Peter Drucker: The Best Podcast Ever

I just stumbled on to the best Peter Drucker interview ever. The interview aired on Tuesday, August 02, 2005 – so this is fairly recent stuff. It’s an hour long, but terribly important for us now.
In the interview, we find out what Drucker thinks about:
– US involvement in Iraq
– Roosevelt, Truman, Hitler, Stalin, Mao, a hint about Bush
– The Future of America
– Executive Pay
– Knowledge Worker Productivity
– The Knowledge Society
– The American College system
– Capitalism & Free Markets
– The Future of Government
– Cutting the Things that Government is Good At
– Power and its Limits
– The First Constituent – NOT the Shareholder but the Consumer (!)
– Power Sharing in the New World
– The Prosperity of Denmark and Holland
– Where the World is Going
– The End of Western Dominance
– Pluralism: Values and Co-Existence
– Information not Power
– 30 Rough Years Ahead
– America’s Return to Humility
– God
The interview blew me away. Listen to it here
I also found a great print interview with Drucker with Forbes’ Rich Karlgaard. Here are some excerpts:
What Needs to Be Done
Successful leaders don’t start out asking, “What do I want to do?” They ask, “What needs to be done?” Then they ask, “Of those things that would make a difference, which are right for me?” They don’t tackle things they aren’t good at. They make sure other necessities get done, but not by them. Successful leaders make sure that they succeed! They are not afraid of strength in others. Andrew Carnegie wanted to put on his gravestone, “Here lies a man who knew how to put into his service more able men than he was himself.”
Check Your Performance
Effective leaders check their performance. They write down, “What do I hope to achieve if I take on this assignment?” They put away their goals for six months and then come back and check their performance against goals. This way, they find out what they do well and what they do poorly. They also find out whether they picked the truly important things to do. I’ve seen a great many people who are exceedingly good at execution, but exceedingly poor at picking the important things. They are magnificent at getting the unimportant things done. They have an impressive record of achievement on trivial matters.
Mission Driven
Leaders communicate in the sense that people around them know what they are trying to do. They are purpose driven–yes, mission driven. They know how to establish a mission. And another thing, they know how to say no. The pressure on leaders to do 984 different things is unbearable, so the effective ones learn how to say no and stick with it. They don’t suffocate themselves as a result. Too many leaders try to do a little bit of 25 things and get nothing done. They are very popular because they always say yes. But they get nothing done.
Creative Abandonment
A critical question for leaders is, “When do you stop pouring resources into things that have achieved their purpose?” The most dangerous traps for a leader are those near-successes where everybody says that if you just give it another big push it will go over the top. One tries it once. One tries it twice. One tries it a third time. But, by then it should be obvious this will be very hard to do. So, I always advise my friend Rick Warren, “Don’t tell me what you’re doing, Rick. Tell me what you stopped doing.”
The Rise of the Modern Multinational
The modern multinational corporation was invented in 1859. Siemens invented it because the English Siemens company had grown faster than the German parent. Before the Second World War, IBM was a small maker, not of computers, but of adding machines. They had one branch in England, which was very typical for the era. In the 1920s, General Motors bought a German and English and then Australian automobile manufacturer. The first time somebody from Detroit actually visited the European subsidiaries was in 1950. A trip to Europe was a big trip. You were gone three months. I still remember the excitement when the then head of GM went to Europe in the 1920s to buy the European properties. He never went back.
21st Century Organizations
Let me give you one example. This happens to be a consulting firm headquartered in Boston. Each morning, between 8 A.M. and 9 A.M. Boston time, which is 5 A.M. in the morning here in California and 11 P.M. in Tokyo, the firm conducts a one-hour management meeting on the Internet. That would have been inconceivable a few years back when you couldn’t have done it physically. And for a few years, I worked with this firm closely and I had rented a room in a nearby motel and put in a videoconferencing screen. Once a week, I participated in this Internet meeting and we could do it quite easily, successfully. As a result of which, that consulting firm is not organized around localities but around clients.
How To Lead a 21st Century Organization
Don’t travel so much. Organize your travel. It is important that you see people and that you are seen by people maybe once or twice a year. Otherwise, don’t travel. Make them come to see you. Use technology–it is cheaper than traveling. I don’t know anybody who can work while traveling. Do you? The second thing to say is make sure that your subsidiaries and foreign offices take up the responsibility to keep you informed. So, ask them twice a year, “What activities do you need to report to me?” Also ask them, “What about my activity and my plans do you need to know from me?” The second question is just as important.
Prisoner of Your Own Organization
When you are the chief executive, you’re the prisoner of your organization. The moment you’re in the office, everybody comes to you and wants something, and it is useless to lock the door. They’ll break in. So, you have to get outside the office. But still, that isn’t traveling. That’s being at home or having a secret office elsewhere. When you’re alone, in your secret office, ask the question, “What needs to be done?” Develop your priorities and don’t have more than two. I don’t know anybody who can do three things at the same time and do them well. Do one task at a time or two tasks at a time. That’s it. OK, two works better for most. Most people need the change of pace. But, when you are finished with two jobs or reach the point where it’s futile, make the list again. Don’t go back to priority three. At that point, it’s obsolete.
How Organizations Fall Down
Make sure the people with whom you work understand your priorities. Where organizations fall down is when they have to guess at what the boss is working at, and they invariably guess wrong. So the CEO needs to say, “This is what I am focusing on.” Then the CEO needs to ask of his associates, “What are you focusing on?” Ask your associates, “You put this on top of your priority list–why?” The reason may be the right one, but it may also be that this associate of yours is a salesman who persuades you that his priorities are correct when they are not. So, make sure that you understand your associates’ priorities and make sure that after you have that conversation, you sit down and drop them a two-page note–“This is what I think we discussed. This is what I think we decided. This is what I think you committed yourself to within what time frame.” Finally, ask them, “What do you expect from me as you seek to achieve your goals?”
The Transition from Entrepreneur to Large Company CEO
Again, let’s start out discussing what not to do. Don’t try to be somebody else. By now you have your style. This is how you get things done. Don’t take on things you don’t believe in and that you yourself are not good at. Learn to say no. Effective leaders match the objective needs of their company with the subjective competencies. As a result, they get an enormous amount of things done fast.
How Capable Leaders Blow It
One of the ablest men I’ve worked with, and this is a long time back, was Germany’s last pre-World War II democratic chancellor, Dr. Heinrich Bruning. He had an incredible ability to see the heart of a problem. But he was very weak on financial matters. He should have delegated but he wasted endless hours on budgets and performed poorly. This was a terrible failing during a Depression and it led to Hitler. Never try to be an expert if you are not. Build on your strengths and find strong people to do the other necessary tasks.
The Danger Of Charisma
You know, I was the first one to talk about leadership 50 years ago, but there is too much talk, too much emphasis on it today and not enough on effectiveness. The only thing you can say about a leader is that a leader is somebody who has followers. The most charismatic leaders of the last century were called Hitler, Stalin, Mao and Mussolini. They were mis-leaders! Charismatic leadership by itself certainly is greatly overstated. Look, one of the most effective American presidents of the last 100 years was Harry Truman. He didn’t have an ounce of charisma. Truman was as bland as a dead mackerel. Everybody who worked for him worshiped him because he was absolutely trustworthy. If Truman said no, it was no, and if he said yes, it was yes. And he didn’t say no to one person and yes to the next one on the same issue. The other effective president of the last 100 years was Ronald Reagan. His great strength was not charisma, as is commonly thought, but that he knew exactly what he could do and what he could not do.
How To Reinvigorate People
Within organizations there are people who, typically in their 40s, hit a midlife crisis when they realize that they won’t make it to the top or discover that they are not yet first-rate. This happens to engineers and accountants and technicians. The worst midlife crisis is that of physicians, as you know. They all have a severe midlife crisis. Basically, their work becomes awfully boring. Just imagine seeing nothing for 30 years but people with a skin rash. They have a midlife crisis, and that’s when they take to the bottle. How do you save these people? Give them a parallel challenge. Without that, they’ll soon take to drinking or to sleeping around. In a coeducational college, they sleep around and drink. The two things are not incompatible, alas! Encourage people facing a midlife crisis to apply their skills in the non-profit sector.
Character Development
We have talked a lot about executive development. We have been mostly talking about developing people’s strength and giving them experiences. Character is not developed that way. That is developed inside and not outside. I think churches and synagogues and the 12-step recovery programs are the main development agents of character today.
Wow. And that was in print.
Again, don’t forget to listen to the interview here

Managing Ignorance: The Passing of Peter Drucker


Farewell Peter Drucker.
The biggest business thinker of them all is gone. Perhaps business will start listening to him now. A sad day.
from the NY Times:
Peter F. Drucker, the political economist and author, whose view that big business and nonprofit enterprises were the defining innovation of the 20th century led him to pioneering social and management theories, died yesterday at his home in Claremont, Calif. He was 95.
His death was announced by Claremont Graduate University.
Mr. Drucker thought of himself, first and foremost, as a writer and teacher, though he eventually settled on the term “social ecologist.” He became internationally renowned for urging corporate leaders to agree with subordinates on objectives and goals and then get out of the way of decisions about how to achieve them.
He challenged both business and labor leaders to search for ways to give workers more control over their work environment. He also argued that governments should turn many functions over to private enterprise and urged organizing in teams to exploit the rise of a technology-astute class of “knowledge workers.”
Mr. Drucker staunchly defended the need for businesses to be profitable but he preached that employees were a resource, not a cost. His constant focus on the human impact of management decisions did not always appeal to executives, but they could not help noticing how it helped him foresee many major trends in business and politics.
He began talking about such practices in the 1940’s and 50’s, decades before they became so widespread that they were taken for common sense. Mr. Drucker also foresaw that the 1970’s would be a decade of inflation, that Japanese manufacturers would become major competitors for the United States and that union power would decline.
For all his insights, he clearly owed much of his impact to his extraordinary energy and skills as a communicator. But while Mr. Drucker loved dazzling audiences with his wit and wisdom, his goal was not to be known as an oracle. Indeed, after writing a rosy-eyed article shortly before the stock market crash of 1929 in which he outlined why stocks prices would rise, he pledged to himself to stay away from gratuitous predictions. Instead, his views about where the world was headed generally arose out of advocacy for what he saw as moral action.
His first book (“The End of Economic Man,” 1939)was intended to strengthen the will of the free world to fight fascism. His later economic and social predictions were intended to encourage businesses and social groups to organize in ways that he felt would promote human dignity and vaccinate society against political and economic chaos.
“He is remarkable for his social imagination, not his futurism,” said Jack Beatty in a 1998 review of Mr. Drucker’s work “The World According to Peter Drucker.”
Mr. Drucker, who was born in Vienna and never completely shed his Austrian accent, worked in Germany as a reporter until Hitler rose to power and then in a London investment firm before emigrating to the United States in 1937. He became an American citizen in 1943.
Recalling the disasters that overran the Europe of his youth and watching the American response left him convinced that good managers were the true heroes of the century.
The world, especially the developed world, had recovered from repeated catastrophe because “ordinary people, people running the everyday concerns of business and institutions, took responsibility and kept on building for tomorrow while around them the world came crashing down,” he wrote in 1986 in “The Frontiers of Management.”
Mr. Drucker never hesitated to make suggestions he knew would be viewed as radical. He advocated legalization of drugs and stimulating innovation by permitting new ventures to charge the government for the cost of regulations and paperwork. He was not surprised that General Motors for years ignored nearly every recommendation in “The Concept of the Corporation,” the book he published in 1946 after an 18-month study of G.M. that its own executives had commissioned.
From his early 20’s to his death, Mr. Drucker held various teaching posts, including a 20-year stint at the Stern School of Management at New York University and, since 1971, a chair at the Claremont Graduate School of Management. He also consulted widely, devoting several days a month to such work into his 90’s. His clients included G.M., General Electric and Sears, Roebuck but also the Archdiocese of New York and several Protestant churches; government agencies in the United States, Canada and Japan; universities; and entrepreneurs.
For over 50 years, at least half of the consulting work was done free for nonprofits and small businesses. As his career progressed and it became clearer that competitive pressures were keeping businesses from embracing many practices he advocated, like guaranteed wages and lifetime employment for industrial workers, he became increasingly interested in “the social sector,” as he called the nonprofit groups.
Mr. Drucker counseled groups like the Girl Scouts to think like businesses even though their bottom line was “changed lives” rather than profits. He warned them that donors would increasingly judge them on results rather than intentions. In 1990, Frances Hesselbein, the former national director of the Girl Scouts, organized a group of admirers to honor him by setting up the Peter F. Drucker Foundation for Nonprofit Management in New York to expose nonprofits to Mr. Drucker’s thinking and to new concepts in management.
Mr. Drucker’s greatest impact came from his writing. His more than 30 books, which have sold tens of millions of copies in more than 30 languages, came on top of thousands of articles, including a monthly op-ed column in The Wall Street Journal from 1975 to 1995.
Among the sayings of Chairman Peter, as he was sometimes called, were these:
¶”Marketing is a fashionable term. The sales manager becomes a marketing vice president. But a gravedigger is still a gravedigger even when it is called a mortician – only the price of the burial goes up.”
¶”One either meets or one works.”
¶”The only things that evolve by themselves in an organization are disorder, friction and malperformance.”
¶”Stock option plans reward the executive for doing the wrong thing. Instead of asking, ‘Are we making the right decision?’ he asks, ‘How did we close today?’ It is encouragement to loot the corporation.”
Mr. Drucker’s thirst for new experiences never waned. He became so fascinated with Japanese art during his trips to Japan after World War II that he eventually helped write “Adventures of the Brush: Japanese Paintings” (1979), and lectured on Oriental art at Pomona College in Claremont from 1975 to 1985.
Peter Ferdinand Drucker was born Nov. 19, 1909, one of two sons of Caroline and Adolph Drucker, a prominent lawyer and high-ranking civil servant in the Austro-Hungarian government. He left Vienna in 1927 to work for an export firm in Hamburg, Germany, and to study law.
Mr. Drucker then moved to Frankfurt, where he earned a doctorate in international and public law in 1931 from the University of Frankfurt, became a reporter and then senior editor in charge of financial and foreign news at the newspaper General-Anzeiger, and, while substitute teaching at the university, met Doris Schmitz, a 19-year-old student. They became reacquainted after waving madly while passing each other going opposite directions on a London subway escalator in 1933 and were married in 1937.
Mr. Drucker had moved to England to work as a securities analyst and writer after watching the rise of the Nazis with increasing alarm. In England, he took an economics course from John Maynard Keynes in Cambridge, but was put off by how much the talk centered on commodities rather than people.
Mr. Drucker’s reputation as a political economist was firmly established with the publication in 1939 of “The End of Economic Man.” The New York Times said it brought a “remarkable vision and freshness” to the understanding of fascism. The book’s observations, along with those in articles he wrote for Harpers and The New Republic, caught the eye of policy makers in the federal government and at corporations as the country prepared for war, and landed him a job teaching at Sarah Lawrence College in Bronxville, N.Y.
Writing “The Future of Industrial Man,” published in 1942 after Mr. Drucker moved to Bennington College in Vermont, convinced him that he needed to understand big organizations from the inside. Rebuffed in his requests to work with several major companies, he was delighted when General Motors called in late 1943 proposing that he study its structure and policies. To avoid having him treated like a management spy, G.M. agreed to let him publish his findings.
Neither G.M. nor Mr. Drucker expected the public to be interested because no one had ever written such a management profile, but “The Concept of the Corporation” became an overnight sensation when it was published in 1946. ” ‘Concept of the Corporation’ is a book about business the way ‘Moby Dick’ is a book about whaling,” said Mr. Beatty, referring to the focus on social issues extending far beyond G.M.’s immediate operating challenges.
In it, Mr. Drucker argued that profitability was crucial to a business’s health but more importantly to full employment. Management could achieve sustainable profits only by treating employees like valuable resources. That, he argued, required decentralizing the power to make decisions, including giving hourly workers more control over factory life, and guaranteed wages.
In the 1950’s, Mr. Drucker began proclaiming that democratic governments had become too big to function effectively. This, he said, was a threat to the freedom of their citizens and to their economic well-being.
Unlike many conservative thinkers, Mr. Drucker wanted to keep government regulation over areas like food and drugs and finance. Indeed, he argued that the rise of global businesses required stronger governments and stronger social institutions, including more powerful unions, to keep them from forgetting social interests.
According to Claremont Graduate University, Mr. Drucker’s survivors include his wife, Doris, an inventor and physicist; his children, Audrey Drucker of Puyallup, Wash., Cecily Drucker of San Francisco, Joan Weinstein of Chicago, and Vincent Drucker of San Rafael, Calif.; and six grandchildren.
Early last year, in an interview with Forbes magazine, Mr. Drucker was asked if there was anything in his long career that he wished he had done but had not been able to do.
“Yes, quite a few things,” he said. “There are many books I could have written that are better than the ones I actually wrote. My best book would have been “Managing Ignorance,” and I’m very sorry I didn’t write it.”

What Artists Know About Leadership

HBS Working Knowledge:
The image of artist, cast as a metaphor for those who provide acts of leadership, immediately evokes two primary responses—affirmation and resistance. Those who think of themselves as artists in the conventional sense of the word—for example, painters, sculptors, musicians, writers, architects, photographers, and some athletes and gardeners—may pick up the metaphor with ready enthusiasm, recognizing that incorporating their artist-self into their practice of leadership opens into a horizon of powerful possibilities. But those who suffered through their last required art project in school, or who hold the stereotype of an artist as nonrational, asocial, marginal, or soft—may cast a more jaundiced eye upon this metaphor.
It is highly likely, however, that the jaundiced eye belongs to someone who in some aspect of his or her professional or personal life exemplifies the power and qualities of an artist: the ability to work on an edge, in an interdependent relationship with the medium, with a capacity for creative improvisation. (Entrepreneurs and some politicians, physicians, and educators, for example, are akin to artists, seeking to bring into being what has not yet taken form.)
Hmmm.

IBM Goes a Blogging

From AdAge:
IBM SEES BLOGGING AS MARKETING’S NEXT BIG THING
Company’s ‘Blogger in Chief’ Encourages Employees to Publish to Outside World
Far from viewing workday blogging as bad thing, IBM sees it as the next big thing for marketing.
Eyeing blogging’s potential as a way to influence potential employees and business partners, IBM began formally offering blogging tools to its workers six months ago. The tools came complete with a list of a dozen guidelines assembled, in true new-media fashion, by contribution to an internal “wiki” (an open-source encyclopedia) over a 10-day period.
IBM’s ‘blogger in chief’ “Other companies have fired people for blogging, but IBM is encouraging it,” said Christopher Barger, Big Blue’s unofficial “blogger in chief.”
The list offers simple, almost common-sense pointers, such as follow the IBM business code of conduct; respect copyright laws; and don’t reveal proprietary information. The company now has 15,000 registrants on its internal blog, with more than 2,200 of those employees maintaining external blogs. Wikis and RSS feeds are used internally for collaboration and automated information feeds.
Its embrace of digital marketing also extends to podcasting, with the company creating podcasts around cultural tech themes such as the home of the future, the car of the future and the store of the future.
Bonding technique “Marketers should look at blogs as a real-time cheat sheet on how to be relevant with customers,” said Intelliseek’s chief marketing officer, Pete Blackshaw. “The name of the game is to be as conversational as possible vs. being static. … It’s a bonding technique with your consumer.”
It’s also an established technique among tech companies such as Microsoft and Sun Microsystems that also have extensive employee blogging and emerging media programs. Microsoft blogger Robert Scoble (known also by his blog’s name, Scobleizer) and developer network Channel9 have gone a long way in helping reverse the company’s so-called evil empire reputation.
In some respects, employee blogging is reminiscent of traditional employee testimonial advertising — after all, if pilots and flight attendants can extol the virtues of Southwest Airlines in ads, why shouldn’t IBM’s own experts open blog discussions with consumers?
“What [Vice Chairman] Bob Lutz is doing with the General Motors blog [fastlane/gmblogs.com] is not much different than what Lee Iacocca did in the ’80s,” Mr. Blackshaw said. “It’s all about being genuine and relevant and conversational with consumers.”
The problem, however, can sometimes be the tenor of the conversation and whether employees running amok on the Internet fits with a well-crafted, traditional marketing strategy.
“If employees are given appropriate guidelines, it can certainly be right on strategy,” said Jonathan Paisner, brand director at CoreBrand. “The broadcast model of a centralized voice saying this is our one voice out to the world isn’t realistic anymore.”
Different for tech companies
Experts caution that tech companies should be viewed differently than other companies when it comes to new media in that they likely have uncommonly large number of purveyors, experts and leading-edge adopters who are more comfortable with these technologies. That comfort goes a long way in personalizing brands and creating one-to-one relationships with customers. While IBM says it does not want to use new media as traditional sales and marketing tools, it has succeeded in opening discussions in health care and video gaming with “outsiders,” which in turn could lead to new business relationships.
“This is a way to get our expertise out there, not by shoving it down people’s throats, but by just starting conversations,” Mr. Barger said. “It expands our reputation, perceptions and reach of IBM, at the same time expanding the number of people we can learn from.”

10 Rules for Neo-Dotcoms

A while back Tom Foremski wrote about the rise of the New Rules Enterprise:
“There is a new kind of dotcom company that will emerge during Internet 2.0—this current and very distinct emerging phase of the Internet. I’m not sure what to call the new dotcom but I know what it is. It is a company that plays by the emerging new rules of the economy. New-rules companies will decimate established companies in many/most sectors but at varying rates.”
Here are Foremski’s 10 rules for the New Rules Enterprise
The first rule of the New Rules enterprise is that it is new, brand spanking new.
The second rule is it is staffed by a small group of executives that know the most efficient business processes for what the venture will produce.
The third rule is to stick as much open source/industry platform software and hardware onto the business processes as you can, creating a highly automated highly-efficient business venture with virtually free IT.
The fourth rule is to use as much web services IT as possible.
The fifth rule is you do not use venture capital–you and four others throw your credit cards into a bowl and work free for six-months to create the nucleus of the venture. It’s an atomic ventures world. It’s the $40k startup. When IT, and other infrastructure costs are so cheap and available to everyone then knowledge capital becomes the competitive differentiator—who is on your team.
The sixth rule is don’t put anybody on the payroll unless you absolutely have to.
The seventh rule is the venture does not go public, it stays private. It will have private investors/owners and those investors would be paid in dividends. By staying private newrules enterprises are a blackbox corporation. Competitors cannot peek inside because it is private and thus cannot benchmark their business model against it.
The eighth rule of the newrules enterprise is that there will be a lot of intellectual property that is not patented but is kept secret.
The ninth rule is don’t put anybody on the payroll unless you absolutely have to.
The tenth rule, and the most important, is that the newrules enterprise uses blogging techniques and technologies to market research/help produce and sell products and services that near-perfectly match the needs of their customer communities.

Guy Kawasaki: “Don’t worry, be crappy”

Guy Kawasaki says he’s “living proof that if you do one thing right in your career, you can coast on your reputation for 20 years.”
Don’t believe it. This is a man of action, and shares his philosophy in this Always-On article:
“I think the world is essentially divided into two groups: the prototypers, the people who build stuff, and the typers, the people who think the key to entrepreneurship and innovation is Microsoft Office. If you think that the key to innovation and entrepreneurship is Microsoft Office, something is wrong with you. If you’re thinking, “I have to write a business plan with Word; I need to create a pitch with PowerPoint; I need to build a 30-page financial model with Excel,” you’re on the wrong track. The key to all of this is to prototype, not type.”
Also:
“I look at that computer now and say, ‘My God, there are elements of crap in it that really embarrass me.’ It was a revolutionary product, don’t get me wrong, but we charged $2,500 for a computer that had 128K of RAM, and we were proud of that. We thought this was an ocean of RAM. And there was no software, no hard disk—which was OK because if you don’t have software, there’s nothing to copy to the hard drive. No color, no fast printing, no fast networking. What crap. But it was revolutionary crap. Don’t worry, be crappy. Ship it then test it. Don’t wait for the perfect world where chips are cheap enough and fast enough: Ship it; get your product out there.”

Japanese Kids Display Primate Behavior

Nobuo Masataka, a professor at the Kyoto University Primate Research Institute and author of the monster best seller “Keitai wo Motta Saru (Monkeys With Mobile Phones),” argues that the proliferation of mobile phones has got young Japanese making monkeys of themselves, aping the behavior patterns of chimpanzees.
The primate specialist says the actions of the dearuki-zoku closely resemble behavior patterns in chimpanzees, which tend to travel in groups, walking around for a long time without going to any specific place, then eating and disposing of their wastes in the same place before bedding down on piles of grass whenever and wherever the inclination takes them.
Read all about it!

Herb Kelleher: The Complete Interview

Here’s the best executive interview I’ve read in a long time. It took place back in 2003, but it reminds us why Southwest Airlines has succeeded where so many others have failed.
A few excerpts:
“We’ve never tried to lecture other companies as to how they should behave, what kind of environment they should try to create, because there are a hundred roads to Rome and you can get to Rome by any one of those roads. But our focus has always been on the well-being and the joy that we want our people to experience.
“I just always have felt that people should be natural in their behavior, that they should be able to derive enjoyment from whatever they do. When they derive enjoyment they tend to work together better, they tend to be more productive. One time a ramp agent wrote me, he said, Herb, I’ve caught on to what you’re doing, you’re making work fun – and home is work. Now, I’ve never repeated that to anybody because I thought that wouldn’t make me very popular in certain quarters but he did get it. And you know I don’t think that in order for people to be effective they have to act like automatons.
“We don’t hire a great many people in management positions from other airlines, but we have hired some over the years where we felt that the expertise was required as we grew. And it’s interesting to see their response because they get into the Southwest environment and for awhile they are like a new dog in town, just kind of sniffing around, because they want to see if this is legitimate, whether it’s genuine, whether it’s heartfelt. And after about six months, I would say, you get either one of two reactions: they feel liberated for the first time in their business lives and they say, “Hey, this is for real. I can say what I want to. I can joke. I can be friendly with people.” Or in some cases they say, “This makes me feel very insecure, the fluidity of it is daunting to me. I need a more structured environment than Southwest Airlines has in order for me to be comfortable.”
“one of the things that I want to tell you with respect to a mission statement is that a lot of people hire outside people to prepare their mission statements. My suggestion is that if you need someone outside your company to prepare a mission statement for you, then you really don’t know what your mission is and you probably don’t have one.
“the thing about it is that a group got together and said, We want to define spirit. And I said, I don’t think you want to do that. Because Wordsworth said, “It’s murder to dissect.” And I think it’s murder to dissect to take a concept like that and make it too narrow and make it confining and a strait jacket instead of as expansive as anybody wants it to be. So we’re not going to define it. As long as it’s a positive attitude, that’s the Southwest Airlines spirit. Don’t chain it. Don’t put it in jail.
“we’ve said we’re in the customer service business and we happen to operate an airline. But then any business is about providing great customer service to the people you serve. We just happen to be in one branch of the customer service business. And if you have a great customer service organization it doesn’t matter whether you’re flying people or selling steel or cleaning houses or whatever it might be.
“when we built this building I said give me an interior office because fundamentally bureaucrats scrap over space, which in and of itself I think should be somewhat meaningless, physical space. It’s the space between your ears that should be the important thing. So I did say, I want an office without a window, away from a corner.
Read the complete interview here.
We should all be so lucky to work with a leader like this!

The Leaked Ray Ozzie Memo

To: Executive Staff and direct reports
From: Ray Ozzie
Date: October 28, 2005
Subject: The Internet Services Disruption
It is an exciting time, as we’re at the beginning of the biggest product cycle in the company’s history. In a week we ship new versions of Visual Studio, SQL Server and BizTalk Server. Later this month we ship Xbox 360. Next year we have a double barreled release of our two largest products with Windows Vista and Office “12”. It’s a great time for customers, our partners, and for those at Microsoft who have put so much of themselves into these products.
But we bring these innovations to market at a time of great turbulence and potential change in the industry. This isn’t the first time of such great change: we’ve needed to reflect upon our core strategy and direction just about every five years. Such changes are inevitable because of the progressive and dramatic evolution of computing and communications technology, because of resultant changes in how our customers use and apply that technology, and because of the continuous emergence of competitors with new approaches and perspectives.
In 1990, there was actually a question about whether the graphical user interface had merit. Apple amongst others valiantly tried to convince the market of the GUI’s broad benefits, but the non-GUI Lotus 1-2-3 and WordPerfect had significant momentum. But Microsoft recognized the GUI’s transformative potential, and committed the organization to pursuit of the dream – through investment in applications, platform and tools – based on a belief that the GUI would dramatically expand and democratize computing.
When we reflected upon our dreams just five years later in 1995, the impetus for our new center of gravity came from the then-nascent web. With a clear view upon the challenges and opportunities it presented, the entire company pivoted to focus on the internet to pursue that ‘fully connected’ dream with support for internet standards throughout our product line: a web browser, server and development tools, and a service in MSN that was transformed into a web portal. Many things we developed in that era continue to fuel the growth of today’s internet: the technologies of AJAX – DHTML and XMLHTTP – were created in 1998 and used in products such as OWA.
In 2000, in the waning days of the dot com bubble, we yet again reflected on our strategy and refined our direction. After taking a more deliberative look at the internet and its implications for software, we came to the conclusion that the internet would go beyond browsing and should support programmability on a global scale. We observed that certain aspects of our most fundamental platform – the tools and services that developers use when building their software – would not likely satisfy the emerging security and interoperability requirements of the internet. So we embarked upon .NET, a transformative new generation of the platform and tools built around managed code, the XML format and web services programming model. At the time, it was a risky bet to build natively around XML, but this bet paid off handsomely and .NET has become the most popular development environment in the world.
It is now 2005, and the environment has changed yet again – this time around services. Computing and communications technologies have dramatically and progressively improved to enable the viability of a services-based model. The ubiquity of broadband and wireless networking has changed the nature of how people interact, and they’re increasingly drawn toward the simplicity of services and service-enabled software that ‘just works’. Businesses are increasingly considering what services-based economics of scale might do to help them reduce infrastructure costs or deploy solutions as-needed and on subscription basis.
Most challenging and promising to our business, though, is that a new business model has emerged in the form of advertising-supported services and software. This model has the potential to fundamentally impact how we and other developers build, deliver, and monetize innovations. No one yet knows what kind of software and in which markets this model will be embraced, and there is tremendous revenue potential in those where it ultimately is.
Just as in the past, we must reflect upon what’s going on around us, and reflect upon our strengths, weaknesses and industry leadership responsibilities, and respond. As much as ever, it’s clear that if we fail to do so, our business as we know it is at risk. We must respond quickly and decisively.
The Landscape
Since 1995, inexpensive computing and communications technologies have advanced at a rapid rate that even exceeded our expectations. It’s so very difficult now for us to imagine a world without the PC, the web and the cell phone. In the US, there are more than 100MM broadband users, 190MM mobile phone subscribers, and WiFi networks blanket the urban landscape. This pattern is mirrored in much of the developed world. Computing has become linked to the communications network; when a PC is purchased, it’s assumed that the PC will have high-speed internet connectivity. At work, at home, in a hotel, at school or in a coffee shop, the networked laptop has become our ‘virtual office’ where we file our information and interact with others. The broad accessibility and rapid pace of innovation in hardware, networks, software and services has catalyzed a virtuous cycle whose pace isn’t slowing. There has never been a more exciting time to be a developer or a user of technology.
Our products have embraced the internet in many amazing ways. We’ve transformed the desktop into a rich platform for interactive internet browsing, media and communications-centric applications. We’ve transformed Windows into best-of-breed infrastructure for internet applications and services. We’ve created, in .NET, the most popular development platform in the world. We’ve got amazing products in Office and our other IW offerings, having fully embraced standards such as XML, HTML, RSS and SIP. Our MSN team has demonstrated great innovation and has held its own in a highly competitive and rapidly changing environment – particularly with Spaces and in growing a base of 180M active Messenger users worldwide. The Xbox team has also built a huge user community and has demonstrated that internet-based “Live” interaction is a high-value, strong differentiator.
But for all our great progress, our efforts have not always led to the degree that perhaps they could have. We should’ve been leaders with all our web properties in harnessing the potential of AJAX, following our pioneering work in OWA. We knew search would be important, but through Google’s focus they’ve gained a tremendously strong position. RSS is the internet’s answer to the notification scenarios we’ve discussed and worked on for some time, and is filling a role as ‘the UNIX pipe of the internet’ as people use it to connect data and systems in unanticipated ways. For all its tremendous innovation and its embracing of HTML and XML, Office is not yet the source of key web data formats – surely not to the level of PDF. While we’ve led with great capabilities in Messenger & Communicator, it was Skype, not us, who made VoIP broadly popular and created a new category. We have long understood the importance of mobile messaging scenarios and have made significant investment in device software, yet only now are we surpassing the Blackberry.
And while we continue to make good progress on these many fronts, a set of very strong and determined competitors is laser-focused on internet services and service-enabled software. Google is obviously the most visible here, although given the hype level it is difficult to ascertain which of their myriad initiatives are simply adjuncts intended to drive scale for their advertising business, or which might ultimately grow to substantively challenge our offerings. Although Yahoo also has significant communications assets that combine software and services, they are more of a media company and – with the notable exception of their advertising platform – they seem to be utilizing their platform capabilities largely as an internal asset. The same is true of Apple, which has done an enviable job integrating hardware, software and services into a seamless experience with dotMac, iPod and iTunes, but seems less focused on enabling developers to build substantial products and businesses.
Even beyond our large competitors, tremendous software-and-services activity is occurring within startups and at the grassroots level. Only a few years ago I’d have pointed to the Weblog and the Wiki as significant emerging trends; by now they’re mainstream and have moved into the enterprise. Flickr and others have done innovative work around community sharing and tagging based on simple data formats and metadata. GoToMyPC and GoToMeeting are very popular low-end solutions to remote PC access and online meetings. A number of startups have built interesting solutions for cross-device file and remote media access. VoIP seems on the verge of exploding – not just in Skype, but also as indicated by things such as the Asterisk soft-PBX. Innovations abound from small developers – from RAD frameworks to lightweight project management services and solutions.
Many startups treat the ‘raw’ internet as their platform. At the grassroots level, such projects actively use standards such as vCards and iCal for sharing contacts and calendars. Most all use RSS in one way or another for data sharing. Remixing and mashing of multiple web applications using XML, REST and WS is common; interesting mash-ups range from combining maps with apartment listings, to others that place RSS feeds on top of systems and data not originally intended for remixing. Developers needing tools and libraries to do their work just search the internet, download, develop & integrate, deploy, refine. Speed, simplicity and loose coupling are paramount.
And the work of these startups could be improved with a ‘services platform’. Ironically, the same things that enable and catalyze rapid innovation can also be constraints to their success. Many hard problems are often ignored – the most significant of which is achieving scale. Some scale issues are technological and result from the fact that they are generally built on application server platforms rather than high-scale service platforms. But new services also need to build user communities from scratch – generally by word of mouth. Many fund their sites using syndicated ads, but have a difficult time transforming their services into higher levels of commerce. Some seek to incorporate client software into their user experience, but then need to reinvent software deployment, update, communications and synchronization mechanisms. User identity and cross-service interoperability mechanisms are still needlessly fragmented. Intuitively there seems to be a platform opportunity in providing such capabilities to developers in a form that retains the speed, simplicity and loose coupling that is so very important for rapid innovation.
Key Tenets
Today there are three key tenets that are driving fundamental shifts in the landscape – all of which are related in some way to services. It’s key to embrace these tenets within the context of our products and services.
1. The power of the advertising-supported economic model.
Online advertising has emerged as a significant new means by which to directly and indirectly fund the creation and delivery of software and services. In some cases, it may be possible for one to obtain more revenue through the advertising model than through a traditional licensing model. Only in its earliest stages, no one yet knows the limits of what categories of hardware, software and services, in what markets, will ultimately be funded through this model. And no one yet knows how much of the world’s online advertising revenues should or will flow to large software and service providers, medium sized or tail providers, or even users themselves.
2. The effectiveness of a new delivery and adoption model.
A grassroots technology adoption pattern has emerged on the internet largely in parallel to the classic methods of selling software to the enterprise. Products are now discovered through a combination of blogs, search keyword-based advertising, online product marketing and word-of-mouth. It’s now expected that anything discovered can be sampled and experienced through self-service exploration and download. This is true not just for consumer products: even enterprise products now more often than not enter an organization through the internet-based research and trial of a business unit that understands a product’s value.
Limited trial use, ad-monetized or free reduced-function use, subscription-based use, on-line activation, digital license management, automatic update, and other such concepts are now entering the vocabulary of any developer building products that wish to successfully utilize the web as a channel. Products must now embrace a “discover, learn, try, buy, recommend” cycle – sometimes with one of those phases being free, another ad-supported, and yet another being subscription-based. Grassroots adoption requires an end-to-end perspective related to product design. Products must be easily understood by the user upon trial, and useful out-of-the-box with little or no configuration or administrative intervention.
But enabling grassroots adoption is not just a product design issue. Today’s web is fundamentally a self-service environment, and it is critical to design websites and product ‘landing pages’ with sophisticated closed-loop measurement and feedback systems. Even startups use such techniques in conjunction with pay-per-click advertisements. This ensures that the most effective website designs will be selected to attract discovery of products and services, help in research and learning, facilitate download, trial and purchase, and to enable individuals’ self-help and making recommendations to others. Such systems can recognize and take advantage of opportunities to up-sell and cross-sell products to individuals, workgroups and businesses, and also act as a lead generation front-end for our sales force and for our partners.
3. The demand for compelling, integrated user experiences that “just work”.
The PC has morphed into new form factors and new roles, and we increasingly have more than one in our lives – at work, at home, laptops, tablets, even in the living room. Cell phones have become ubiquitous. There are a myriad of handheld devices. Set-top boxes, PVRs and game consoles are changing what and how we watch television. Photos, music and voice communications are all rapidly going digital and being driven by software. Automobiles are on a path to become smart and connected. The emergence of the digital lifestyle that utilizes all these technologies is changing how we learn, play games, watch TV, communicate with friends and family, listen to music and share memories.
But the power of technology also brings with it a cost. For all the success of individual technologies, the array of technology in a person’s life can be daunting. Increasingly, individuals choose products and services that are highly-personalized, focused on the end-to-end experience delivered by that technology. Products must deliver a seamless experience, one in which all the technology in your life ‘just works’ and can work together, on your behalf, under your control. This means designs centered on an intentional fusion of internet-based services with software, and sometimes even hardware, to deliver meaningful experiences and solutions with a level of seamless design and use that couldn’t be achieved without such a holistic approach.
The Opportunities
These three tenets are causing a shift in the software landscape that started with consumers and is progressively working its way toward the enterprise – changing how software is monetized, how software is delivered, and what kind of software is ultimately embraced. With our presence in so many markets serving so many audiences, and with such a broad variety of products and solutions, we are well positioned to deliver seamless experiences to customers, enabled by services and service-enhanced software, including:
SEAMLESS OS – The operating system as it would be designed for today’s multi-PC, multi-device, work anywhere, web-based world. Enabling you to login using any of your service-based or enterprise identities. Deploying software automatically and as appropriate to all your devices, and roaming application data and settings. Permitting seamless access to storage across all your PCs, devices, servers and the web.
SEAMLESS COMMUNICATIONS – Communications and notifications – from voice to typing to shared screen; from PC to service-based agent to phone. Maintaining continuous co-presence with intimate friends and family; improving the coordination amongst individuals who need to work together by reducing latency and adding clarity through shared context.
SEAMLESS PRODUCTIVITY – Enabling you to create, find and organize documents and data among all the desktops, devices, servers and services to which you have access, and with all the others with whom you need to work, through ‘shared space’ products that are internet service-based, enterprise server-based and directly peer-to-peer. Working within and across homes, small businesses, virtual workgroups and enterprises.
SEAMLESS ENTERTAINMENT – Enabling you to create, store, organize, present, consume and interact with media of all kinds; accessing, caching and viewing it anywhere you like regardless of where the media resides. Gaming experiences that bring two or two million people together across PCs, devices and the web.
SEAMLESS MARKETPLACE – Enabling you to research, find, buy and sell whatever you want through a seamlessly integrated purchase, billing & payment & points, advertising & lead generation & sales management system designed to satisfy the needs of both buyers and sellers.
SEAMLESS SOLUTIONS – Enabling workgroups and businesses to rapidly create and customize any of a broad class of template-driven, semi-structured data-based applications and solutions that “just work” and provide instant value – whether using them from the web, from enterprise servers, or from mobile client PCs.
SEAMLESS IT – Enabling enterprises to seamlessly and cost-effectively manage many of the things they’ve classically done within their data centers – e.g. PCs, messaging, content and applications. The management experience might be wholly within the cloud, or with the cloud seamlessly integrating enterprise server assist.
Moving Forward
In order to adapt to the requirements underlying these key tenets, groups must reflect upon their existing plans, and assess their designs in the context of the end-to-end experiences they need deliver in order to understand how services might make a substantive impact. Groups should consider how new delivery and adoption models might impact plans, and whether embracing new advertising-supported revenue models might be market-relevant.
In assessing where we are and where we need to be, some new efforts will surely require incubation. But in many areas we have 80% of the product and technical infrastructure already built – we just need to close the 20% gap. Following are but a few thoughts for each division intended to catalyze a “services-enhanced software” mindset.
Platform Products & Services Division
a. BASE vs. ADDITIVE EXPERIENCES – In MSN, and in Windows Update and software deployed by it, we have quite a bit of experience with methods and practices for getting innovations to market on a rapid cycle. In the form of a newly combined division, we should consider many options as to how we might bring user experience innovations and enhancements to users worldwide. Specifically, we should consider the achievability, desirability, and methods of increasing the tempo for both ‘base’ OS experiences as well as ‘additive’ experiences that might be delivered on a more rapid tempo. In doing so, we would better serve a broad range of highly-influential early adopters.
b. SERVICES PLATFORM – Through years of experience, the MSN team understands the methods and practices of building ‘internet scale’ services. The Platform team understands developers and has deep experience in communications and storage architectures. These teams must work together, benefiting from each others’ strengths, to develop a next generation internet services platform – a platform for both internal and external innovation. A platform with capabilities and an operations infrastructure that takes those services to a scale never yet seen on the internet – to our benefit, and to the benefit of our partners and customers.
c. SERVICE/SERVER SYNERGY – A tension has emerged between our products designed for the enterprise and those for the internet. Exchange/Hotmail, AD/Passport, and Messenger/Communicator are but three examples. All our enterprise clients and servers must interoperate with and complement our internet services. Our functional aspirations are generally “server/service symmetry”, but architectural considerations dictate that different implementations may be required to economically reach internet scale. We must quickly find the best path to achieve seamless user, developer, and administration experiences involving servers and services.
d. LIGHTWEIGHT DEVELOPMENT – The rapid growth of application assembly using things such as REST, JavaScript and PHP suggests that many developers gravitate toward very rapid, lightweight ways to create and compose solutions. We have always appreciated the need for lightweight development by power users in the form of products such as Access and SharePoint. We should revisit whether we’re adequately serving the lightweight model of development and solution composition for all classes of development.
e. RESPONSIBLE COMPETITION – We will compete energetically but also responsibly and with recognition of our high legal responsibilities. We will design and license Windows and our internet-based services as separate products, so customers can choose Windows with or without Microsoft’s services. We’ll design and license Windows and our services on terms that provide third parties with the same ability to benefit from the Windows platform that Microsoft’s services enjoy. Our services innovations will include tight integration with the Windows client via documented interfaces, so that competing services can plug into Windows in the same manner as Microsoft’s services. We will compete hard and responsibly in services on the basis of software innovation and price – and on that basis we will offer consumers and businesses the best value in the market.
Business Division
a. CONNECTED OFFICE – How would we extend or re-conceptualize Office modules to fit in this seamless model of connectedness to others, and to other applications? Should PowerPoint directly ‘broadcast to the web’, or let the audience take notes and respond? How should we increase the role of Office Online as the portal for productivity? What should we do to bring Office’s classic COM-based publish-and-subscribe capabilities to a world where RSS and XML have become the de facto publish-and-subscribe mechanisms?
b. TELECOM TRANSFORMATION – How should our investments in RTC evolve to serve not just the enterprise, but also fully embrace the concept of grassroots adoption? How can RTC begin as an individual phenomenon, growing into a small business offering with a level of function that they’d never imagine possible, growing into the enterprise? How should we utilize service-based federation and hosting to ensure a ‘just works’ experience for all users, whether or not an administrator was ever involved?
c. RAPID SOLUTIONS – How can we utilize our extant products and our knowledge of the broad historical adoption of forms-based applications to jump-start an effort that could dramatically surpass offerings from Quickbase to Salesforce.com? How could we build it to scale to hundreds of millions of users at an unimaginably low cost that would change the game? How could we re-shape our client-side software offerings such as Access and Groove, and our server offerings such as SharePoint, to grow and thrive in the presence of such a service? Could these rapid solutions encourage a new ISV ecosystem and business model?
Entertainment & Devices Division
a. CONNECTED ENTERTAINMENT – How can XBox Live benefit from interconnection with other services assets, such as PC-based and mobile-based IM and VoIP? How might both the PC and XBox mutually benefit from a common marketplace? Might PC users act as spectators/participants in XBox games, and vice-versa?
b. GRASSROOTS MOBILE SERVICES – How might the Windows Mobile device experience be transformed by for consumers by connection to a services infrastructure – in particular one enabled by RTC-based unified communications? How might unmediated connection to a rich services infrastructure transform mobile phones into a mass market messaging, media and commerce phenomenon?
c. DEVICE/SERVICE FUSION – What new devices might emerge if we envision hardware/software/service fusion? What new kinds of devices might be enabled by the presence of a service?
What’s Different?
One perspective on this memo might be to say “This is in many ways is pretty close to what we’re already working on. What’s the big deal?” Or “We tried something similar years ago; why will we succeed this time?” These are understandable reactions. Many visions of the future going all the way back to “Information at Your Fingertips” contain elements of what has been laid out here.
That said, I have a number of reasons for optimism that we can deliver well on this vision. First, I know that Bill, Steve and the senior leadership team understand that Microsoft’s execution effectiveness will be improved by eliminating obstacles to developing and shipping products. The recent reorganization into three divisions is a significant step, and the division presidents are committed to changes to improve our agility.
Second, we are just now completing a wave of innovation that has never been seen in this company. 2006 is going to be an amazing year for shipping products, and many across the company will be ready to take on a new mission.
Third, regardless of past aspirations, this is the right time to be focusing on services for two specific reasons: the increasing ubiquity of broadband has made it viable, and the proven economics of the advertising model has made it profitable. It can be argued, for example, whether or not Hailstorm was the ‘right’ undertaking. But regardless, the effort would certainly have benefited from having a known-viable services business model for which to design.
Finally, I believe at this juncture it’s generally very clear to each of us why we need to transform – the competitors, the challenges, and the opportunities. As an outsider, I was repeatedly impressed and awed over the years by how this company’s talent has swarmed to effectively respond to huge business challenges and transitions.
That said, even when we’ve been solidly in pursuit of a common vision, our end-to-end execution of key scenarios has often been uneven – in large part because of the complexity of doing such substantial undertakings. In any large project, the sheer number of moving parts sometimes naturally causes compartmentalization of decisions and execution. Some groups might lose sight of how their piece fits in, or worse, might develop features without a clear understanding of how they’ll be used. In some cases by the time the vision is delivered, the pieces might not quite fit into the originally-envisioned coherent whole. We cannot allow the seams in our organization, or our methods of making decisions, show through in our products, or result in the failure to deliver on key end-to-end experiences.
Complexity kills. It sucks the life out of developers, it makes products difficult to plan, build and test, it introduces security challenges, and it causes end-user and administrator frustration. Moving forward, within all parts of the organization, each of us should ask “What’s different?”, and explore and embrace techniques to reduce complexity.
Some problems are inherently complex; there is surely no silver bullet to reducing complexity in extant systems. But when tackling new problems, I’ve found it useful to dip into a toolbox of simplification approaches and methods. One such tool is the use of extensive end-to-end scenario-based design and implementation. Another is that of utilizing loosely-coupled design of systems by introducing constraints at key junctures – using standards as a tool to force quick agreement on interfaces. Many such tools are not rocket science: for example, by forcing a change in practices to increase the frequency of release cycles, scope and complexity of any given release by necessity is greatly reduced. Another simple tool I’ve used involves attracting developers to use common physical workspaces to naturally catalyze ad hoc face-time between those who need to coordinate, rather than relying solely upon meetings and streams of email and document reviews for such interaction. Embracing change at a local level through such tools can make a real difference – one project at a time.
Next Steps
We’re off to a great start with many initiatives already under way – from efforts occurring now within MSN, to the IW services being launched imminently. We’re in a tremendous position to succeed, but doing so will require your belief, creativity, support, leadership, follower-ship and action.
This memo was intended to get all of us roughly on the same page, and to get you thinking. The next steps are:
1) I am working with the division presidents to assign, by December 15th, “scenario owners” – a role intended to improve our execution of key services-based initiatives through leadership. These leaders will provide an outside-in perspective in mapping out and communicating specific market objectives, while at the same time working with developers and others at the detail level to ensure expedient decision making and continuity. These individuals will be responsible for driving critical decisions such as feature re-prioritization and cuts while appreciating the business tradeoffs and impact of such decisions. They’ll listen. They’ll rapidly effect changes in plans to ensure execution and improve agility, even for scenarios that span divisions. Initial scenarios to be assigned ownership will include the seven seamless experiences described earlier.
2) Beginning in January these individuals will work with me and with product groups to concretely map out scenarios and pragmatically assess changes needed in product and go-to-market plans related to services and service-based scenarios. For some groups this will impact short-term plans; for many others on path to shipping soon, it will factor significantly into planning for future releases.
3) All Business Groups have been asked to develop their plans to embrace this mission and create new service offerings that deliver value to customers and utilize the platform capabilities that we have today and are building for the future. We expect both technical and non-technical communities to be increasingly engaged on the topic of services and service-enhanced software. As we begin planning the next waves of innovation – such as those beyond Vista and Office “12” – we will mobilize execution around those plans.
4) I have created an internal blog that will be used to notify you of further plans as they emerge. There, I’ll point you to libraries of documents that you will find interesting to read, and I’ll be experimenting with ways that you can directly engage in the conversation.
http://blogs/live
These steps are important and necessary, but not sufficient, for us to deliver on our aspirations. The most important step is for each of us to internalize the transformative and disruptive potential of services. We must then focus on the need for agility in execution, and take actions as appropriate where each of us can.
The opportunities to deliver greater value to our customers, to our developer and partner communities, and to our shareholders are significant. I very much look forward to embarking on this journey with all of you.
— Ray

The Leaked Bill Gates Memo

From: Bill Gates
Sent: Sunday, October 30, 2005 9:56 PM
To: Executive Staff and Direct Reports; Distinguished Engineers
Subject: Internet Software Services
Microsoft has always had to anticipate changes in the software business and seize the opportunity to lead.
Ten years ago this December, I wrote a memo entitled The Internet Tidal Wave which described how the Internet was going to forever change the landscape of computing. Our products could either prepare for the magnitude of what was to come or risk being swept away. We dedicated ourselves to innovating rapidly and lead the way much to the surprise of many industry pundits who questioned our ability to reinvent our approach of delivering software breakthroughs.
Five years ago we focused our strategy on .NET making a huge bet on XML and Web services. We were a leader in driving these standards and building them into our products and again this has been key to our success. Today, over 92% of the Fortune 100 are utilizing .Net and our current wave of products have XML and Web services at their core and are gaining share because of the bold bet we made back in the year 2000.
Today, the opportunity is to utilize the Internet to make software far more powerful by incorporating a services model which will simplify the work that IT departments and developers have to do while providing new capabilities.
In many ways this is not completely new. All the way back in 1998 we had a company meeting where we outlined a vision in which software would become more of a service over time. We’ve been making investments since then — for example, the Watson service we have built into Windows and Office allows us and our partners to understand where our users are running into problems and lets us improve their experience. Our On-line help work gives us constant feedback about what topics are helping our users and which we need to change. Products from MSN like Messenger and Hotmail are updated with new features many times throughout the year, allowing them to deliver innovations rapidly. Our Mappoint service was a pioneer in letting corporations connect up to a web based API on a subscription basis.
However, to lead we need to do far more. The broad and rich foundation of the Internet will unleash a “services wave” of applications and experiences available instantly over the Internet to millions of users. Advertising has emerged as a powerful new means by which to directly and indirectly fund the creation and delivery of software and services along with subscriptions and license fees. Services designed to scale to tens or hundreds of millions will dramatically change the nature and cost of solutions deliverable to enterprises or small businesses.
We will build our strategies around Internet services and we will provide a broad set of service APIs and use them in all of our key applications.
This coming “services wave” will be very disruptive. We have competitors who will seize on these approaches and challenge us – still, the opportunity for us to lead is very clear. More than any other company, we have the vision, assets, experience, and aspirations to deliver experiences and solutions across the entire range of digital workstyle & digital lifestyle scenarios, and to do so at scale, reaching users, developers and businesses across all markets.
But in order to execute on this opportunity, as we’ve done before we must act quickly and decisively. This next generation of the Internet is being shaped by its “grassroots” adoption and popularization model, and the cost-effective “seamless experiences” delivered through the intentional fusion of services, software and sometimes hardware. We must reflect upon what and for whom we are building, how best to deliver new functionality given the Internet services model, what kind of a platform in this new context might enable partners to build great profitable businesses, and how our applications might be reshaped to create service-enabled experiences uniquely compelling to both users and businesses alike.
Steve and I recently expanded Ray Ozzie’s role as CTO to include leading our services strategy across all three divisions. We did this because we believe our services challenges and opportunities will impact most everything we do. Ray has long demonstrated his passion for software, and through his work at Groove he also came to realize the transformative potential for combining software and services. I’ve attached a memo from Ray which I feel sure we will look back on as being as critical as The Internet Tidal Wave memo was when it came out. Ray outlines the great things we and our partners can do using the Internet Services approach.
The next sea change is upon us. We must recognize this change as an opportunity to take our offerings to the next level, compete in a manner commensurate with our industry responsibilities, and utilize our assets and our broad reach to reshape our business for the benefit of the users of our products, our customers, our partners and ourselves.
Bill

Trying to Understand the Riots in France

Two articles from BusinessWeek on the trouble in France:
– “Sarkozy Googles as Paris Riots” and
– “The Economics Fueling the French Riots
The articles are written from a “US viewpoint.” A comment left behind the second article is worth noting:
I did not expect BusinessWeek to come out with such a biased article, very pro-American. Very hypocritical as well. France’s social politics is set up to not “leave people behind” and give them an opportunity instead of straight poverty. The only thing that America does offer unemployed youngsters a job in the Army to support their own politics/shake-up/disrespect of Muslim countries; that attitude fuels Muslims worldwide with anger towards all Western societies, including France. The problem isn’t just unemployment but it’s more about France’s ancient “social class differences” and the non-white immigrant population doesn’t like to be called “scum” (a French minister’s outraged response to the first riots). This was written by a white guy from the Netherlands.
Another view from Parapundit: French Muslim Rioting Hits Yet Another High
I’m not sure what to think about all this craziness. The “white guy” in the Netherlands pretends he lives in a color-blind society. The BusinessWeek folk think it’s about unemployment rates. And the french politician is just covering his behind. I should ask Doug Smith.
UPDATE: Economist article

If the CEO can’t blog, should they still be CEO?

“The PR department must take its hands off the blog in order for it to work properly – no fake blog entries written for the CEO, and no vetting posts before they go live. (If your CEO cannot be trusted, even after being trained in how to blog legally and sensibly, not to drop clangers in the posts he writes, then he should not be blogging.)” – posting at CEO Bloggers Club
Also: “In order to blog well, they also have to be the right CEOs – straight-shooters, engaging and with interesting things to say. Sun Microsystems’ Jonathan Schwartz is a great one, as are Thomas Nelson Publishers’ Michael Hyatt and Five Across CEO Glenn Reid.”
Schwartz isn’t the CEO at Sun, but he does have his own views – published recently in HBR: “If You Want to Lead, Blog.” Says Schwartz:
Many senior executives at Sun, including me, have blogs which can be read by anyone, anywhere in the world. We discuss everything from business strategy to product development to company values. We host open letters from the outside, and we openly respond to them. We talk about our successes. And our mistakes (if you don’t believe me, go to http://blogs.sun.com/roller/page/jonathan?entry=dear_john).
That may seem risky. But I’d argue that it’s riskier not to have a blog. Remember not long ago when CEOs would ask their assistants to print outtheir email for them to read, and then they’d dictate responses to be typewritten and sent via snail mail? Where are those leaders now? (Thelast of my contacts of that breed just retired.) Ten years from now, most of us will communicate directly with our customers, employees and the wider community through blogs. For executives, having a blog is not going to be a matter of choice, any more than using email is today. If you’re not part of the conversation others will speak on your behalf, and I’m not talking about your employees.

So the question is this: if your CEO can’t blog, should she still be CEO? What I’m asking is if your CEO cannot communicate in real time, but needs a PR machine to do her messaging, is she really CEO material?
Now there are CEOs who could blog, but don’t. I’m sure Bill Gates would love to blog, but I suspect his lawyers won’t let him.
Blogging is becoming, in some ways, a test for company transparency. Speaking of which, why aren’t the big boys at Google blogging yet? Bill Gates- you can beat them to this one!

Talent War: China’s Woes

JSB and JH3 are right:
“Where value originates and who captures it will increasingly depend on the evolution of talent markets and the relative capability of firms (and nations) to rapidly develop and amplify the value of this talent. Product markets and financial markets will of course still matter, but the center of gravity for value creation and capture will inexorably migrate to global talent markets…” see The Only Sustainable Edge
The global talent war continues. Now, a McKinsey Quarterly article “China’s looming talent shortage” backs up Seely Brown and Hagel, making the following points:
– If China’s economy is to go on growing and its base is to evolve from manufacturing to services, it will require a huge number of qualified university graduates.
– While university graduates are plentiful there, new research shows that only a small proportion of them have the skills required for jobs further up the value chain—and competition for these graduates is becoming fierce.
– China must undertake a long-term effort to raise the quality of its graduates by changing the way it finances its universities, revamping curriculums to meet the needs of industry, and improving the quality of English-language instruction.
– China could emerge as a base for IT and business process offshoring, but unless the country addresses its looming labor shortage now the global ambitions of Chinese companies will probably be stymied.
It’s all about quality! The paradox:
China’s pool of potential talent is enormous. In 2003 China had roughly 8.5 million young professional graduates with up to seven years’ work experience and an additional 97 million people that would qualify for support-staff positions. Despite this apparently vast supply, multinational companies are finding that few graduates have the necessary skills for service occupations. According to interviews with 83 human-resources professionals involved with hiring local graduates in low-wage countries, fewer than 10 percent of Chinese job candidates, on average, would be suitable for work in a foreign company in the nine occupations we studied: engineers, finance workers, accountants, quantitative analysts, generalists, life science researchers, doctors, nurses, and support staff.
Read the article here. (registration required)

NYT Refuses Sun Ad Bashing Dell

I must say I loved this ad from Sun. It’s actually fairly brilliant because it:
1) states Sun’s case in a humorous way,
2) highlights the different strategies the two companies are allegedly pursuing (innovation=Sun, low-cost=Dell),
3) beats Dell at its own game- price,
4) has an environmental angle,
5) tells us about the best server in the world!
6) trumpets open source messaging via Solaris…
I could go on and on.
Lucky for Sun that the NYT refused to print the ad, giving it even more buzz… All the news that’s fit to print, eh? They can print Judy Miller, but not an ad?
Well, the ad is on Jonathan Schwartz’s blog– which gives it that much more authenticity!
One more thing- will design and innovation rule the future of global competition? Sun thinks so.
I do too.

Video-on-Demand: Here it is, says Forrester

Interesting analysis from Forrester:
“The iPod video player doesn’t matter. Downloading episodes of Lost and Desperate Housewives to computers barely matters. What does matter is the crack in the traditional television business model opened by the Apple/ABC deal to allow consumers on-demand access to current hit TV shows. Unwittingly, Apple is building the proof of concept for the video-on-demand (VOD) business model. Demands by cable operators to put the same deal on the VOD tier, rebellion by network affiliates, and greater availability of niche content will fracture the old business model.”
The story here.

Less Fat, So You Can Eat More


Proteus Industries used a special animal protein to create a coating for fried foods that prevents excess oil from penetrating beyond the breading or batter during cooking. The cooked food stays crispy on the outside, but it’s not greasy on the inside. That translates into real fat busting: the overall content in fish sticks, for instance, goes from 14 g to as little as 4 g — a 70 percent drop.
Proteus’ process is making its debut in fish sticks from the company’s collaborator, Good Harbor Fillet.
Why can’t we just eat less fried stuff?

The Rise and Fall of Brand America

When we express a preference for French holidays, German cars or Italian opera, when we instinctively trust the policies of the Swedish government, comment on the ambition of the Japanese, the bluntness of the Americans or the courtesy of the British, when we avoid investing in Russia, favor Turkey’s entry into Europe or admire the heritage of China and India, we are responding to brand images in exactly the same way as when we’re shopping for clothing or food. But these are far bigger brands than Nike or Nestlé. They are the brands of nations.
Nation brand is an important concept in today’s world. Globalization means that countries compete with each other for the attention, respect and trust of investors, tourists, consumers, donors, immigrants, the media, and the governments of other nations: so a powerful and positive nation brand provides a crucial competitive advantage. It is essential for countries to understand how they are seen by publics around the world; how their achievements and failures, their assets and their liabilities, their people and their products are reflected in their brand image.
Simon Anholt has developed the Anholt-GMI Nation Brands Index – the first analytical ranking of the world’s nation brands. This report: Nation Brands Index – Q3 Report, 2005 tells us how nations view each other. Good stuff.
But even more critical, perhaps, is Anholt’s book: Brand America: The Mother of All Brands.
Here’s how the book is advertised on Anholt’s website:
Q: When is a country like a brand?
A: When it’s the United States of America.
America is more than just a country: it’s the biggest brand in history. Launched as a global brand, managed like a global brand and advertised like a global brand since the Declaration of Independence, America has deliberately marketed itself – as well as its products and culture – with skill, determination and sheer, hardnosed salesmanship.
But today, it’s a brand in trouble. Brand America shows, for the first time in print, how the world’s most successful brand grew to greatness, how close it now is to throwing it all away, and how it might win back those disillusioned ‘consumers’.
For anybody who has ever wondered what was the secret behind America’s greatness, and what happens next to the world’s sole superpower, Brand America is essential reading.
It’ll change your mind about brands, about countries and about America for ever.
Here’s what Phil Kotler had to say about the book:
“Anholt and Hildreth are to be congratulated for raising the issue of why Brand America is suffering a strong decline around the world. They trace American history, the values of Brand America and the growth of anti-Americanism, and offer stimulating suggestions for how to repair our broken image.”
Read it. That’s Brand America: The Mother of All Brands.

Google’s Product Development & Management Process Revealed

From Marissa Mayer via Evelyn Rodriguez. Download here>>
Thanks for taking notes, Evelyn!
Some highlights:
Small, Agile Engineering Teams
• 3-person units (like start-ups!)
• Unit is a project – they don’t have departments
• Unit is co-located (sit next to each other) also with PM
• Engineers work on project for 3-4 months, then transition to next project
• Very fluid
• With 180 engineers, they can work on 60 projects – so they can afford to invest
on high-risk, high-return projects as well. (They call high-risk projects “Googlettes”)
• Each project manager works with 9-10 people across units. For example, maybe a category such as “Enterprise Infrastructure”
• The technical lead in each unit of 3 is responsible for technical excellence of project.
• Documentation
– Very sparse, only what is needed in Product Requirements Document
(PRD)
– Eric Schmidt: “Late binding decision-making process”
– Evolves based on feedback
– Includes information on general market size, revenue in PRD but believe that “if you build something users use, there will be a way to make money”
• Large Projects
– Example: Enterprise Product – broken into logical modules, thus 4 units
(of 3 people) = 12 people
• Monetization teams
– Larry Page: “No such thing as a successful failure; if it is useful to people, later we can make revenue from it in a logical way.”
Focus on providing value to user first.
– Then create team to execute the “monetization” of most useful products/services.
• Marissa (speaker) was on team to monetize search
– Created AdWords, etc.
This is very, very interesting. Beeg trouble for moose and squirrel, er, Microsoft!

The Fortune Under the Pyramid


From the Economist:
“For workers from poor countries who venture abroad to earn a better living, sending money home to relatives can be hugely expensive. Such remittances have become an important source of income in many developing countries, dwarfing other inflows of capital from overseas such as foreign direct investment and multilateral aid. But if the money is being sent, say, from America to Venezuela, charges can amount to as much as 34% of the sum involved, according to Dilip Ratha of the World Bank.
“Why are the poor so badly served? The easy answer, that people who have little money do not make suitable clients for sophisticated financial services, is at most a half-truth. A better explanation, this survey will argue, is that the poor have been hurt by massive market and regulatory failure. Fortunately that failure can be, and increasingly is being, remedied.”
Read the article here.
All I know is that when money trickles down to the poor, it usually gets siphoned off by a middleman, or the neighborhood mafia.

Daniel Yankelovich: Poll This, America

A great interview from S+B.
Daniel Yankelovich – the “father of the public opinion poll” – says:
“…attitudes were replaced in the 1960s and 1970s by unenlightened self-interest: Win at any cost. Strip away regulations and constraints. Anything that isn’t illegal is OK. Conflict of interest isn’t a real issue, except for a few straitlaced dummies. Everybody bends the rules, and you have to do so to survive. Someone caught in an ethically
questionable situation might say, “Well, I didn’t do anything wrong. I didn’t break the law.” For someone from my generation, ethics doesn’t have anything to do with breaking the law. Essentially, there was a dumbing-down of morality that came in with the baby boomers in the 1960s.”
Hello! Maybe he’s been reading On Value and Values!

Diego Maradona vs. George Bush?

The lead article in this week’s Economist: “Tired of globalisation” has a skewed view of what’s happening in Latin America. The article even takes a pot shot at Maradona (maybe they’re still upset at that “hand of god” goal in the World Cup).
Globalization cannot ignore the consequences and effects on people. This is the lesson that business never learns. That’s a fact. And so Maradona and Hugo Chavez have fun at the expense of the US.

Dragon, Tiger and Mouse: China, India and Me


A while back BusinessWeek devoted an issue to the issue of China and India.
I particularly liked “Asking The Right Questions” because it looked at new non-western business models being built in India. In India, that’s called being non-aligned!
John Hagel has an instructive blog post on China and India titled: “Patterns of Business Innovation in China and India”. Read it!
Where does this leave us? You, me, and our kids? What are we going to do for a living? What options are there for kids who go through our stellar educational system?
I decided to look up the high school curriculum in a) Kansas and b) India. Here’s what I found:
– Kansas: A Guide to Kansas Curricular Standards [high school]
– India: CBSE [12th grade] – Mathematics, Physics, Chemistry, Biology, Political Science, History, and more.
Looks like we lost the race before we even got started!
So, what are our kids going to be doing? Are we destined to be a nation of used-car salesmen? One nation-under-E-bay…
What would poor Ben Franklin say if he saw us now? How would he earn his living today? Join the military? Wal-Mart? a band? a gang? an evangelical church?

Family Values: Costco vs. Wal-Mart

Let’s compare some workplace statistics, as reported by the companies…
Employees covered by company health insurance
Costco 82%
Wal-Mart 48%
Insurance-enrollment waiting periods (for part-time workers)
Costco 6 months
Wal-Mart 2 years
Portion of health-care premium paid by company
Costco 92%
Wal-Mart 66%
Annual worker turnover rate
Costco 24%
Wal-Mart 50%
Read more about this here.
The Wal-Mart people need to go read Doug Smith’s On Value and Values.
Why does Wal-Mart want this? This is not a PR problem, Wal-Mart. It’s a values problem. Again, read Doug Smith.

Measuring Knowledge Management: OECD Report

The results of an OECD survey on Knowledge Management practices in Canada, Germany, Denmark and more. Interesting, but not earth-shattering.
What they state as findings:
● KM practices have spread across the economy, just as technology diffuses;
● KM practices are implemented to deal with a great variety of objectives
(static efficiency, innovation, co-ordination);
● Size matters: firms manage their knowledge resources differently,
depending upon their size, and with little regard to industrial classification;
● KM practices matter for innovation and productivity performance;
● Cluster of practices: although this is a bit premature to make this kind of
statement, cluster of practices makes it possible to see the two main
strategies: codification and personalisation;
● Survey respondents showed a high level of interest, which in fact increases
as the size of the firm grows.
PDF download here.
I’ve always thought that different cultures view knowledge differently. Some cultures value knowledge more than others. In India, for example, I classify people into two groups- the devotees of Lakshmi and the devotees of Saraswati.
Lakshmi reminds me of Aphrodite. She’s the goddess of beauty, fortune and prosperity. Gold coins fall from her hands. Two white elephants, symbols of luck, accompany her everywhere. During Diwali, the festival of lights, people light up their houses with candles (or electric lights) so Lakshmi will find her way to their house.
And Saraswati reminds me of Athena. She’s the the goddess of wisdom, the arts, and eloquent speech. She’s seen as the mother of the Veda, creator of the Sanskrit language and Devanagari letters. The protector of fine-arts and sciences. In her hands are a Vina (a musical instrument symbolising the arts) and a lotus (or a parchment – symbolising learning) and a rosary . Her Vahana (vehicle) is a swan (or sometimes a peacock).
My dad used to worship Saraswati once a year (on her “feast” day) in a very modest ceremony. His wealthy friends used to worship Lakshmi in much more elaborate (and expensive) rituals.
To me this works across cultures- either you worship money, or you worship the truth. The numbers of Saraswati followers are dwindling fast.

Blogging Youth: A Report from Pew

The Pew Internet & American Life Project finds that over half of all teens have their own blog or have contributed photos, text or artwork to a blog or other Web site.
“American teenagers today are utilizing the interactive capabilities of the internet as they create and share their own media creations. Fully half of all teens and 57% of teens who use the internet could be considered Content Creators. They have created a blog or webpage, posted original artwork, photography, stories or videos online or remixed online content into their own new creations.
“Teens are often much more enthusiastic authors and readers of blogs than their adult counterparts. Teen bloggers, led by older girls, are a major part of this tech-savvy cohort. Teen bloggers are more fervent internet users than non-bloggers and have more experience with almost every online activity in the survey.
“Teens continue to actively download music and video from the internet and have used multiple sources to get their files. Those who get music files online believe it is unrealistic to expect people to self-regulate and avoid free downloading and file-sharing altogether.
Download the PDF here.