Ballmer: Innovation doesn't happen overnight

Commitment to long-term research, talent and lots of patience are necessary for Microsoft to stay on top of the pack, says CEO Steve Ballmer.

SINGAPORE--Spearheading long-term research and development (R&D) to address disruptions caused by the changing software landscape, is Microsoft's mantra in staying ahead, says company CEO Steve Ballmer.

Speaking at the IDA Distinguished Speaker Series Wednesday, the Microsoft's head honcho also noted that many IT companies do not commit themselves to building multiple competencies. "When companies do something well, they usually map everything else to that model and [are] not the least embracing disruptions," he said.

Underscoring disruptions across industries made by the changing definition of software, Ballmer said: "Software used to be something that came on a CD that you put in a computer. Now, software is something that flies around the Internet that gets put in phones, PCs, servers and TVs at the speed of light."

A key factor in embracing disruptions such as Internet applications, while staying ahead in the technology industry, is to engage in long-term research and development (R&D), he pointed out. Microsoft spends US$6 billion on R&D each year.

"If you want to be an innovator, you have to take the long-term approach," he said. "There is a view that innovation happens overnight and that's simply not the case. It took us eight to 10 years to get Windows popular, and many years to get databases popular."

Although the benefits of long-term R&D may not manifest in a company's bottom line right away, Ballmer shared how he manages shareholder expectations on the company's profitability.

Noting that there are different kinds of shareholders and it is not possible to please everyone, he said: "It is more important to say [to shareholders] what you think is important, and then people who agree with you become your shareholders," he added. "I tell my shareholders quite explicitly that we have to invest in the long term…which is three to seven years."

However, like many big companies, Ballmer said, Microsoft still has a few long-term shareholders. He noted that although private equity may be deemed disruptive, it often brings to a company funds that stay for a longer period of time than funds that come from public stock markets. "It's important to find a shareholding base that matches the time frame for payback for your business."

Microsoft, Ballmer noted, has "more patience than most of the people in our business".

"In our business, people give up quickly," he said. "When I arrived at Microsoft 27 years ago, there was a company that owned 70 percent of the IT industry."

Referring to IBM, Ballmer said: "That company is still a fine company, but it is not that company that it was 27 years ago, in part because it lacked the patience to stay with their investments. It's ironic that IBM invented the personal computer business but is no longer a participant."

Staying on top with talent
Ballmer said over the last 20 years, no other company has hired more top-notch computer talent than Microsoft.

"And I don't think anybody's worked harder than us on that, which is also the result of hard work and commitment more than anything else," he added.

In the last few years, while Microsoft has hired industry luminaries such as Ray Ozzie, it also lost other top employees like Kai-Fu Lee to archrival Google. The search giant also boasts of prominent hires including Vint Cerf, the longtime technologist widely known as a founding father of the Internet.