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That “0.00003% of the world used...”?

Heh.

Your words are running through cisco boxes and my code right now, Sparky. In effect, you’re using it, you’re just too ignorant to know you’re using it.

That said, Microsoft’s “innovations” aren’t. They’re poor attempts to ape other market innovators. Since Gates stepped back from leading engineering at MSFT, they’ve done precious little innovation. That’s the #1 problem Microsoft has now. Microsoft has run their snout down one blind alley after another, pissing away time and engineering resources when they tried to cram Windows into places it wasn’t going to go. Windows has pretty much all the features it ever needed - and one could argue that it did as of WinXP. Office has done precious little in the way of innovation, and for Mac users, Microsoft forced a gratuitous UI change down on users which didn’t impress anyone. When you’re used to moving through an Excel spreadsheet on your keyboard, you’d better leave the hot keys and menus alone for users... but they couldn’t.

As it is, Microsoft’s path is somewhere between an industrial company and a utility... from a purely business perspective, they’ve become a cash-flow generator, not a growth company. They’ve build up a huge wad of excess cash (like $66B), and pretty soon investors are going to do what they’ve done to other cash-generating tech companies like Intel, cisco, et al: force them to disburse that money in dividends. If Microsoft won’t do that, then there will come a point where the stock isn’t worth owning, because without growth, they’re not returning value to the shareholders.

But the worse part of the stock problem is that a flat share price becomes especially destructive inside a company where the comp plans were based in large part on stock appreciation. Because the share price doesn’t appreciate significantly, the only path to higher compensation inside MSFT (or similar companies) is to move into management. So you get a bunch of engineers who go into management... which results in more bureaucracy, more meetings, more approvals necessary to do anything, etc. The go-go cultures of all these tech companies dies shortly after the upward trajectories of their stock prices level off. And Microsoft’s trajectory has been flat-sideways, rattling between the low 20’s to low 30’s for a decade+ now. WIthout throwing off a huge dividend, stock option grants aren’t rewarding performance by hot engineering staff to put in the death march hours to come up with something insanely aggressive.

But that’s not going to happen inside MSFT now. I have some buddies who have worked at MSFT in the last decade. The corporate culture they describe inside the engineering departments at MSFT is horrible. Everyone is working on short-term goals to make sure that they don’t get fired - as a result of MSFT’s employee ranking system. Let’s say you have a team with 10 people. Managers are told that there will be only two reviews above-average, seven average and one employee they have to finger for dismissal. The result of this system (which came into being in some form or other in many tech companies after the crash) is that engineers spend way too much time politicking and brown-nosing with management (or trying to get into management, which is relatively immune to these hard-quota review systems) instead of innovating and coding.

The result are products like Zune. How hard is it to build a MP3 player? It’s trivial hardware. It has a very limited software base. Apple made a killing on these devices, and more importantly, the follow-through revenue from iTunes. Microsoft? They shot themselves in both feet: first, when they didn’t grok the product space, second when they’ve just killed most of it in the last couple months. A whole lot of money and effort, down the drain.

The big growth is downwards in size - the mobile market. Apple and Google copped that clue, Microsoft is very late to the game. They bumbled WinCE and phones in a big way. Now they’re betting on WinRT and Surface. Maybe it catches on... the history of how MSFT’s stuff actually works in the mobile space, however, doesn’t inspire confidence. Once again, they’re late to market, they’ve allowed others to set the bar and gain traction. Real innovation requires you to be first, not second or third.

The best thing Microsoft could do now is take their hottest engineers, do a spin-out with a pre-packaged comp plan that says “If you deliver product X by time T, you will be compensated with $C amount of CASH (not stock, CASH).” And they’re going to have to put seven figures on that number, at the very least, considering how far behind the curve they are.