Poor, slow-footed old Microsoft. It just can’t adapt to changing times or keep up with more innovative, agile and forward-looking companies like Apple and Google.
That’s been the way many of us have thought of Microsoft for a long time. But it may be our thinking that’s old and outdated.
On a day in late January, everything changed. Microsoft unveiled its latest pre-release version of Windows 10 and showed off new holographic technology. And it showed that these days if you’re looking for innovation, you’ll find it up north in Washington, at Microsoft’s Redmond headquarters.
Microsoft’s inability to innovate in the past had nothing to do with the company failing to invest in research and development. Microsoft has long been a leader in R&D. The latest European Union report on R&D spending puts Microsoft well ahead of both Google and Apple — $10.6 billion annually versus $6.7 billion for Google and $3.5 billion for Apple, according to the most recent figures.
The issue, instead, has been a lack of will to turn research into useful, innovative products. Several years ago, Reuters published an in-depth look at the state of Microsoft and found that, unsurprisingly, Microsoft’s R&D spending “has not brought the breakthroughs it should.” Reuters quoted Don Dodge, a former “startup evangelist” at Microsoft who now works for Google, as saying, “Comparing Microsoft to Apple over the past 10 years in terms of innovation, new products and completely new businesses, the differences are pretty obvious. What did Microsoft investors get in return for their investment of over $75 billion in R&D and acquisitions?"
The problem, the article went on to say, was that Microsoft suffered from the classic “innovator’s dilemma” that occurs when a business cares more about protecting its existing markets than about creating new ones, fearful that new markets may eat into existing revenue streams.
That’s no longer the case. Under Satya Nadella, Microsoft has felt free to risk cannibalizing existing revenue. The first hints of that came when Nadella gave the go-ahead to release a version of Office for the iPad. In the past, the company had refused to do that, worrying that if Office were available for the iPad, there would be less reason for people to buy Windows-based tablets.
With January’s demonstration of the new holograph technology, Nadella seemed to be saying, “We’re not going to worry about that sort of thing anymore.”
I don’t think I’m reading too much into it. The HoloLens technology on display was something new and exciting. It’s a set of wraparound glasses that let you see and interact with augmented-reality 3D holograms. You can also build your own holograms using a Microsoft toolset, and print out the results with 3D printers. Google Glass doesn’t even come close to the amazing things you can do with Windows HoloLens.
The fact that it had been brought out of R&D and readied for public display as an upcoming Microsoft product means something. At a minimum, it means that the company diverted resources from what it usually does, which is to find ways to build a firewall around Windows and so protect market share. And Microsoft did this even though, in the short term at least, HoloLens doesn’t seem to have significant revenue attached to it.
Forgoing immediate revenue seems to be the theme of Windows 10. That might not be innovative, but it certainly shows a change in mind-set. When Windows 10 is formally released some time later this year, and for a year after that date, anyone with Windows 7 or Windows 8.1 will be able to upgrade to it for free. What’s the catch?
Microsoft is setting the stage for Windows as a Service. When that happens, Windows will continually update itself with new features. No more big operating system release bashes. But everyone who uses Windows will be enticed into subscribing, with revenue locked down for years to come. Seen in that light, free upgrades to Windows 10 don’t seem so altruistic. But it’s clever — innovative, even.
In the end, Windows will offer the same services and information across multiple devices. And those services will include innovations like the Cortana digital assistant, which will run on traditional computers, tablets and smartphones. Apple doesn’t have that yet — Siri doesn’t yet run on desktops or laptops.
In the old-and-slow days of Microsoft, none of this would have happened. But those days are over. Microsoft is now a leading innovator, and Silicon Valley will have to get used to it.