision to build a business, not just write software and then figure out how to sell it.

4. Would Response Point have been successful if it had been placed within a more traditional management structure and organizational reporting structure within one of the Microsoft business groups?

Xuedong Huang: There is no fixed way of developing new product. There are pros and cons with different approaches.  Diversity helps to ferment new innovations.  I believe they all could be successful with the right kind of leadership.  Great products and ideas can come from anywhere and from any approach.

Taking an out-of-the-box approach like Response Point certainly has its own advantage.  First, there is no “innovator’s dilemma” issue for us.  We can investigate what our customers really want without worrying about the legacy products or trying to incrementally improve an existing product to accommodate the needs of our customers.  Second, being small has a unique advantage. The speed is associated with the mass, as Newton’s laws taught us.  It is relatively easier to instill a sense of mission to rally the team to achieve a higher goal in an agile way.  We’re very happy with the approach we’ve taken to developing Response Point, and I am proud of the results the team has delivered.

5. What type of innovation barriers were avoided by being an independent team?

Xuedong Huang: In addition to what I outlined above, being independent also enabled us to take huge risks. We were able to carefully examine cross-group opportunities and leverage great technologies in the Microsoft Research labs.  Most importantly it helped the entire team understand our customers.  Every functional area on the team – development, test, program management, product management, business development – has had direct customer contact.  We’ve done site visits, installed systems ourselves, trained customers and answered their support calls.  That experience gives the team a very unique perspective.

6. Any thoughts about how the team will migrate into the traditional Microsoft business groups?

Xuedong Huang: We took advantage of being in Microsoft Research to explore cross business group opportunities. That very reason made it a little bit harder for us to migrate directly to one of the existing business group.  We are fortunate to have our management support so we are able to function as if we were part of a traditional business group.  For now, we’re focused on our beta 2, which starts this month, and broadening our beta customer base. I am excited to collect more direct feedback to continue to refine the product. 

7. This model appears to have been a success – will this approach be used as a template for other Microsoft initiatives?

Xuedong Huang: Response Point was successful because we had management support, put the right kind of people in place, went through an appropriate funding process, took an end-to-end view of the business early on, fed direct customer feedback into the development process throughout, and had the fortitude to take some noteworthy risks, such as emphasizing the unique speech-enabled user interface. The lessons we learned could be useful to other Microsoft initiatives but I don’t think there must be a fixed way of driving forward a new product.  Innovation can come from anywhere and from any approach, and many other teams at Microsoft are deploying their own new ways of launching great new products.  This is what is great about Microsoft.  There is no master template or company-mandated innovation model.  When you give smart people the freedom to try something new, and the flexibility to learn and adapt as the business grows, good things happen.

There were a couple of points made above that I thought were important takeaways:

• You need to deeply and passionately understand the environment in which your customer "lives"
• You need to identify the structural boundaries and gaps within your organization and look at such areas as "opportunity fields" for innovation
• You need to think beyond the first-degree set of issues related to a product or service you are innovating around and think broadly about the entire ecosystem - often it is the secondary and tertiary aspects that determine success
• You need to take risks - there are times when it is vital to act and improvise "outside the box"