Chapter 6: Harness the Intellect of Every Employee

Overview

Smart people anywhere in the company should have the power to drive an initiative.

—BILL GATES, Chairman and chief software architect, Microsoft

The Internet is not just about new start-up companies .... The Internet is much more about existing businesses and how they take skills and customer base and move over to use these digital approaches to do things better. That's the most profound thing about this revolution.

—BILL GATES

In the seat of the CEO: You are the newly hired CEO of a $75 million woodworking equipment manufacturer. You have extensive experience in the industry, and you've been hired to help spark productivity and growth. In the last 2 years, the company has grown by an anemic 3 percent annually, less than a third of the industry average, and productivity (as measured by revenue per employee) is also down significantly. Employee turnover is high, and morale is at an all-time low. The board feels that one of the key problems is the company's outdated computer system, and you've been hired to turn the company around.

As you take up the reins, you learn that much of the company's vital information has been either kept on paper or stored in antiquated computers that often malfunction. You speak to many employees who voice their frustration, and you then spend the next 6 months working with an outside contractor to update the entire system with new computers and to develop a new company intranet site.

Henceforth, the firm will eliminate a great deal of paperwork by digitizing its forms and increasing the amount of data that is input by customers. With the majority of company information online, there will be no more need to duplicate forms, purchase orders, etc. You estimate that the improved operating efficiencies will save the company close to $2 million within a year.

After announcing that the system will be ready within a week, you also let everyone know that a group of experts (the same outside contractor that designed the new systems and created the intranet site) will be hosting a week of orientation sessions. During these sessions, everyone from secretaries to senior executives will learn how to navigate the various components of the new system and use its applications.

The network administrator hosts the meetings and demonstrates how easy it is to access information and download key forms and data. On your instructions, she also explains which managers and employees will have access to what information (you have decided, against the advice of your contractor, that access should be limited by function, since turnover is high, and you don't want key information going to your competitors). She and her team will be available by phone on a day-to-day basis to answer technical questions. While they will not be able to answer specific questions about company data, her staff has been instructed to forward all communications to designated department leaders within the company.

A month after the system is up and running, it is evident, much to your shock and dismay, that the new system has decreased worker efficiency. How can this be? You assumed that the opposite would be true. Instead, you're finding that there is increased frustration, and that certain departments are getting bogged down in a bureaucratic nightmare.

For example, it takes days for sales managers to get key information from the marketing department, and the inventory managers are being deluged with questions from sales management. As a result, there is a backlog in orders, and the company is recording 20 percent fewer orders year over year than it did before the switchover.

Where did you go wrong? You brought in state-of-the-art systems, and you trained everyone to use them. How can productivity be down? More important, what should you do next?

What would Bill Gates do?

The story is now the stuff of legend. Bill Gates wrote his first software program as a young teenager. It was a program for playing tic-tac-toe on a computer. Years later, he and his long-time friend Paul Allen were hanging out at the Harvard Square newsstand and spotted the latest issue of Popular Electronics. On the cover was a picture of a build-it-yourself microcomputer kit called the Altair 8800. "This is our chance," said Allen to Gates.

Gates spent 5 weeks writing the BASIC program for the machine, and—sometime in the winter of 1975—the world's first microcomputer software company was born. "In time, we named it Microsoft," Gates later wrote. "Our initial insight made everything else a bit easier. We were in the right place at the right time. We got there first."

In 2002, Gates reflected on his initial vision:

The early dream was a machine that was easy to use, very reliable and very powerful. ... We even talked back in 1975 about how we could make a machine that all of your reading and note taking would be done on that machine.

Gates later secured his future when he snapped up the rights to an operating system, enhanced it, and sold the upgraded system to IBM. Microsoft's "disk operating system," known as DOS, helped propel the company into its position as the country's largest software company. Competitors who underestimated the barely-out-of-his-teens CEO did so at their own peril.

A quarter-century later, Microsoft is one of the world's largest and most powerful corporations. In 2002, Gates topped the Forbes 400 list of the world's wealthiest individuals, with a personal fortune of $43 billion. Some years earlier, Gates had handed the reins and the title of CEO over to Steve Ballmer, so that Gates would be free to help develop next-generation products (e.g., TVs, cell phones, tablet PCs) as Microsoft's "chief software architect."

During the economic and technology downturn of the early 2000s, Microsoft held up better than most technology companies, with a 12 percent increase in sales and an additional 5000 people added to the workforce in 2001 (while most of its competitors were cutting jobs). The company's signature Windows operating system still owns an eye-popping 93 percent of the market, but competitors in more than 20 countries have Microsoft in their crosshairs. In recent years, Gates and Microsoft have been forced to fight their fiercest battles in the courtroom rather than the marketplace, answering charges of monopolistic and unfair competitive practices.

Gates does not seem overly concerned, despite the fact that he has been ordered to publish 272 pieces of computer code for competitors. The next generation of Windows (nicknamed "Longhorn") is due out in 2005, and despite the long-drawn-out legal battles and a somewhat tarnished public image, Microsoft remains a company to be emulated. It is, above all, an idea-driven company. ("A computer in every home and on every desk," read an early mission statement.) Gates and his senior colleagues have spent a great deal of time thinking of ways to create an organization in which all employees can contribute to the knowledge base of the enterprise.

Of course, many companies say this is their goal. But Microsoft goes farther than most in living this goal. And, in part, as a result, Microsoft is one of the most valuable companies in the world, as well as one of the most profitable. In the fiscal year that ended in the summer of 2002, Microsoft's revenues topped $28 billion, and its net income approached the $8 billion mark—not bad for a Harvard dropout.