Microsoft's Elop: It's 'Time to Double Down' on R&D

After spending most of his professional career at companies that competed with Microsoft (MSFT Quote), Stephen Elop joined, as he jokingly calls it, the "Evil Empire from the Northwest." That was a little over a year ago. As president of Microsoft's Business Division, Elop oversees the largest revenue-generating division of the company.

He held various positions at Macromedia starting in 1998, rising to CEO after Rob Burgess stepped down in January 2005. In that role, Elop facilitated the acquisition of Macromedia by Adobe Systems (ADBE Quote), completed in December 2005, and joined Adobe as president of worldwide field operations. In January 2007, he left Adobe to become Chief Operating Officer for telecommunications provider Juniper Networks (JNPR Quote). In January 2008, after extensive interviews with Bill Gates and other leaders at the company, Elop joined Microsoft.

Elop recently gave a keynote address at the Wharton Business Technology Conference in Philadelphia, where he unveiled a "concept" video titled, "A Glimpse Ahead," that paints a vision of where Microsoft sees technology headed in the future. The video's futuristic scenarios -- from wall-sized global teleconferencing systems to tiny credit card-sized devices with location-aware data displays -- were designed, in part, to counteract the claim that Microsoft is not an innovative company. The slick user interfaces in the high-tech devices also signal a renewed focus on the user's experience. As Elop told Knowledge@Wharton, "I came from companies where the experience is fundamentally the differentiator," and one of his goals at Microsoft is to "delight" customers with "unparalleled experiences." Microsoft, Elop noted, "does this sometimes; other times it does not."

Even before the current economic crisis, Microsoft's Business Division faced challenges from disruptive business models and a major technological shift from desktop software to web-based applications. In stewarding Microsoft through this transition, Elop needs to protect revenues from the company's traditional software products while not lagging behind in the emerging arena of online, "cloud-based" software accessed over the web.

Knowledge@Wharton sat down with the 44-year-old Elop following his keynote presentation at the conference to discuss how Microsoft intends to balance leveraging its traditional strengths with moving forward to the next generation of connected software applications. He also talked about how the current economic crisis is reshaping Microsoft's business strategy. An edited version of that conversation follows.

Knowledge@Wharton: Can you characterize your current role at Microsoft?

Elop: I am the president of the Microsoft Business Division, which is responsible for taking care of information workers -- be that someone in the corporation or an individual at home. Of the range of products that we cover within our division, the Microsoft Office suite is the largest element. But [the division also includes] collaboration products like SharePoint, our unified communications stack, and our Dynamics product for ERP and CRM technologies.

It's the largest division in the company by revenue -- not the largest by head count. The field organization is larger.

Windows and Office are two of the bedrock elements of the company, but Unified Communications [UC] and Dynamics are among the fastest growing elements of the company.

So, while people first pigeon-hole me as "the Office guy," there's so much more. UC is a multi-billion dollar business. SharePoint surpassed a billion dollars for the first time last year. Anywhere else on the planet, those smaller businesses would be entire companies all by themselves. Given the scope of Microsoft, they're part of a division.

Knowledge@Wharton: With Office, you have a product that is very profitable and dominant in its category. In some of these other cases, however, you're entering markets where there are already strong competitors. How does your marketing strategy differ in those instances?

Elop: You have to approach things differently. You have to look for opportunities where the whole is greater than the sum of the parts. We do not think of it as: Here's our UC marketing strategy, here's our SharePoint strategy, here's our Office client application strategy. We think about: What is our strategy to help people become more productive? What is our strategy to help information workers? What is our strategy in terms of the business productivity infrastructure that they need?

When we have a conversation with a customer, it's less about pitching specific products and more about talking through how we help them solve business problems -- which today means saving money, becoming more productive, things like that.

We focus on a high degree of interoperability between the different products. You may think of Office as Word, PowerPoint and Excel, but within a corporation we think of that Office suite of products as the companion to the server capabilities, the workflow, the business intelligence, the various things they can do in their corporation ... with the whole being greater than the sum of the parts. It's all those pieces coming together which offers the best value for our customers.