Unlocking Microsoft's Innovation Secrets — JoAnn Garbin & Dean Carignan

Fred Schonenberg
Hello everyone and welcome to the VentureFuel Visionaries podcast. I'm your host, Fred Schonenberg. I am thrilled today to welcome JoAnn Garbin and Dean Carignan. They are the co-authors of the Insider's Guide to Innovation at Microsoft.

We often talk on this show about how visionaries at large companies are able to drive innovation and the challenges they face. JoAnn and Dean have actually written a book on how Microsoft has done that. So I'm so excited to dig into the learnings that they share in the book, as well as to explore the strategies and stories from Microsoft's very dynamic journey into innovation.

So please enjoy the Insider's Guide to Innovation at Microsoft. JoAnn, Dean, welcome to the show.

Dean Carignan
Thank you.

JoAnn Garbin
Thank you.

Fred Schonenberg
Could you all share a brief introduction to how this book came to be? Maybe a little bit about your journey and how this all got started. Maybe JoAnn, we'll start with you.

JoAnn Garbin
Yeah, you know, Dean was in the company 17 years already. I was in my first year and we met and we were both in these leading innovation from blank sheet of paper to something spaces. And we started swapping stories. And even though most of my career has been as an entrepreneur and most of his career has been as an intrapreneur, our stories were shockingly similar. And so that led us to start thinking about maybe there really are some fundamental practices and truisms to innovation that cut across all of it.

Dean Carignan
And I would just add to that, that we were, I think, pleasantly surprised as we sat down and started to work on the research, how many Microsofties brought forward these amazing stories of innovation and how close we could get into the details and document not just the what of the innovation, but the how and the specific tools that were used. And so we wrote the book. 

We decided we would write the book not just for Microsoft or technology companies, but for anyone in any organization. And we also observed that really, as the world changes faster and faster with generative AI, the need for a guidebook was just more and more profound. And so we formed a two-part mission. One would be to write the book and make it available to anyone who wants to be a better innovator. And the second part would be to donate all proceeds to STEAM charities to try to nurture and cultivate the next generation of innovators.

Fred Schonenberg
I love that. And I think it's so cool that you all, you have the intrapreneur and entrepreneur coming together, because that's often a disconnect in a lot of these books. You have a lot of people that write about the entrepreneur's journey, or similarly, like how to be an intrapreneur, but the two together are really where the magic is. And I love that this isn't just stories, but it has the how-to guidebook element.

Could you all share maybe, for people that maybe don't know or aren't thinking about Microsoft all the time, a couple of examples of the breakthrough innovations, just to kind of level set us here to start the conversation?

JoAnn Garbin
Yeah. We all know Office, Word, PowerPoint, Excel, but there's a lot of things we don't realize are Microsoft. I mean, one of the big ones is Xbox. A lot of people don't know Xbox is Microsoft. But then there's all of these things behind the things. Like we just wrote a bonus chapter about the evolution of digital fonts from the days of green screens with orange blocky letters to today where everything we do is digital reading. That inflection point was an invention called Cleartype, and Cleartype came out of Microsoft. And so we interviewed the guy and that was leading the team that created Cleartype. And it's just fascinating how many of those examples exist. Dean, I'm sure you have dozens on hand.

Dean Carignan
Yeah. Some of the ones that I really like are, one of those are a case study about a group called Cognitive Services that back in around 2014, imagined that AI could be delivered through the cloud as a service and started working really early on this with a tiny team of about six very junior people sponsored by a couple of senior executives. 

And the things that you could do with that very agile, motivated, but small team and also with the foresight of seeing that AI would be important, that it would be cloud-based, that it would be a service, was really this early work that set us up for a lot of the success that we're having in this new era of generative AI. And that's one of the things we talk about in the book is that innovation is loopy.

You never quite know when you're gonna have a hit and when the payoff's gonna come, or maybe you're investing on more of the long game, but the teams we studied were very comfortable with that loopiness and non-linearity of innovation. So yeah, Cognitive Services is one that's in the book that we both really love. 

Fred Schonenberg
I love this. And in my notes, I had this phrase different than the loopiness of innovation, but I'm gonna play off that and jump to, in the notes of maybe like a subheader of one of the chapters, you talk about continuous adaptive innovation. And maybe that ties into the loopiness a little bit that needs to continuously be innovating because you don't know which one is gonna be the hit. You don't know when it's gonna actually take form. Can you talk a little bit about that mindset? And then I have a follow-up off of that, but maybe talk about the loopiness a little bit.

JoAnn Garbin
Yeah, and we stole the overall model from nature. Nature has this adaptive cycle and we use the meadow to forest analogy of, you have a meadow, seeds fly in, rain, sunshine, forest blooms, lightning strikes, burns it down, goes back to meadow and it keeps going. If you don't pave over it, it'll just keep doing that. Well, I was introduced to that actually during a biomimicry retreat. And I was like, holy crap, that's innovation.

And what you see time and again in this life cycle of innovation is this infinite loop of discover, design, develop, mature, and then disruption. And then if you survive the disruption, you're coming around that other side of the infinite loop in regrouping. But a lot of people don't make it in the regrouping. And the best companies know that if you keep discovering and designing and developing while things are maturing, as one gets disrupted, the next one's coming up right behind it, you're taking a portfolio approach to the infinite loop. 

And then there's this whole other concept of rigidity trap, which is, you know, I'll stop there, but it is just recognizing that it's not an S-curve like we're all taught, where you follow the S and then start a new S, it's actually an infinite loop. 

Dean Carignan
Yeah, and that's one of the things we discovered, I think, that has helped Microsoft to stay innovative has been the awareness that you can be disrupted at any time. And there's an interview out now with Bill Gates where he talks about, not until about the year 2000, did he start to feel like the company was successful or like they had done well. And even then he would always push everyone in the company to think about who's out there, it may not even be a company right now. It might be two individuals in a garage, you know, hacking something together, but always be aware of that disruptive possibility.

And two of our favorite case studies, you know, are basically Microsoft Office and Visual Studio Code, which were multi-billion dollar businesses with, you know, over 80% market share, but understood the risk of disruption and proactively took change to either disrupt themselves or insulate themselves from disruption. And so that awareness and lack of complacency, I think is just a theme throughout the book.

Fred Schonenberg
Yeah. I love that. And I'm gonna preview you to that. I wanna come to the rigidity trap. I actually, if you don't mind talking about that, because I think that might be something we see a lot with corporates and would love your point of view on it. I also think that everybody listening just went and Googled or used Bing, I guess, to find biomimicry retreats, because I don't know what that is, but it sounds awesome. 

JoAnn Garbin
It's fabulous. I highly recommend biomimicry. The Biomimicry Institute is the nonprofit that teaches the retreats.
Fred Schonenberg
That’s amazing.

JoAnn Garbin
Totally endorse it. There's so many lessons to learn from nature. You know, it's the greatest experimenter and innovator there is, and it has 3.8 billion years of practice. So you just have to know how to look at things at a functional level. It's not about looking like nature, it's about functioning like nature. And that takes a little bit of training to be able to just get below the surface of features and appearance and get into that functional aspect.

Fred Schonenberg
A much more expensive and long version of that is having a five-year-old, is that going out with my son and looking at nature. And you're there for a long time because they have lots of patience. And it's like, oh my gosh, there's all these things happening that mirror what's happening in our professional lives. 

JoAnn Garbin
If you take a hike with a biomimic, it will be a very slow, long hike.

Fred Schonenberg
Oh my gosh, I'm all over this for our next offsite. So could you talk a little bit about the rigidity trap? What it is and maybe how you saw Microsoft overcome it.

JoAnn Garbin
Yeah, I'll start. Dean, you take the Microsoft side of it. You're great at that. In essence, the rigidity trap can happen to any system. Big company, small company, natural system, single species. And all it means really is you've lost the ability to adapt. How you function, what you need to survive and thrive has become so specified that when the context shifts, you can't flex. You can't adapt to the new environment. 

So we see it all the time in nature with species going extinct in part right now because we're rapidly changing the context, right? And they can't change fast enough. But in little companies, you're not getting the market signals back. You can't find your fit, but you're clinging to your dream of what you wanna bring to market. Well, that clinging is going to run you out of time and capital and energy and interest and everything else. And in big companies, Dean can list the many ways that you can become rigid in a big company.

Dean Carignan
I think that the real problem of the rigidity trap in a corporation is the things you're good at, the things you're successful get encoded into your DNA as a company. And when the time comes that those things that you do are no longer beneficial, but harmful because the environment has changed or there's new competition or customers have changed, it's very hard to reprogram your DNA.

One of the things we observed at Microsoft is true of any company is the things you're good at get encoded not just in your hard formal systems, but the soft systems, the culture, the things you celebrate, the types of people you have leading your organization, the vocabulary you use. And it's very hard to change those things. One of the processes that starts it is to make the invisible visible.

You almost have to kind of understand what is deep in your DNA and then methodically work to change it, which is a lot of what our current CEO, Satya Nadella, did when he arrived and decided he was gonna make cultural change one of his focus areas. But the case study in the book that really captures this well is the one on Bing and the one on us getting Googled. And what was interesting about that period was that we had embraced a fast follower strategy.

We thought that we were good enough and well-resourced enough that we could follow a competitive innovation and then overtake them in time. And the classic example of this was the browser wars and our ability to kind of go head-on with Netscape Navigator and eventually become the predominant browser. And so there was this sense that that was just a viable strategy.

When Google came along, we didn't realize the importance of search. We were slow, sufficiently so that they got a headstart. And what they did was what we call an architectural innovation. They blended technological breakthroughs, like how they did the search algorithm with business model breakthroughs, like how they brought advertisers into the ecosystem. And that was unbreakable. That was, we tried everything, we resourced it. And so that is why in search, we could never become the market leader, but we were able to learn from that.

And that's the term to be Googled at Microsoft means to move too late and to end up with an entrenched competitor that's out-innovated you. And so I think it's that almost meta learning capability that you can have one way of doing things as a company, you can have a spectacular failure like missing the search revolution and you can learn from it and pivot and become better. And so, yeah. So that's how we try to deal with the rigidity trap.

Fred Schonenberg
Yeah, it's such a great story. And I'd love it to be Googled as a phrase that gets used, right? Because then you learn from it and you don't repeat the mistake. It's not like, oh, don't talk about that. That was the time we lost or we did not have our great success. One of the questions that popped up as you were talking was I think often it's clear when the rigidity trap is at the end of its cycle. Like, oh no, we've been disrupted, right?

But at the beginning, when it starts to get a little stiffer, it often is you're doing very well. And how, maybe at Microsoft, whether it's positive or negative, have you seen that moment of balancing short-term results with long-term need for innovation and change, right? Because it's sort of like change doesn't come fast until the end, right? And then it's like, oh, we missed it. Curious if there's anything in the book that talks to that dynamic of short-termism versus long-term goals.

JoAnn Garbin
Yeah, and the key takeaway is you need space for both all the time. You can't go from mode shifting, like this year we're gonna be long-term and next year we're gonna be short-term. It's like, no, they have to coexist. And we saw it show up in various ways throughout the book. One of the biggest consistent ways Microsoft stays in this constantly pushing the frontier forward is the billion-dollar Microsoft research arm.

Now, not every company can do that. And that's not where all of the innovation at Microsoft starts from. We also have groups that carve out small teams within their teams. And if somebody proposes a customer hypothesis that leadership feels is validated enough to explore further, they will dedicate full-time effort to go explore it and prove it. And then you have things like Xbox that stood up a whole new business line to do it, to explore entertainment from Microsoft. 

So there's a lot of different ways to do the long-term. The short-term is almost easier, right? Because it's continuous improvement. It's keeping your business viable and learning from doing. It's that long-term that there's no one size fits all. And every single case study was an example of Microsoft investing in that long-term. But Dean, what would you, what comes to mind for you?

Dean Carignan
It's always a struggle, especially with a publicly listed company. A couple of other mechanisms that have worked well at Microsoft is a group called The Garage, which is a centralized team of innovation experts. And they understand innovation as a process and the way it works in a big company. And so they're a resource that groups can drop in on, work with, prototype, hack. They also run every year, a week-long hackathon, which 70,000 people from across Microsoft participate in. They take a week off of all other responsibilities and they pull together, and usually a multidisciplinary team to prototype, explore, or build something.

Fred Schonenberg
We've had Mike Pell on the show.

JoAnn Garbin
How nice.

Fred Schonenberg
Yeah, I think he was one of the first like three guests and he's one of the only multi-time guests.

Dean Carignan
So, we launched our book in Mike's garage in New York City.

Fred Schonenberg
I love it. What a great space that is too.

Dean Carignan
The other thing I was gonna say is that we also noticed a real need for innovators to be incredible communicators and to a certain extent, salespersons, because the near-termism is brought to you by your shareholders. And they just want to see that consistent return on their investment, which is their complete right and something they should ask for. 

The innovator is kind of coming into this mix and saying, I got this big idea, it doesn't generate revenue right now, and it's not guaranteed, but trust me. And you're selling the vision and the kind of delayed reward. And so we saw two patterns there. One, which is where innovators are just themselves incredibly persuasive communicators and can bring together the coalition of support to protect an innovation. We also saw people who very pragmatically spit out the role of inventing this new thing and being the innovation champion. And sometimes those are not the same person with the same skillset.

JoAnn Garbin
Yeah. And I'll just add from the intrapreneur entrepreneur, it's the same. Like as an entrepreneur, you're always selling and everybody in your company is a salesperson. The successful innovation teams in a big company are the exact same thing. It's just you're selling internally. 

Whereas in a small or entrepreneurial organization, everybody's mission aligned. You have this cognitive switch you have to do in an internal organization to recognize like a big company like Microsoft, people got their day jobs and they've got their metrics and they've got their whatever. All the systems are structured around today's products and services. So to Dean's point, you've got to start building that coalition early, like day zero of your innovation. You've got to bring people to the table.

Dean Carignan
In fact, pattern three in the book is called Innovate with Everyone. And it's that idea of building the coalition before you really need to ask for favors, inspiring trust and being incredibly disciplined in your craft of innovation. Because the other thing that can kill you as an innovator is if people think you're not reliable or if you're not gonna execute. The outcomes of innovation are uncertain, but the approach and process needs to be very meticulous and disciplined and structured because that's how you gain credibility.

Fred Schonenberg
Love that. And I think one of the things that you all talk about in the book that I jotted down was overcoming defeat through extreme collaboration, which I think is a lot of what you're talking about here. And maybe we'll come back to that, but I wanted to double down on one thing that pops in mind as you all were talking about the hackathons and all the luxury and great work that happens internally at Microsoft.

One of the things we've seen at large companies is this sort of not invented here syndrome. This unwillingness to accept any idea that might come from the outside or a startup that might wanna partner with Microsoft and do something often hits the R&D team. Wait a second, we've got all the PhDs in engineering and computer science degrees. We could build this thing. Did you see anything of that external, internal balance happening at Microsoft that was interesting or part of the book?

JoAnn Garbin
Yeah, so yes and no. Everybody we interviewed, we didn't find any not invented here in the people we interviewed, honestly. They were all ideas that came from everywhere. We worked with this group and we coordinated with that group and we invested outside. It really was extraordinary. 

However, that said, there is an age old joke in Microsoft of an org chart diagram where every bubble on the org chart is pointing guns at the other bubble. And it's not entirely untrue that that has existed too in the company's history. But there's been a lot of work to disarm the org chart and open up. And even just like the move to open source, like Visual Studio Code was the first open source product Microsoft put out. That's a huge difference from Microsoft of old. But Dean, what else? 

Dean Carignan
I would say, yeah, the org chart with the guns was a huge thing. And one of the things was the Microsoft that I joined when I first joined and not everywhere, not every part of it, but you could feel some of that. When Satya became CEO, he very systematically set out to change, especially that aspect of our culture. And he brought in, really leaned in on this notion of the growth mindset versus the fixed mindset.

And I think that he modeled that behavior in how he himself acted. And one of the things that I think was really helpful and he would repeat it over and over and over is we need to be a company of learn-it-alls, not a company of know-it-alls. And really echoed that message that good ideas come from anywhere and we need to pull together around the best ones and deliver them. So I think we've been through that journey and changed pretty spectacularly.

Fred Schonenberg
Love that. I think I could extend this for like four more hours, but I want people to go buy your book to find out the rest of what's there, but this is tremendous. I wonder if you could distill this down. I'm at a conference right now in Monterey and they had a speed dating where you network with people and we had like 10 minutes to talk to somebody. And so like if you had 10 minutes just to talk to somebody and you're running out of time or at the end, and it was like, what's one piece of advice would you have for a corporate innovator, maybe at a different company from what you learned writing this book? What would that advice be? And maybe I'll start with you, JoAnn.

JoAnn Garbin
You know, I will start with a phrase that at first people look at it and go, what? But it is quickly became the most popular takeaway of the book, which is say it ugly. And creating a space where people can say things ugly means you have an environment of such high trust that if somebody has a counterintuitive idea or a challenge to the status quo, a question to authority, any number of things that we know drives innovation, the trust of the environment is so high. They don't have to find the perfect way and the perfect time and the perfect person to say it to. Say it ugly and we'll pretty it up together. If you can achieve that, you've transformed from a company that produces innovations to an innovative company.

Fred Schonenberg
Hey, cool. Dean, what about you?

Dean Carignan
I love that one as well, but in the interest of diversity, you know, we studied the work preference, the work styles of innovative groups and we identified personas of people that contribute to innovation. But the one that we hadn't even thought about before we started the research was when we called the boundary crosser. And these were people who are really good at working across divisions, across disciplines, are good at going into research teams and bridging through to product teams and marketers. And we were amazed at how outsized impact these boundary crossers have. And every successful innovation group, Microsoft had several that fell into this category. 

We also realized that we ourselves are boundary crossers. So, you know, I think the bigger a company becomes, the more you need those people. And because the tendency of the company is always to go into silos and to cordon off and get vertical efficiency at the cost of horizontal innovation. And so people who break through those boundaries and connect and drive are just incredibly important.

Fred Schonenberg
I think there's a Dave Chappelle standup routine where he says, habitual line steppers. Yes. It feels like that's a different way to put it. Where can people go to get the book, learn more about what you all have put together?

JoAnn Garbin
Yeah, head over to www.innovationatmicrosoft, all spelled out, .com. Sign up to become a member of the free insider community. We're posting new stories and bonus chapters, all free for download. And all the links to buy the book, ebook, audio book, they're all there as well. So that's the best place to find us.

Fred Schonenberg
Amazing. And Dean, JoAnn, thank you so much for writing the book. It's fantastic. And everything you're doing to spark change and giving back to the STEAM community. And also for taking the time to share stories with us today.

Dean Carignan
Our pleasure.

JoAnn Garbin
Thank you for having us.