How Microsoft Works

In their 2005 annual report, Microsoft lists its financial highlights. The "Cash & Short Term Investments" entry for 2005 really stands out. It's amazing that such a large company has nearly $38 billion in the bank. That cash allows Microsoft to be adaptable. While most dominating companies retrench defensively to preserve the valuable territory that they control, Microsoft does the opposite. It can change its focus in an instant. Like some kind of mutant super-company, Microsoft can out-maneuver giants like IBM and apply its endless cash resources to overwhelm smaller rivals like Netscape.

Part of this incredible ability is the nature of producing software: It doesn't have the logistical struggle of building an airplane or a skyscraper. People make software by writing computer programs. You can produce software as long as you have the skills and the idea.

Microsoft was also there before anyone else. Not only have they "been there and done that," but they also have the market position and the cash on hand to exploit the market to their advantage.

Organization may be the most important key to Microsoft's success. Bill Gates never really consolidated the company after its start-up phase. Instead, he sought to replicate the most productive aspects of Microsoft's first team. Microsoft designs its teams to be overworked. Project managers calculate the number of staff members needed to accomplish a task, then reduce it. This results in a team that has to scramble immediately or be overwhelmed.

Microsoft also takes great care to choose the "right" people. The take-away is that Microsoft has very specific criteria their workers must fulfill, and they have developed an innovative means of assessing candidates: They ask them riddles. A company built on dominating via improvisation and high-energy needs high-energy problem solvers who don't mind working 72 hours straight. Although this type of employee seems difficult to find, somehow Microsoft keeps finding them.

All empires fall at some point, and organizations atrophy like muscles in old age. Usually, the charismatic leader isn't there to see it, because he probably wouldn't let things get to that point. Bill Gates is not likely to buck that trend, so you can count on Microsoft's reign to extend for years to come.

In the meantime, let's look at what Microsoft has in store for us.