Microsoft's challenge: Innovation, innovation, innovation

Former Softies are weighing in publicly about Microsoft's culture of innovation -- or lack thereof -- in the past couple of days. What they aren't doing is offering any real suggestions about how Microsoft can make a company of 90,000 or so employees more agile, less insular and more innovative.

Don Dodge, who was cut in the last round of Microsoft layoffs, only to resurface days later at Google as an evangelist, is extolling the virtues of Macs this week. Dick Brass, who retired from Microsoft in 2004 and was instrumental in the Tablet PC launch, is airing his grievances about what went wrong back in 2000 in an op-ed piece in the New York Times. Bill Hill, the leader of the ClearType team at Microsoft who left Microsoft last summer, has a post on his personal blog that also criticizes Microsoft's development and commercialization processes.

I've met and/or heard all of these folks speak during my time covering Microsoft. They've all had their share of justifiable frustrations with management, as have most folks who leave a company (voluntarily or not). Apple's launch last week of the iPad, with many subsequent stories and blog posts declaring Microsoft had lost their ten-year lead in the tablet market, probably led, at least in part, to Brass' and Hill's discontent.

The most surprising thing about a number of industry watchers' reactions to these complaints, in my mind, the fact that anyone is stunned to hear that Microsoft is a political place, populated by some execs who seem intent on building empires inside the Empire. Hello, corporate politics! Show me a big company that isn't a shark tank, and I'll show you a company that has no teeth.

Secondly, I'm also surprised that anyone familiar with Microsoft's history is shocked that one Microsoft team tried to kill off another team's project because it was viewed as internal competition. It was common knowledge that when Bill Gates was still CEO at Microsoft, and for years afterwards, Microsoft's brass routinely pitted one team against another inside the company and let "the best" team win. Just one of many examples: Remember the Office vs. NetDocs contest? NetDocs -- which could have become Microsoft's equivalent to Google Docs if it had launched back in 2001 -- lost.

Over time, many of the Microsoft teams and managers that "lost" didn't succumb simply because their technology wasn't innovative enough. Sometimes it was too ahead of its time. Other times, it lost because the Microsoft managers in charge of the company's money-earning cash cows (like Windows and Office) didn't want anything to upset their fiefdoms.

Are these healthy behaviors? No. Did they actually make Microsoft any more successful? I'm doubtful.

The other and more intersting question raised by Brass and others -- besides which manager killed whose project ten years ago -- is about innovation (whatever that really means). The tech world has changed a lot since the early part of the last decade -- the period about which Brass's criticisms focused. In spite of CEO Steve Ballmer's public bluster, Microsoft execs actually do realize they can't ignore Web apps and Web standards. Microsoft no longer acts as though Apple is nothing but a minor irritant; in fact, I and some other company watchers have said we think Microsoft is too Apple-obsessed for its own good.

In the past couple of years, in particular, I've felt that Microsoft's top execs have come to understand (for the most part, not completely) that internal dog fights ended up causing more harm than good. To try to kick start innovation, new tactics are being put in place, like the creation of hybrid labs (Live Labs, Startup Labs, DevLabs, etc.), designed to allow smaller projects to have a better chance to make it to the commercial market. At the same time, Microsoft execs also have been incubating a number of other projects -- things like Midori, Azure, the Online services, etc. -- to give them a head start. And then there have been the attempts by Microsoft to spur innovation by sequestering certain teams and separating them (physically and virtually) from the rest of the company while they mature (think Xbox, Zune, Courier).

Will these kinds of changes be enough to keep Microsoft in leadership positions outside of Windows and Office -- the two places it has a monopoly? I'm not sure. But at least management is making some changes in attempt to become more agile.

As others have said today, it's easy to be the Monday morning quarterback, analyzing in hindsight what Microsoft could/should have done. It's hard coming up with ideas about how to make a company as big and established as Microsoft able to keep pace with a rapidlychanging tech environment.

Would breaking the company into a consumer company and an enterprise company help achieve this goal? (Sometimes I think so....) Other thoughts about how  -- and if -- Microsoft can become more innovative?