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“Microsoft is not PARC”

such projects impress and even charm. Even while pursuing its lofty dreams, however, the lab cannot escape comparisons to the one computer-science venture that got started with a similar blitz: Xerox’s Palo Alto Research Center, or PARC. Formed in 1970, Xerox PARC took only a few years to fashion the graphical interface, laser printer and other core technologies that have come to define personal computing.

But there’s a legendary catch. PARC was isolated from Xerox’s East Coast headquarters, where copier-oriented suits didn’t grok computing. The computer jockeys themselves lacked a sense of which technologies might actually sell-and in what form. They envisioned a $20,000 networked machine, the Xerox Star. It wasn’t until Apple’s Steve Jobs usurped their ideas for the Macintosh that PARC’s inventions took off.

Is Microsoft destined to make similar mistakes? Given the huge customer base locked into its existing products, would something truly revolutionary stand a chance of being embraced by Microsoft’s business groups? Some observers say no-at least not without the company’s experiencing the competitive hardships that rocked other labs in the early 1990s and forced researchers to work hand-in-hand with developers, marketers and customers to turn lab inventions into meaningful products. “I wonder if you can learn without going through the trials by fire,” says one top IBM research manager, adding that right now, anyway, “my impression is that Microsoft Research is much more like a sandbox for playing.”

There is a sandboxy aspect to the lab, almost as if its members are still simulating a great research effort before figuring out how to really do it. Computer industry research labs are famously casual-sports shirts and blue jeans. But Microsoft goes them one better: shorts and T-shirts. Rashid is a die-hard Star Trek fan who keeps a picture of himself with James “Scotty” Doohan on his office wall. Staffers hang with sci-fi writers such as Neal (Snow Crash) Stephenson and Greg Bear, who even created a character named Nathan Rashid in his book Slant.

And then there’s Myhrvold, who reportedly netted $104 million from stock options sales in 1997 and was recently featured in an aircraft ad because he was the 100th person to order a Gulfstream V jet. In Barbarians Led by Bill Gates, former Microsoft developer Marlin Eller and co-author Jennifer Edstrom complain that the fast-talking visionary throws out ideas without understanding the challenges involved. In particular, they cite his misplaced early 1990s evangelism for interactive TV, which has gone into hiding at Microsoft and just about everywhere else. “Talking to Myhrvold was a little like smoking dope,” they wrote. “It could give you insights’ but in the light of day those insights often didn’t make any sense.”

A more palpable portent of trouble may lie in the World Wide Web. It wasn’t until December 1995 that Gates proclaimed “a second PC revolution-the Internet.” To astute observers, being that late in the game was a symptom of big problems in the way research works at Microsoft. “They already have manifested to me a problem that we had been criticized for in the early days of PARC,” says John Seely Brown, the innovation guru who now directs the Xerox lab. “How is it conceivable,” he wonders, “that Gates did not understand the Internet until he did?”

Brown says that the evidence from Microsoft points in a disturbing direction: “Take the hypothesis that they have great researchers-and they’ve had them for some time.” These researchers, observes Brown, certainly grasped the Internet’s importance. Microsoft’s apparent lack of alertness, he concludes, suggests that mold-breaking ideas must be funneled through Myhrvold and Gates before they can diffuse out to the ranks. Such funnels, he says, slow the spread of research ideas and curtail innovation. His admonition: “Watch out for funnels.”

Arriving late at the Internet party may have been Microsoft’s most conspicuous miscue, but it isn’t the only one. Another ominous warning sign might be seen in Talisman, a system for rendering high-quality PC graphics. Microsoft touted it as a new standard. But Talisman proved to be a bust when it rolled out in late 1997. A big reason: the novel technology required software companies and graphics chip makers to adopt new procedures. Admits Kajiya, Talisman’s chief architect and now the lab’s assistant director, “It was just not natural for the market to do that.”

Despite such misfires, however, competitors should not easily dismiss Microsoft’s research arm. While Myhrvold has admitted attaching too little importance to the Internet in the early 1990s, Microsoft Research officials insist that the company was able to catch up rapidly because technologies developed in the lab were close at hand.

That may be viewing the experience through rose-colored glasses. Still, it’s hard to find a major company that wasn’t behind the Internet curve, albeit not as far as Microsoft. And no good lab can escape at least a few Talisman-like disappointments: If it doesn’t have some flops, it’s not thinking big enough. Besides, Microsoft’s research brain trust is keenly aware that what’s far more important than isolated successes and failures is a lab’s connection to the rest of its company-and its business objectives. They claim Microsoft’s research venture is well protected against becoming a software ivory tower.

Indeed, Microsoft deliberately established the lab on the main corporate campus rather than near an academic center la Xerox PARC. The goal: Keep business objectives high in researchers’ minds. Staffers routinely lunch with product group colleagues, and when technology is transferred, researchers often join developers in the business units until products are complete. Those close ties help ensure that the lab tackles problems important to the product side-and that product personnel know what research can offer, notes Richard Draves, manager of the lab’s operating systems group. Says he, “You can pick up a phone and call up a friend in just about any group in the company because you’ve worked with them in the past.”

Microsoft’s commitment to such fusion was readily apparent last summer, when virtually the entire speech research effort-20 people in all-was transplanted to Building 25 to help the speech products group introduce improved speech recognition technology into a variety of applications. Leader Xuedong Huang had a core team up and working even before boxes were unpacked and remodeling completed.

Close interactions with product groups is just one part of the puzzle, however. Despite any talk of funnels, lab personnel cite their strong bonds with Microsoft’s senior management as another key factor in keeping research on track. “At the very top ranks of the company people are technologists at heart-they love technology,” says Daniel Rosen, general manager of Microsoft’s New Technology group, which supplements Research by investing in or acquiring technologies from outside the company. In fact, Myhrvold and other members of Microsoft’s powerful executive committee hold doctorates in mathematics or computer science. And that expertise, Rosen says, helps pave the way for the fruits of research to be integrated into products and overall corporate strategy.

Finally, unlike Bell Labs and IBM, where studies range from hardware to software, biology to physics, Microsoft’s lab has a sharp and narrow focus. Outside of a four-person theory contingent, its 27 core groups focus on speech, natural language processing, graphics and other areas central to the future of personal computing. The result, lab managers believe, is a blue-sky lab with an “it’s-cool-to-ship” attitude. Researchers are expected to advance the state of the art by publishing papers and speaking at technical gatherings. Rashid and Ling proudly cite the fact that 10 of 50 invited papers at the prestigious Siggraph 96 conference were given by Microsoft’s graphics gurus. But they’re just as quick to boast the lab has contributed important code to virtually every company product. Proprietary creations include compression algorithms that allow more data to be stored on a disk, speech-recognition technology, an inference engine in Office 97 that makes troubleshooting easier, a video server and a host of development tools to facilitate programming.

Such feats-seemingly mundane in contrast to discovering laws of nature-mark a far different orientation from the old Bell LabsIBMXerox PARC style of throwing inventions over the wall to development groups. Research managers say their product-centric mindset stems from the dual philosophy governing the lab. On the grand level, researchers are mandated to do for their fields what DOS and Windows did for the PC: Set the standards on which everything else rests. But fundamental developments may take years. The interim aim is to spin out products that help justify the lab’s existence. Myhrvold sees such seedlings as a natural outgrowth of the lab’s more lofty ambitions. As he says in true guru-like fashion, “You get more small ideas by thinking big than by thinking small.”

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