Implications for Leadership and Management in Designing and Controlling Innovation and Change: The Microsoft Case
No organization can hope to remain competitive today without carefully and efficiently managing the pace of innovation within that organization in response to changing consumer needs, industry trends, and internal capabilities. Communications technologies and other new mechanisms of conducting and creating business that have come about in the Digital Age have increased the pace of business dramatically, affecting all levels and segments of the supply chain and the product life cycle. In short, innovation is the new standard, and companies need to be researching and developing the next generation of products while still celebrating the release of the current generation. Consumers have proven to be more than willing to meet this ongoing supply with a never-ending demand for new gadgetry and more and faster capabilities, and businesses that fail to perceive and take advantage of this fact will find themselves being out-branded, out-priced, and outclassed.
Perhaps in no industry or market is this more explicitly or abundantly clear than in the technology sector, from whence the changes that drive the pace of the rest of the business world largely emerge. Software and hardware products that perform a variety of functions, from mobile communications to advanced digital image processing, are in constant demand for a wide and growing range of consumer and business applications. A company that isn't constantly striving to produce the latest and best types of its product class is a company doomed to failure.
This does not mean that innovation is the only decisive factor in shaping the competitive landscapes of modern industries or even the modern technology industry specifically, of course. For a company like Microsoft, where early innovations led to substantial and perhaps even monopolistic market shares, sheer clout can carry organizations pretty far. Microsoft would not have been able to maintain its position as an industry leader in several specific fields if it did not continue to innovate, however, and in fact the size of the organization makes its innovations an even bigger accomplishment, in some ways. This paper will examine certain specific challenges that are faced when attempting to manage innovation and change in an organization the size of Microsoft, and how this company met the challenges and barriers to innovation in order to remain a hugely successful company.
An understanding of the external environment facing Microsoft and similar companies is necessary in order to appreciate the need for innovation, certain barriers to innovation, and certain other influential forces in the computer technology industry. There are a variety of forces at work in the computer and personal technology industries that influence the competitive environment directly and the internal workings, strategies and operations of the companies in these industries indirectly, and understanding these complexities is necessary for understanding how innovation is driven in these industries. An application of certain commonly used frameworks can illuminate the specific forces at work.
According to Porter's Five Forces model of the external environment, the forces that increase competition are buyer power, supplier power, the threat of new entrants, and the threat of substitutions, all of which are themselves in turn influenced by the degree of competition in the industry. For Microsoft, all of the potential increases in competition are somewhat mitigated by the sheer size and clout of the company, which also makes the problem of substitution threats obsolete for many of Microsoft's products (Daft & Marcic 2010). Buyer power is rather strong in the industry, however, as an increasing number of Microsoft's diversified product line consists of non-essential or automatic items, and this creates intense competition in certain product areas, yet the capital costs for any meaningful new entrance into any of Microsoft's major markets make this threat negligible at worst (Daft & Marcic 2010). Ultimately, Microsoft is still the biggest kid in the sandbox, but it shares a market with other over-sized toddlers that can still pack a wallop when it comes to competition.
The political, economic, social, technological, legislative, and environmental (PESTLE) factors surrounding Microsoft and its industries of operation are also highly significant forces. Microsoft has been on the losing end of several suits and legal actions due to unfair competitive practices, and neither social nor political perspectives view Microsoft especially favorably, at least in some circles. The company has always been a very strong economic performer, and its size limit its exposure to the larger economic ties somewhat; though the company was certainly affected by the recent recession, it weathered that storm better than most other companies.
The company has necessarily been required to respond internally to these external forces, and some have seen the company as ultimately failing in its attempts to remain truly innovative given the current atmosphere in the industry. Companies like Google, Apple, Sony, and others that compete with Microsoft either directly or indirectly in one or more markets roll out new and improved products at much faster rate and wit a much higher degree of success than does the software and now gaming system/search engine/cell phone maker/etc. giant (Clarke 2010). The company has focused abundant energy on projects that did not pan out without any real controls, lacking the specificity, measurability, and time-bound aspects of the SMART acronym for effective business objectives and goals (Ambler 2006). On the other hand, Microsoft can be seen as a company undergoing a period of major transition, innovative not only in its products but in its mode of operation.
Leadership Style and Organizational Culture
The leadership style that is employed in any given organization, department, or team can have a major impact on how successfully that organization/etc. is able to innovate. Simply put, an effective balance between controlling the focus of group efforts and allowing the freedom and self-direction that encourages new ideas to develop must be achieved in order to lead to effective innovations on an efficient timeline (Mayle 2006). Being able to steer and guide employees with a strong perception of commitment despite changing political landscapes is also essential to maintaining an effective and well-integrated company (Glader 2006).
In both of these respects, it must be conceded that Microsoft has largely failed. Rather than an executive leadership team that is seen on helping to control focus while encouraging free thinking and collaboration, Microsoft's leaders have been accused of being aloof, arrogant, and almost willfully out of touch with the company's employees and the needs and desires of consumers (Brass 2010; Clarke 2010; Hawn 2004). With one of the world's richest men until recently the company's leader and still a prominent figurehead for Microsoft, it is perhaps not surprising that members of the Microsoft organization see the company as a "clumsy innovator" with missteps and misguidance that cannot simply be attributed to the problems of scale that the company's leadership has mentioned (NY Times 2010). In short, the leadership at Microsoft has been less than ideal for any organization, but the level of disconnect and lack of appropriate time-scales resulting from the inability for Microsoft's leadership to see what's going on in the trenches has drastically impacted its innovative capabilities.
Microsoft's culture is also responsible for its lack of truly effective innovation in recent years, but this is something that the company has been able to demonstrate massive turnarounds in before (Tidd et al. 2005). Essentially, with ineffective leadership and a lack of true focus on and commitment to the types of innovative projects and timelines that will help the company achieve greater competitive advantages in new and emerging areas of the technology sector, the culture degraded into a more plodding and monotonous repetition of old value rather then new ideas (Brass 2010; BITS 2010). There are signs that this might be changing, however.
At the surface level, culture is represented by artifacts, and though the recent innovative artifacts that Microsoft has released might not have been especially successful commercially, they demonstrated a strong commitment to truly new and innovative products that might be helping to redefine the culture and trajectory of the company (BITS 2010; Clarke 2010; Hawn 2004). The espoused values of the company remain largely the same, signaling that the changes that can be witnessed at the surface level might not have become fully visible at deeper levels, but this does not necessarily mean that change is not occurring (Mayle 2006). At its core, Microsoft appears to be fairly actively seeking new business areas and models for achieving growth and profitability, and though it might take some time for an organization of this size to restructure and re-staff itself in a way that makes capitalizing on innovative forces truly possible, it is almost certain this company will find a new way to thrive.
Organizational Change in Microsoft
There are four roles identified in situations of organizational change. Microsoft has never been short on the first of these roles, inventors, who are concerned with the technical details of innovations and/or processes, and there appears to be a fair number of champions…