The Rise of the Internet and the End of Microsoft?

The story of how Microsoft reacted to the Internet phenomenon illustrates the way Gates empowers workers by encouraging communication at every level of the hierarchy—and thereby derives great benefit. Had Gates taken a different tack, Microsoft might have become a very different company. The story begins in the mid-1990s. While some companies were gearing up for the Internet in a big way, at that time Microsoft was a laggard. By the fall of 1995, Microsoft—long accustomed to the status of media darling—was being derided for not responding to the Internet quickly or effectively enough.

In retrospect, Gates readily admits that he simply missed the boat at first. Within a few years , however, Microsoft had reversed course in dramatic fashion. The company acquired or made investments in dozens of Web-based companies, and went from a company without an Internet strategy to a company obsessed with the power of this new technology:

If we go out of business, it won't be because we're not focused on the Internet. It'll be because we're too focused on the Internet.

In other words, once the software giant grasped the importance of the Internet, it responded with urgency. So how did a huge company like Microsoft go from "not getting it" to being one of the key players in the industry? For one thing, Gates listened to employees who had their ears closer to the street than he did, and were hearing the new ideas that he was not hearing.

Foster a Culture in Which Ideas Rule

While Microsoft clearly was not oblivious to the Internet in the early to mid-1990s, it did not put the Internet high on its priority list. (Gates recalls that he ranked the Internet as number five or six on his priority list back then.) What is most compelling about Microsoft's shift to an Internet strategy is that it did not originate with Gates or another senior manager. Instead, the firestorm of change was sparked by an employee.

During a trip to a college campus, a Microsoft employee noticed that Cornell University was using the Internet for far more than just computer-science applications. Upon his return to the company, he composed and fired off a "the-sky-is-falling" memo, declaring that Microsoft would "go out of business" unless it listened to him. Eventually, the memo made its way to Gates, where it had an enormous impact:

Microsoft's awareness that something very dramatic was going on around the Internet really came from employee[s] ... so he became a change agent at Microsoft. ... And people looked at that, they looked at the other memos they had saying similar things, and we said, boy, this is profound.

Two observations: First, it took some guts for Gates to make this admission. (Wasn't he the resident visionary ?) And second, this type of bottom-up strategic initiative would have been impossible in a company with an inflexible hierarchy. But Gates was both appropriately humble and flexible. He took those messages very seriously, and he organized several company retreats in 1994 and 1995 to respond to them. By the end of 1995, the company had a new top priority, and the Internet was defining the future of the company. Gates credits the company's use of electronic mail—and a supportive company culture—with fostering an environment in which ideas could trump hierarchy:

If we hadn't had electronic mail, and the type of culture that that creates ... there's no doubt that our leadership would have been eclipsed if we had taken that long to really get it, and drive Internet standards into our products. So for us this digital approach has made the difference between being on top of things or actually falling behind.

Here are several ways to ensure that your organization emphasizes ideas and intellect sharing:

MAKE SURE THAT THE ORGANIZATION HAS AN INFRASTRUCTURE AND CULTURE THAT FOSTER IDEAS FROM EVERYONE. Gates credits the culture of Microsoft with helping to spark its Internet strategy. Unless employees are genuinely encouraged to contribute their thoughts and ideas, organizations risk missing out on potentially critical information.
CONSIDER HOSTING COMPANY RETREATS TO FOCUS ON KEY INITIATIVES AND TO HELP THE MANAGEMENT TEAM CORRECT ITS COURSE. Once Gates realized that the Internet would indeed be a breakout technology, he hosted several key retreats in order to devise a cohesive strategy for the company. Retreats or multiday meetings on an important initiative can help an organization redefine its focus.

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The Rise of the Internet and the End of Microsoft?

The Rise of the Internet and the End of Microsoft?

Foster a Culture in Which Ideas Rule

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