Thursday, January 13, 2011

Microsoft, with all its patents, afflicted by "innovator's dilemma"?

In talking about the recent IFI report on patent numbers in the US, a ComputerWorld post essentially gets to the disconnect between "counting patents" and measuring innovation:

Microsoft spends an estimated $9 billion annually in research, development, and acquisitions. An in-depth Reuters report about Microsoft noted this about the company's approach to research and innovation:

There is a growing feeling that the $9 billion a year Microsoft is now spending on research and development -- totaling almost $69 billion over the last decade -- has not brought the breakthroughs it should.

"Comparing Microsoft to Apple over the past 10 years in terms of innovation, new products and completely new businesses, the differences are pretty obvious," said Don Dodge, a former 'startup evangelist' at Microsoft, who now works for Google. "What did Microsoft investors get in return for their investment of over $75 billion in R&D and acquisitions?"

The Reuters article went on to say that Microsoft appears to suffer from the "innovator's dilemma" which occurs when a company focuses on protecting existing markets, rather than trying to create new ones, worried that new markets may eat into existing revenue streams. The article has this to say:
That view is shared by another former high-ranking Microsoft executive, still active in the technology sector, who asked not to be identified. "There probably isn't another company in the world that has the same amount of raw talent and smart people," he said. "Then you look at the results over the last 10 years and they're not so impressive. How do you explain that gap?"
But there's more than that at work. Microsoft has made a conscious decision to do pure research as well as applied research, which necessarily means that research dollars may never turn into actual products. A Computerworld examination of the research labs at Microsoft, HP, and IBM, notes:
Leaders of Microsoft's research group sometimes speak with nostalgia about the glory days of computer science research, when labs like the revered Xerox Palo Alto Research Center and Bell Labs worked on ambitious projects.
Most of those famed institutions are gone or are shadows of their former selves, victims of budget cuts and investors who demand that every dollar be clearly earmarked toward development of profitable products.

While its research group never quite ranked among those famous labs, Microsoft likes to boast that it's one of the few remaining public companies that still do pure research, including kinds that might not turn into products for many years.

So Microsoft deserves kudos for spending money on research and possibly never seeing a return on it. More companies should follow suit.

link to discussion about ifi report:


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