Why Can't Microsoft Innovate Like Apple?

Feb. 5.10 | About: Microsoft Corporation (MSFT)

by Sandeep Baliga

A former vice president at Microsoft (NASDAQ:MSFT) writes how destructive competition within the company is destroying innovation:

For example, early in my tenure, our group of very clever graphics experts invented a way to display text on screen called ClearType. It worked by using the color dots of liquid crystal displays to make type much more readable on the screen. Although we built it to help sell e-books, it gave Microsoft a huge potential advantage for every device with a screen. But it also annoyed other Microsoft groups that felt threatened by our success.

Engineers in the Windows group falsely claimed it made the display go haywire when certain colors were used. The head of Office products said it was fuzzy and gave him headaches. The vice president for pocket devices was blunter: he’d support ClearType and use it, but only if I transferred the program and the programmers to his control. As a result, even though it received much public praise, internal promotion and patents, a decade passed before a fully operational version of ClearType finally made it into Windows.

He adds:

Internal competition is common at great companies. It can be wisely encouraged to force ideas to compete. The problem comes when the competition becomes uncontrolled and destructive. At Microsoft, it has created a dysfunctional corporate culture in which the big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence.

This is a classic problem sometimes known as the “not invented here” syndrome: if you did not invent it, you denigrate it.

Tomas Sjöström and I have a published paper on this topic. There’s lots of stuff going on in it, but here is one key idea:

Suppose two players are competing for promotion and one is more senior than the other. Then, the senior guy has the incentive to denigrate the work of the junior guy because the only way the junior guy can leapfrog him in the career race is if he has a successful project. So, the senior guy tries to squash the junior guys ideas. But the junior guy has the reverse incentives, to exaggerate the quality of his own work. It turns out that this incentive is easier to deal with than the denigration incentive. This is because exaggeration carries a risk: if your idea is tried out and is a huge failure, your career is in ruins. This reduces your incentive to exaggerate bad ideas. But denigration kills ideas so you never find out if the denigrator was lying. So our conclusion is that well designed self-assessment is better than peer review.

If only Microsoft listened to us, they’d be more profitable. Call me Bill, Steve Ballmer, anybody….

There is still one question: Does Apple (NASDAQ:AAPL) have a better system in place to manage innovation? If so, what is it?