(Article Summary) Re: [clug] Innovation's soft spot - Next - http://www.theage.com.au/technology/

Alex Satrapa grail at goldweb.com.au
Wed Nov 24 23:11:27 GMT 2004

On 25 Nov 2004, at 07:00, Sam Couter wrote:

> Stephen Jenkin <sjenkin at canb.auug.org.au> wrote:
>> http://www.theage.com.au/articles/2004/11/22/1100972316458.html
> No cookies, no registration, no view.

Odd - it worked for me first go yesterday, now it's asking me for 
registration! One more "John Doe" account for The Age to clean up ;)

> Got a link that works? Or an executive summary?

My summary:

> Microsoft is a big fat high-inertia corporation. Smaller corporations 
> like Google - being built to support innovation - are producing new 
> markets faster than Microsoft can, mainly because Microsoft's efforts 
> are focussed on continuing development of their mainstay products: 
> Microsoft Office and Microsoft Windows. A Google-sized return on 
> investment in research (est. $3B from investment of $300M) would only 
> bolster Microsoft's revenue by 4%. Pundits agree that Microsoft is 
> hideously inefficient in research, development and innovation - but 
> they also agree that innovation is mostly luck, and it turns out that 
> corporate culture is not conducive to innovation or luck.

Following summary courtesy of Apple's SummaryService (part of Mac OS 
X), some editing by me:

> It was on November 12, 1990, in a speech at the Comdex/Fall show in 
> Las Vegas, that Microsoft chairman Bill Gates first proclaimed his 
> vision for "information at your fingertips" - software to let people 
> easily find the data they wanted, wherever it was on their computer or 
> office network.  The new system, he promised, would arrive within 
> three years.
> ...
> Meanwhile, Google, founded eight years after Gates announced his 
> quest, has stolen the day.  Google's string of internet search 
> innovations won over customers and made a ton of money.  It spent 
> $US233 million ($301 million) on R&D since 1998 - just 3.4 per cent of 
> Microsoft's annual R&D budget - yet its market value now tops $US3.7 
> billion.
> ...
> Most of Microsoft's 57,000 workers are engineers; 700 of them work 
> only for Microsoft Research (MSR), the company's quasi-academic think 
> tank that is two-and-a-half times the size of Xerox PARC [which 
> invented the modern PC and operating system GUI in its 1970s heyday].
> With an annual budget of $US250 million, MSR hires the best and 
> brightest - Gary Starkweather, inventor of the laser printer at 
> XeroxPARC; Jim Gray, a seminal developer of the distributed database; 
> and Gordon Bell, known as the "father of the minicomputer" for his 
> work with miniprocessors at Digital Equipment Corporation in the 
> 1960s.  Twelve of MSR's researchers have been inducted into the 
> National Academy of Engineering.  Two have won the Draper Prize; three 
> more have won the A.M. Turing Award for computer science.
> ...
> Microsoft's co-chief technology officer, Craig Mundie, says of every 
> dollar the company spends on R&D, "probably something in the order of 
> 90 per cent is directly in line, or in service of, the existing 
> business groups".  Just 10 per cent "is essentially (invested in) pure 
> research or incubation (of new products)".  If Mundie's assessment is 
> on target, most of those fresh patents ($US6.1 billion worth in 
> research to produce $US2.7 billion in revenue) [cover] innovative 
> features in existing products.
> Microsoft's cash cows, which generate 60 per cent of its revenue, 
> Windows and Office, will last forever on someone's PC unless Microsoft 
> comes out with a good reason to force people to buy new versions.  
> Increasingly, Microsoft is tying Office on the desktop with Windows 
> Server to generate new revenue.
> ...
> Although Microsoft has spent lavishly on dozens of new opportunities, 
> it hasn't fared very well. ... innovation experts argue Microsoft 
> isn't investing enough in offensive innovation to define its future.  
> And the research it does seems wildly inefficient.  Over the past five 
> years, Microsoft spent an average of $US9 million per patent, nearly 
> twice its peer group.
> ...
> Venture capitalists typically pore over 50 to 100 deals to find a good 
> $20-million software investment.  By that logic, Microsoft, with its 
> $6.8-billion annual R&D budget, must consider as many as 35,000 new 
> ideas just to find a few hundred worth investing in every year.  There 
> just might not be enough opportunities out there for Microsoft to 
> employ its vast resources effectively.
> "Microsoft has to create the third- or fourth-largest software company 
> in the world every year to be considered innovative," says Brian 
> Skiba, managing director of the San Francisco-based hedge fund Viant 
> Group.


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