Microsoft's decade of de-innovation

If there were an antonym for innovation, it would describe Microsoft in the past decade. It counts one fabulous success - the Xbox - numerous embarrassments like Vista and the Kin, and a continued inability to break new ground.

Now Vanity Fair has done a major piece on what it calls “one of American corporate history’s greatest mysteries” – Microsoft’s “downfall”. 

It's a bit early to be talking about the downfall of a $258bn market cap busines, but there’s surely no mystery.

MS has been ensnared by innovator’s dilemma. The generous margins from Windows and Office have given it little incentive to build new businesses, while its attempts at mobile and even e-readers have failed because it has tried to leverage these irrelevant core products.

The result is the recent its $6.2 billion write-down of online ad acquisition aQuantive.

But in this excerpt on the VF blog, the practice of stack ranking – a form of hierarchical performance evaluation – is widely blamed for fostering a pernicious, risk-averse culture.

According to writer Kurt Eichenwald: “Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process” inside the company.

 “If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

This is staggering. Pretty much every single guide to successful innovation cites the ability to risk-take and to fail as critical. At Microsoft, staff are motivated to not be seen as failing as badly as fellow employees.

This is a live issue today is in the handset space, where MS has tied its fortunes to another waning star.

Says one ex-marketing exec:

“You look at the Windows Phone and you can’t help but wonder, how did Microsoft squander the lead they had with the Windows CE devices? They had a great lead, they were years ahead. And they completely blew it. And they completely blew it because of the bureaucracy.”

It’s no wonder that Nokia has prepared a ‘plan B’ for the Windows Phone.

For a more detailed and optimistic view about MS and the Ballmer era, click here.