MICROSOFT SECRETS: How the World's Most Powerful Software Company Creates Technology, Shapes Markets, and Manages People - Hardcover

Cusumano, Michael A.

Hardcover

ISBN 10: 0028740483 ISBN 13: 9780028740485

Publisher: Free Press, 1995

Synopsis

Today, Microsoft commands the high ground of the infomation superhighway by owning the operating systems and basic applications programs that run on the world's 170 million computers. Beyond the unquestioned genius and vision of Bill Gates, what accounts for Microsoft's astounding success? For the first time, drawing on almost two years of on-site observation at Microsoft headquarters, eminent scientists Michael A. Cusumano and Richard W. Selby reveal many of Microsoft's innermost secrets. From this inside report based on forty in-depth interviews by authors who had access to confidential documents and project data, Cusumano and Selby identify seven complementary strategies that characterize exactly how Microsoft competes and operates. Bill Gates' "Brain Trust" of talented employees and exceptional management, "bang for the buck" competitive strategies, and clear oranizational goals produce an orientation toward self-critiquing, learning, and improving; a flexible, incremental approach to product development; and a relentless pursuit of future markets. To demonstrate how Microsoft puts these strategies into action, the authors define a further set of principles to reveal a style of leadership, organization, competition and product development which is both consistent with the company's loosely structured "programmer" culture and remarkably effective for mass-market production of software. Focusing specifically on the unique "synch-and-stabilize" approach to product development, they show how this vital capability enables Microsoft not only to build an increasing variety of complex features and end-products for fast-paced markets with short life cycles, but also to shape evolving mass markets and foster organizational learning. They examine how the flexibility of this process allows the company to "scale up" for larger and more complex projects -- a key asset that Microsoft must continue to cultivate in order to maintain its position as industry leader. Cusumano and Selby's masterful analysis successfully uncovers the distinctive way in which Microsoft has combined all of the elements necessary to get to the top of an enormously important industry and stay there. Managers in many different industries, especially those concerned with rapidly evolving complex product features and high technical standards, will discover hundreds of invaluable lessons in this superbly readable book.

About this title

About the Author

Michael A. Cusumano teaches strategy and technology management at MIT's Sloan School of Management. He lives in Cambridge, Massachusetts.

Reviews

The authors of this surprisingly candid report interviewed 38 Microsoft employees, including chairman and CEO Bill Gates, other top executives, middle managers and software developers, and they were also given access to internal documents and project data. They provide a detailed look at how the software giant develops new products, competes and strives to improve its operations. Seven key strategies central to Microsoft's approach are identified, among them: continually improve products incrementally, with direct input from customers during the development process; organize small teams of overlapping specialists who formally share tasks; aggressively target emerging mass markets. Microsoft has retained much of its loosely structured, small-team culture, and this study helps to explain how the company is able to do so while designing and manufacturing tremendously complicated products. Although some chapters are targeted to people familiar with personal computer software, this pragmatic handbook provides instructive lessons for firms and managers in many industries. Cusumano teaches management of technology at MIT; Selby teaches information and computer science at UC-Irvine. Author tour.
Copyright 1995 Reed Business Information, Inc.

With unrestricted access to confidential internal documents and through interviews with key staff members, Cusumano (The Japanese Automobile Industry, LJ 4/1/86) and Selby (Univ. of California-Irvine) provide an inside look at how Microsoft organizes, strategizes, develops products, and improves its organization. The authors' approach differs from that found in previous works (e.g., Gates, LJ 2/1/93, and Hard Drive, LJ 6/1/92), which focused on the firm's history and its noted founder. Instead, they devote a separate chapter to each of the seven operating strategies that have enabled Microsoft to dominate its industry. Managers will find helpful insights and approaches to apply within their own firm. This work effectively complements David Packard's The HP Way (LJ 6/1/95); highly recommended for business collections, managers, and informed readers.?J.P. Miller, GSLIS, Simmons Coll., Boston
Copyright 1995 Reed Business Information, Inc.

Now that Bill Gates has been declared the richest man in the world and his company produces the software that drives most of the world's personal computers, fascination and interest in the man and in Microsoft, his company, are at an all-time high. There are already at least three books profiling Gates and Microsoft. Another, I Sing the Body Electronic by Fred Moody , follows the development of Microsoft's new multimedia Explorapedia and focuses on the company's project-team approach to product development. Gates' own much-anticipated, much-delayed (much like several of the company's software releases) The Road Ahead is also now due in the fall. With that in mind, Simon and Schuster and the Free Press have rushed the release of this book by several months. Gates has a penchant for showcasing his company, inviting outsiders to sit in, watch, report on, and even critique and participate in operations. As he did with Moody, Gates allowed Cusumano, who teaches the management of technology at MIT, and Selby, who teaches information and computer science at the University of California^-Irvine, access to Microsoft's headquarters. There they were able to see confidential documents and project data as well as conduct in-depth interviews. The result is the most thorough profile of one of the most important companies today. Most corporate "biographies" seek either to glorify or vilify their subjects. Cusumano and Selby, however, take an instructive, objective, and analytical look at "how Microsoft organizes, competes, develops new products, and tries to learn and improve as an organization." David Rouse

Excerpt. © Reprinted by permission. All rights reserved.

Chapter 1

Organizing and Managing the Company

Find "Smart" People Who Know the Technology and the Business

To organize and manage the company, Microsoft follows a strategy that we describe as find smart people who know the technology and the business. We break down our discussion of this strategy into four principles:

* Hire a CEO with a deep understanding of both the technology and the business.
* Organize flexibly around and across product markets and business functions.
* Hire the smartest managers you can find -- people with a deep understanding of the technology and the business.
* Hire the smartest employees you can find -- people with a deep understanding of the technology and the business.

These principles, in theory, are not unusual or unique to Microsoft. In practice, however, they have had a profound impact on both the firm and the industry. Few companies have chief executives who know their underlying technology and how to translate this knowledge into a multibillion-dollar business as well as Bill Gates. Many companies organize around product markets and business functions in ways similar to Microsoft, but many companies have difficulty simultaneously maintaining a strong product and market focus as well as a strong set of basic functional skills. For a company in a rapidly evolving and expanding industry, Microsoft has done an excellent job of organizing to match and sometimes lead the market. It has also acquired and nurtured the technical functions needed to build a huge and constantly expanding portfolio of products.

Many firms hire or promote people based solely on their managerial skills, not necessarily on how well they can combine their technical knowledge with an understanding of business and strategy. Microsoft puts knowledge of the technology and how to make money with this knowledge first in choosing managers. While this results in a shortage of middle managers with good people management skills, it has served Microsoft well in the highly technical world of developing computer software. At the same time, through new hires and acquisitions, Microsoft continually broadens its existing skill base such as by adding new groups for consumer software and information-highway products and services.

Microsoft is also particularly rigorous in how it screens people, especially software developers, hiring only 2 or 3 percent of all applicants. Moreover, as with managers, Microsoft looks specifically for people with a deep knowledge of the technology and a very clear sense of how to use this knowledge to ship products for the company.

In many respects, Microsoft's product unit managers operate like the Roman centurions of two thousand years ago. They are sufficiently competent that they do not need a lot of direction and can respond quickly to new opportunities and threats. Their organizations have most of the resources they need to operate independently; the centurions go off on their own and report back only occasionally. But they roam within certain limits, and the leader can rest assured that these centurions -- and their troops -- are fighting for the good of the whole organization. The record speaks for itself: Although not every customer is happy, Microsoft clearly has a leader, a top management team, and an army of employees who deeply understand both the technology and the business of PC software. They also know how to win.

PRINCIPLE Hire a CEO with a deep understanding of both the technology and the business.

Much of a successful company's performance stems from the technical and business acumen, as well as the leadership and managerial abilities, of its chief executive officer. Bill Gates of Microsoft may be the shrewdest entrepreneur and the most underrated manager in American industry today. His talents appear both in a technical understanding of software and computers and in his ability to create and maintain an enormously profitable business. He acquired a reputation years ago as a cantankerous personality who often criticized (and even yelled at) his employees, but Gates has matured along with his company. He continues to guide the selection of new products and businesses, as well as the features that go into key products. Now, however, he relies heavily on several dozen senior executives and technical leaders, and has instituted formal and informal mechanisms to help him direct the Microsoft machinery.

Gates the Person: William Henry Gates was born in 1955 in Seattle, Washington, the middle child in a well-to-do family. (Neither parent was a technologist; his father was a lawyer, and his mother was a teacher.) By all accounts, Gates the child was similar to Gates the adult: His biographers describe him as a "high energy kid" who liked to rock back and forth in his chair, just as he did during our interview. A former teacher described him as "a nerd before the term was invented." His childhood interests included -- but obviously did not end with -- games such as Risk, where players compete for global domination.

Gates's first exposure to computers came during 1968-1969, in his second year at the private Lakeside School. The school had a primitive teletype machine and access to a computer through a time-sharing hook-up. He learned the BASIC programming language and then teamed up with a tenth-grade electronics expert named Paul Allen to learn more about programming. When Gates was fourteen, he and Allen made money by writing and testing computer programs. The duo then established their first company, named Traf-O-Data, in 1972 and sold a small computer that recorded and analyzed motor vehicle traffic data.

In 1973 Gates enrolled at Harvard University. The following year, Allen, who had gone on to study computer science at the University of Washington, left college and took a job with Honeywell in the Boston area. It has often been described how Allen saw an issue of Popular Electronics in 1974 that advertised the new Altair microcomputer kit from MITS Computer, and how he and Gates wrote a version of BASIC using Harvard's computing facilities. Gates left college in 1975 to concentrate full-time on developing programming languages for the Altair (and then for other personal computers), relocating with Allen to Albuquerque, New Mexico, to be next to MITS Computer's office. They formed Microsoft during 1975 as a 60-40 partnership in favor of Gates, reflecting his larger role in developing Microsoft BASIC, the company's first product. (See Appendix 1 for an abbreviated chronology of Microsoft's history.)

Several characteristics stand out in stories about the young Gates. He was intelligent and ambitious, as were his friends. He was able to concentrate intensely on and master what interested him; most notably, computers and how to program them for practical purposes. Perhaps most important, Gates envisioned a world with computers not merely tracking traffic data but sitting on every desktop -- and running his software. This was a great combination of skills and ambitions to have at the dawning of the PC era.

Observers from outside and Microsoft employees paint similar pictures of Gates. They describe him as a visionary with a maniacal drive to succeed, accumulate great power, and make money by taking advantage of his technical knowledge and understanding of industry dynamics. Microsoft the company emerges as an extension of Gates' unique personality and skills.

Gates is a visionary. Very early in the history of the PC, he evolved a strikingly clear concept of where the industry was headed, and he has pursued that vision -- despite many tactical setbacks -- unwaveringly, relentlessly, and ruthlessly.

This guy [Gates] is awesomely bright. But he's unique in a sense that he's the only really bright person I've ever met who was 100 percent bottom-line oriented

Edition details

• Publisher: Free Press
• Publication date: 1995
• Language: English
• ISBN 10: 0028740483
• ISBN 13: 9780028740485
• Binding: Hardcover
• Edition number: 1
• Number of pages: 528