This document discusses Microsoft's history of innovation from its founding in 1975 through 2010 and analyzes why it was no longer the innovation leader it once was. It provides recommendations for how Microsoft can regain its dominance, including continuing large R&D investments, changing its corporate culture to breed more innovation, and shifting to a more consumer-focused marketing strategy. Updates provided include that Microsoft's profits increased from 2010 to 2011 despite dropping in sales in 2009 for the first time.

1. Patrick J. Riffel
Jacob Babcock
Zach Motsch

3.  Did Microsoft ever come out with something
that will make our computers moist and
chewy like cakes where we could just eat
them while we were working?
 So far, Microsoft hasn’t!
 However, competitors like Google and Apple
have introduced innovative products.

4.  “Microsoft was built on innovation, and our
future depends on it” – Bill Gates
 2009 – Dropped in sales
 First year ever
 May 26th, 2010 – Apple overtakes # 1
 October 4th, 2010 – Stock Downgraded
 Microsoft has become known as
“clumsy, uncompetitive innovator.”

5.  The great tech war of 2012
 Apple, Facebook, Google, Amazon
 Microsoft not included

6.  Why was Microsoft no longer creating the
breakthrough innovative technologies it once
used to pride itself on, and how could they
regain their once dominated # 1 position in
the industry?

7. 
 1975: Microsoft is founded by Bill Gates and
Paul Allen
▪ Sold computer language BASIC to MITS
▪ Micro-soft is an abbreviation of “microcomputer
software”

8.  1977: Bill Gates and Paul Allen move from being
"partners" to Gates as President and Allen as V.P.
 1978: First international sales office – Japan
 1981: Microsoft goes private
▪ Bill Gates - President and Chairman
▪ PaullAllen - Executive Vice President
 1981: The 16-bit IBM personal computer is
launched
▪ Uses the 16-bit "Microsoft Disk Operating System" ("MS-
DOS")

9.  1983: Develops the Windows graphical
operating system
 1983: Develops Microsoft Mouse
 1986: Microsoft Works Launched
 Integrates word processing, spreadsheet, database,
communications, and drawing functions
 Public share increases by $61 million from
$21 per share to $28 per share

10.  1989: IBM and Microsoft make a decade long
agreement to jointly develop a range of
system software offerings
▪ Includes enhancements to MS-DOS, Microsoft
OS/2, and Microsoft LAN that work with Intel processors
▪ Microsoft Office is released
 1990: Microsoft Windows 3.0 is released
 1995: Microsoft 95 is launched
▪ Coupled with the "Microsoft Network" ("MSN"), a collection of internet services
▪ Microsoft and NBC form partnership to create a 24-hours news source on MSN

11.  1997: Microsoft Windows 97 along with Microsoft Internet
Explorer 4.0 is launched
 1998: U.S. Justice Department brings two antitrust cases on
grounds that Microsoft's Web browser's inclusion in Windows
95 forces the browser on PC makers and violates a prior pact
with the Feds

12.  2001: Windows XP is launched internationally
 2001: Xbox gaming system is released
 2002: Partner with Compaq, Acer, Fujitsu, Sony, and
Toshiba to release the Tablet PC
 2003: Announce "Windows Mobile" software for
mobile devices
 2004: Federal court approves the settlement
between Microsoft and the Department of Justice

13.  2007: Launch globally:
▪ Windows Vista
▪ Microsoft Office 2007
▪ Zune, digital and music entertainment device
▪ Microsoft Windows Mobile 6
 2008: Microsoft launches bid to acquire
Yahoo!
 2009: Windows 7 is launched
 2009: Bing search engine is launched
 2010: Microsoft Office 2010 is launched

14.  Corporate Culture
 Manages to frustrate the efforts of best thinkers
 Large groups shut down smaller teams in current
structure
 Near all executives in charge of music, e-
books, phone, search, andtablet left in past
decade.
▪ Interview from one of the departed execs states, “Too
many semi-competent managers, too much in-house
politics”

15.  Research and Development
 Timing of product launch has been poor
▪ Web TV- Early
▪ Mobile, MP3 , Video Games – Late
 Spent 9.5 Billion in 2009

16.  Innovation
 Focused on higher margin, lower risk products
▪ Made financial sense
▪ Fell behind in integration and innovation because of it
 Focused on large scale, rather than speed

18.  Bill Gates wrote a class scheduling
program for his school. He
tweaked the program’s code so
that he was placed in classes with
mostly female students
 Microsoft employees are called
“Softie”
 Average – 38-year old Male making
$106k
 Huge art collection
 Over 5,000 contemporary pieces
 Microsoft campus is full of
bunnies
 Had to catch and have them spayed
and neutered

19.  Widely recognized
 Large market share - Global
 Diversified - OS, Browsers, Search
Engines, Media player, gaming, mobile
 Dominates PC World
 High margin products

20.  Lagging in new creative and innovative
products (Apple)
 New products are more imitations then new
ideas
 Neglected to enter the video game industry
until 2001
 Poor timing to market
 Company culture that frustrates the efforts of
visionary thinkers

21.  Large R&D budget - $9.5B
 Multiple different technology segments to
improve and grow in
 Improve in customer tastes rather then business
needs
 Purchase up and coming companies with
innovative ideas and employees
 Further develop and integrate social media
platform within businesses
 Combine existing business products into a social media platform

22.  Shift in the industry
 PC's to non-PC's
 Phones and appliances
 Cloud computing
 Offering services to customers
 Google Docs
 Competitors
 Apple, Google

23.  Co-founded by Steve Jobs and Steve Wozniak
 Lagged behind Microsoft in the computing
industry in the ’70’s and ‘80’s
 Jobs quite in 1985 due to loosing a
boardroom battle for control of the company
 Apple started its turnaround in 1996
 Jobs vision and $150M from Microsoft

24.  Founded in 1998 by Sergey Brin and Larry
Page
 Internet serach engine
 97% of revenue in 2008 and 2009 was generate
through search advertisement sales
 Expanded its products
 Books, Maps, Apps, News
 Purchases companies –YouTube and DoubleClick
 Mobile - Android

25.  World’s largest provider of computer products
and services
 IT infrastructure services
 Business processes services
 Business solutions requiring advanced computing
power
 Has more patents than any other company in
the world
 Created new innovative products that would
generate revenue
 Innovation Jam in 2006
 150,000 employees and stakeholders

26.  Founded in 1994 by David Filo and Jerry Yang
 Leading online portal before google
 Revenue generated by providing marketing
on most of its websites
 Published its website in 25 different
languages
 Became bureaucratic and slow at innovating
 Brickhouse – 2006
▪ Offsite incubator to create new innovations and ensure
they reached the market as soon as possible

27.  Continue to Invest in R&D
 Focus on Cloud-based technology
 Improve communication between R&D and
marketing departments to better align launch
timing and customer needs

28.  Breed Innovation
 Take more risks to discover either flaws or new
opportunities with ideas
 Maintain diverse social connections
 Create fellowships that promote and award
innovation and new business
 Work with education institutions to launch
entrepreneurial-centered courses and programs

29.  Change work culture
 High monetary rewards for innovation
 A flatter organizational hierarchy that cultivates
ideas and lends a stronger voice to the employees

30.  Improve marketing strategy
 Shift from business focused to a consumer
focused marketing strategy
 Increase marketing focus from product features to
product “ease of use”
 Develop more customer retail locations
▪ Release innovative and risky product that will only be
available in stores

31.  Overview of recommendations
 Discussed ways that Microsoft can improve corporate
culture, breed timely innovation, and improve their marketing
strategy.
 What has happened since 2010?
 Increased profits
▪ 62 Billion (2010) – 69 Billion (2011)
 Skype Acquisition for 8.5 billion
 New marketing campaign emphasizing how products connect
family
 Ranked #1 in social media saviness, ahead of all competitors
▪ This change may have some affect on their culture.

33.  Blum, J. An inside look at cloud-based microsoft office
365http://www.entrepreneur.com/article/220246
 Cohen, Amanda. "Surveying the Microsoft Antitrust Universe." Berkley
Technology Law Journal 19.333 (2004): 333-64. EBSCO. Web. 5 Nov. 2011
 Das, Anupreeta. Microsoft, Others Work on Yahoo
Bid.http://www.online.wsj.com/article/SB100014240529702046187045766413500
08919750.html#ixzz1bIo97NUX
 Manjoo, F. (October 19th, 2011). The great tech war of 2012
http://www.fastcompany.com/magazine/160/tech-wars-2012-amazon-apple-
google-facebook
 Microsoft jerry seinfeld bill gates shoe circus commercial.
http://www.youtube.com/watch?v=rIjNJZpRtj8
 N.A. Apple reports 4th quarter
results.http://www.apple.com/pr/library/2011/10/18Apple-Reports-Fourth-
Quarter-Results.html
 N.A. Microsoft annual report
2010.http://www.microsoft.com/investor/reports/ar10/index.html

34.  N.A. Microsoft officially welcomes
skypehttp://www.microsoft.com/presspass/press/2011/oct11/10-13SkypePR.mspx
 Naraine, R. IT wrestles with microsoft monoculture
myopiahttp://www.eweek.com/c/a/Windows/IT-Wrestles-with-Microsoft-
Monoculture-Myopia/
 O’brien, Kevin. Europe Drops Microsoft Antitrust Case.
http://www.nytimes.com/2009/12/17/business/global/17msft.html?pagewanted=
all
 Productivity future vision
(2011).http://www.youtube.com/user/officevideos#p/u/0/a6cNdhOKwi0
 Rosoff, M. Microsoft's 15 biggest acquisitions (until
today)http://www.businessinsider.com/microsofts-15-biggest-acquisitions-so-
far-2011-5
 Sandbert,, Jared. "Microsoft's Six Fatal Errors." Newsweek 135.25 (2000): 22-
29.EBSCO. Web. 5 Nov. 2011.
 Wilcox, J. Microsoft's clever 'family' marketing campaign is
exceptionalhttp://betanews.com/2011/11/03/microsofts-clever-family-marketing-
campaign-is-exceptional/.