[How About This Book] Microsoft's Success Formula: Admitting 'Failure'

Innovating Human Life Since 1975
Behind Every Success Lies Countless Missteps
Losing Core Users Like KakaoTalk's Recent Missteps
Rapid Feedback with Xbox, Bing, and AI Deep Learning
Overcoming Crises Through Large-Scale Transformations
Familiar Stories, Yet Still an Engaging Read

Microsoft, one of the seven leading technology companies driving the US stock market alongside Apple, Amazon, Alphabet, Meta, NVIDIA, and Tesla, is celebrating its 50th anniversary this year. This book chronicles Microsoft's journey from its founding in 1975 and its revolutionary impact on human life through the proliferation of personal computers, to recent technological transformations centered around products like the Xbox game console.

Getty Images

Although Microsoft may appear glamorous on the surface, its path has not always been paved with success. Much like the recent controversy over the KakaoTalk update, Microsoft also experienced painful setbacks when it failed to pivot and lost its core customer base. Dean Carignan, who worked at Microsoft for over 20 years, and Joanne Gavin, currently Director of Innovation in the Cloud division, detail how the company leveraged such failures as stepping stones to achieve large-scale transformations.

According to the authors, Bill Gates and Steve Ballmer faced significant challenges in the gaming sector. While they dominated the PC market in the 1990s, they lagged behind PlayStation in the TV gaming arena. To gain market dominance, Microsoft focused on recruiting top talent and, in 2002, launched the cloud-based social networking play service, Xbox Live. This pioneering move, which preceded Facebook's 2004 debut, was met with enthusiastic market reception. However, Microsoft later overextended by forcibly integrating Xbox with its music, movie, and other business lines, which intensified departmental silos and led to significant internal conflict.

To resolve this, Microsoft eliminated all senior management positions across its business units and consolidated previously siloed organizations to restructure Xbox as a single team. Instead of fostering unnecessary internal competition, the company delegated decision-making authority as much as possible to the field and encouraged productive disagreements. Over approximately 18 months, Microsoft transformed its structure from one centered on "decisions and directives" to a culture focused on "coaching and support."

The Xbox became a critical turning point in establishing Microsoft's internal culture of overcoming fear. The ideal framework pursued by the company is a balance of "BET (Business, Experience, Technology)," a term coined by creative leader Jay Salard. However, the 2013 launch of the Xbox One remains a painful failure. Marketed as an always-on, always-connected next-generation all-in-one home entertainment device, it was seen by consumers as an overpriced product with unnecessary high-end features. The price was set at $499, which was $100 more expensive than Sony's competing PlayStation 4 at $399.

Phil Spencer, who was appointed head of Xbox at the time, recalls, "What I realized through the launch of Xbox One was that the plan looked great on PowerPoint slides. But it wasn't the answer to the needs, questions, and aspirations of our customers. Instead, it was about where 'we' wanted to go and what was necessary for product profitability and scaling up." Afterward, Microsoft shifted from holding console announcement events several times a year to a monthly release system, enabling continuous user feedback collection.

In 2009, Microsoft belatedly entered the search market, forming an alliance with Yahoo and launching Bing. The company tried various approaches, such as integrating Facebook and Twitter data for personalized search results and offering Bing Rewards based on usage. However, as of 2012, its global search market share remained below 5%, a stark contrast to Google's dominance at over 90%.

Internally, some even described the effort as "like trying to break a rock with an egg." Microsoft redefined its strategy from "beating Google" to "steadily increasing market share to become the world's fastest-growing search engine." As a result, since setting this goal in 2009, its market share has risen every quarter, reaching 38.5% of the US PC search market last year.

Now, the real competition is set to unfold in the AI-powered search market. Microsoft claims that its shift to deep learning-based search has significantly narrowed the quality gap with Google. The company points out that Google's transition to deep learning has been relatively slow due to its massive investments in existing machine learning technologies and personnel. Additionally, unlike Google, where search ads account for over 80% of total revenue, search makes up less than 5% of Microsoft's revenue, giving it more flexibility to boldly adopt AI-based search and thus a competitive edge. The authors believe that the future of AI will move toward advanced deep learning, and that this environment will favor Microsoft.

The book offers vivid behind-the-scenes stories from an insider's perspective, which are fascinating. However, as much of the content is already widely known, some readers may find it somewhat predictable, and the book's clearly favorable view of Microsoft may lead to divided opinions among readers.

The Secret of Microsoft's Innovation Unveiled by Insiders | Dean Carignan and Joanne Gavin | Hans Media | 320 pages | 25,000 won