Radical Innovation in a Large Firm:

Dual perspectives on a case at Microsoft 

 

Case Analysis by Barry Sugarman -- based on Fred Moody's

 

 book:  I Sing the Body Electronic: A year with Microsoft on the 

 

multimedia frontier, New York: Viking, 1995.

 

 

This case features a creative project involving artistic design, with an educational purpose, for children -- all areas unfamiliar to a tech firm like Microsoft (MS). That's why I call it "radical innovation".  While this project fit well within the technical competency of MS but in terms of culture and market issues -- this was foreign territory for MS. The year was 1992,  Most PCs processed only text . Even graphic user interfaces were novel then. It was the dawn of personal computing and Microsoft was BIG; mutlimedia publishing was still an unproven idea. Even the visionaries had no clue what the multimedia future would look like, or how vast it would  be. This was before the Web and before popular gaming. If there should be a new industry here, though, Bill Gates wanted Microsoft to dominate it by creating the first defining products.  MS made a strong start with Encarta, the digital encyclopedia, and decided to follow it up with a more ambitious product, the first interactive, digital, children's encyclopedia.  The project was codenamed Sendak (after the children's artist-author) -- at Microsoft. Really! 

 

Microsoft exemplifies a new type of firm that "manages on the edge of chaos". And this case holds special interest since it focuses on one project that was radically innovative -- even for this company. Many new companies start out as highly innovative, but cannot continue to produce radical innovations -- only variations on the same original idea which was successful. This case spotlights an important exception, that many firms would like to emulate .

 

 

Following the release of Encarta, its pioneer digital encyclopedia, Microsoft began development for a more ambitious encyclopedia for children (code-named Sendak) and later named Explorapedia when released for sale.  "Behind the scenes" Fred Emery was closely observing every step of the product development process. Unusually rich data is contained in his  book . It ends with the author declaring himself baffled by what he found. So I shall re- examine and re-frame some of his data here, using a dualistic framework.  

To oversimplify, it's a collaboration (with some underlying conflict) between creativity and corporate commerce. But HOW is that managed?

 

We see two parties and two approaches which conflict in certain ways, although both parties gain when both approaches can be respected. For success, both parties must see some validity in both approaches, although each party is more closely identified with one approach. In this case we see a dynamic/conflict between two approaches:  (i) a loose process to create radical innovation and (ii) mainstream managemen, tightly regulated (including budget, schedule, profit, and control). Each approach must have room to make its contribution.

 

This collaboration was initiated by Microsoft top management to create the multimedia unit. From there proposals arose to Gates to fund specific projects, one of them being Sendak.  The development plan was approved by Bill Gates himself and fully funded. At different phases the relationship between the two parties shifted. Top management always had more power but held back from close supervision during program development, except to insist on meeting the launch date - and to shorten it.   (See table below for time phases.)

 

This is partly a conflict between two groups/sides (designers & managers) and partly between two approaches or mental models.  At certain phases one side may emphasize one approach more than the other; at another phase that same party may see its dependence on both approaches. But how can the conflicts or contradictions in approaches be managed?  Overall, the project designers naturally favored the creativity process with few constraints and top management emphasized Launch on Time (mainstream management). Ultimately MS needed both approaches -- Great Design, On Time. In fact  (after a very rocky process) they achieved that with a successful launch. 

 

BUT then top management decided to restructure the company, ended the special, sheltered status of the multimedia projects. For those innovators  the "golden duality" phase was over. Mainstream corporate management was focused on the interests of the whole company (as they defined them) over the interests of this project. 

 

It is possible that "creativity" and radical innovation across MS as a whole might benefit more from relocating these radical innovators in the MS mainstream, rather  than keeping them as a separate unit. That might have been the intention of top managers, or the aim might have been the wish to "streamline" the TO in that huge firm with hundreds of program units to manage. 

 

Recap:

 

Two approaches or mental models  show up here:  (i) a creative process for radical innovation, and (ii) and mainstream management  ("the corporation" ).  

 

"Management thinking" is the "mainstream" view. It involves a linear, mechanistic model in which schedule, gates, and deadlines must be respected. Time/schedule and budget norms are universal; other metrics vary across units. Managers try to insist that projects launch on time. "Good ideas, On time". Brilliant ideas are a bonus; but not wanted if they disrupt the schedule. While this mainstream management model may work well enough for some incremental product development (innovation) projects, it is problematic with radical innovation projects. Some critics of the mainstream model  recommend "design thinking" as a superior model (Schön, 1987; Martin, 2011).  

I maintain in the dualistic model that design thinking/management is equivalent to successful collaboration between (i) creative process and (ii) mainstream management.

 

Creative process  (as in project Sendak) involves radical revision of basic assumptions by the innovators, "double loop" thinking, creativity, sometimes initially rejected as "crazy".  Such radical innovation, perhaps involving a novel technology or products for an unfamiliar market, rarely stays on schedule, if ever.

 

Gates/Microsoft set up a special, sheltered unit for the new multimedia venture, including project Sendak (this case). Funding was generous; Multimedia projects at MS got special treatment -- they were allowed to hire and expand while there was a company-wide hiring freeze. Corporate management did not interfere or bother them for frequent reports. BUT THEY DID  INSIST that they must launch on time and, of course, their product must rock the market . It's the Both/And formula again. In fact they did ultimately succeed.

 

This extreme summary might sound like the perfect arrangement for a group of idealistic, creative innovators, so why was Moody surprised and confused?  Three factors:

(i) Because of the first six months when the design group seemed like "the project from hell" full of confusion, conflict (not the productive kind) and frustration-stress for participants.  

(ii) Then came  some lucky  breaks and change of leaders.  But just as the final build plan seemed finally ready to GO, lightening struck. The group manager called for a radical reassessment of the entire design. (For U.S. football fans, he threw a "Hail, Mary" pass attempt.)  Somehow they pulled off a near-miracle launch success. 

(iii) The special status for multimedia projects came to an end when MS top management reorganized the company and multimedia projects were mainstreamed, to become part of various established divisions.

 

Managing and performing in large organizations involves many such dualistic tensions, around various dualities. Every start-up contains a design for collaboration among many players and units; other collaborative arrangement evolve; when successful there is a "golden era" which may later collapse -- like the household struggle to keep up with dirty laundry. (Some garments get ruined and cannot be washed clean.)  Research needs more cases that can be analyzed into their phases to see other ways of managing these dualities. In this one the hierarchical difference was prominent, but in many other situations the players are more equal in power, or there are procedures and process for negotiating these issues. 

 

 

This is a short summary of an unpublished paper. 

Revised Jan. 2015.  Barry Sugarman