Craig Mundie: Innovation Convention

Remarks by Craig Mundie, Chief Research and Strategy Officer
Brussels, Belgium
December 6, 2011

Video Message

Thank you for inviting me to share some thoughts with you this evening. I’m sorry I can’t be there in person, but I’m honored to be here at least in a virtual sense.

This Innovation Convention is an important milestone in the development of the Europe 2020 Agenda, and I’d like to congratulate the commissioner on her vision and continuing commitment to innovation during these demanding economic times.

The Innovation Union flagship challenges everyone to rethink how research and development is done in Europe. It brings new energy to the discussion of how Europe can become even more competitive on the global stage.

While I can’t be with you in Europe today, Microsoft most definitely is. We’ve been doing business across Europe for nearly 30 years, and we share many of your goals around R&D, innovation, and helping build the EU’s future information economy.

As you’ve been discussing at this convention, information and communications technology is changing how the world innovates.

We’re at the beginning of an extraordinary time in computing, a new era that will transform how we interact with computers and what we can expect from them. Exponentially more powerful devices, cloud services, big data, and networked communications are opening up a world of possibilities.

In the coming years, computers will become less like tools and more like helpful collaborators.

As a result, billions more people will be able to use, and benefit, from computing systems.

One example of how this is starting to come about is Kinect, an enhancement to Microsoft’s Xbox gaming console. It’s a sensor that can recognize your face, understand your body movements, and respond to your voice. You can play games or control a TV simply by moving and speaking—without holding a controller.

We launched Kinect last year, and people quickly embraced this new way to interact, but the possibilities go far beyond entertainment. We’ve now made it possible for anyone who has a PC to create their own Kinect-based projects. I’d like to show you a few we’ve put together to give you an idea of some of the creativity we’re seeing worldwide.

(Play Kinect sampler video)

So you can see that Kinect has sparked a vast range of imaginative applications — and it’s only the first of these types of technologies.

What computers can do for us is also undergoing tremendous change, especially in terms of helping us gain insight from big data.

Massive volumes of data are becoming available in the cloud, and we are creating new ways to process and analyze it. We can now also apply machine learning to data to get insights that were previously impossible.

For example, we took data from nearly 10 years of patient admissions at a Washington, D.C., hospital, and used machine learning to answer the question: what makes someone more likely to be re-admitted to the hospital? We got detailed answers that no person, however expert, would be able to detect — such as, if you are admitted for congestive heart failure, you have a higher probability of returning if you’ve been diagnosed with clinical depression, or if you’ve been taking drugs for a gastro-intestinal disorder.

With this knowledge, we are able to create a predictive model to apply to current patients, enabling hospital staff to take preventive action and reduce costs.

Technology shifts like natural user interfaces and big data will enable more people to benefit from the power of computing and will improve our ability to innovate at regional and global scales.

The “global innovation economy” is clearly taking shape in many countries and regions.

Around the world, companies and institutions are increasingly collaborating across borders to bring new ideas to market more efficiently — a trend that will greatly improve economic and social well-being.

But there’s both good news and bad news here.

The good news is that technology is making it easier to collaborate, and R&D efforts are evolving to encourage the exchange of ideas and intellectual property throughout the process — a phenomenon the Innovation Union and others are calling “open innovation.” All this is helping new products get to market faster.

The bad news is that government policies for the most part haven’t evolved to support this new model.

The commissioner has identified some key areas for Europe that can be addressed by the Innovation Union flagship, such as sustaining a reliable stream of world-class research. Microsoft wholeheartedly supports these efforts.

In a competitive marketplace, there’s a temptation to focus on ideas that have obvious near-term applications and to emphasize applied research over basic, curiosity-driven research. That might mean taking fewer risks, but it often results in only incremental innovation.

On the other hand, investments in basic research can lead to breakthroughs that open up new and unexpected opportunities.

For example, to create Kinect, Microsoft tapped into the existing work of its research labs — including our lab in Cambridge, England — to overcome deep technical challenges in a very short time. But the greatest advantages come from a mixed approach — combining basic research with the diversity of ideas and inventions from external sources, whether they’re start-ups, innovation centers, universities, or industry partners.

To me, one of the key questions before the EU is whether Europe will continue going down the path of creating institutes to bridge the gap between research and industry, or will it focus more on developing research universities?

Europe needs well-educated workforces that can rapidly develop new technologies into products, which I know is a core goal of the European Institute of Innovation and Technology. But Europe can become even more competitive in the global economy by increasing its sources of consistent, high-quality basic research.

Research universities, in particular, play a dual role of engaging in basic research and educating the workforces of the future. They are also places where disciplines intermingle, and it’s becoming increasingly clear that an interdisciplinary approach is required not only to be competitive, but also to tackle complex world problems like education, healthcare, energy and the environment.

There are no simple answers, but the EU is in an excellent position to tap its rich history of invention, its large market, and the traditions of innovation, creativity and diversity that have made Europe great. By pulling these strengths together, the Innovation Union can be a game-changer for the European economy.

One other thing is certain. Collaboration is crucial, and we’re going to need better ways to meet and work together in the future.

There’s a new service called Avatar Kinect on Xbox LIVE that hints at some possibilities.

Over 30 million people around the world already have Xbox avatars to represent themselves online, and Avatar Kinect lets up to 8 people socialize together in a single virtual environment, no matter where they are physically. It can recognize facial expressions, and you operate your avatar simply by moving and talking.

Today this is just for entertainment, but it’s interesting to think about how something like that might be used in a business setting. Actually, instead of just thinking about it, let me show you.

(Walks off screen and re-enters event as a Kinect Avatar)

MÁIRE GEOGHEGAN-QUINN (European Commissioner for Research, Innovation, and Science): So, Craig, you’re very welcome as an avatar to our first innovation union convention here in Brussels. We’re delighted to see you here, and we’d like to invite you, as an avatar, I have to say I’m very nervous about this. I haven’t done this before. And we’re always, as Don Tapscot told us a couple of minutes ago, frightened of what we don’t know, and frightened of technology.

So, welcome, Craig.

CRAIG MUNDIE: Thanks, Máire. I think it’s good to be here, even as an avatar.

MÁIRE GEOGHEGAN-QUINN: We’re always in Europe willing to try new things, Craig. And we’ve been listening very carefully here in the auditorium to you, and what you said about innovation union.

But now that we can chat together, can I ask you, have you any extra thoughts on innovation in Europe? What do you think works well, and where do you think we need to have a game changer?

CRAIG MUNDIE: Well, one of the reasons that I suggested that we try this avatar discussion was, it’s something that the kids are growing up with now. We introduced it this year, and essentially young children and teenagers are using this to communicate and collaborate for social purposes. But I wanted to, in a way, highlight the importance of getting young people engaged in these scientifically interesting things earlier.

I know a lot of the conversations, which I had a chance to review over the last day-and-a-half, have focused on the universities, and the businesses, and institutes, but I think it’s going to be very important to have the feedstock of very bright, well-trained, young people, and I think we have to think out of the box, and recognize that they’re growing up in a different environment. We need to find a way to bring them into the innovation process earlier.

MÁIRE GEOGHEGAN-QUINN: Well, one of the discussions that’s gone on at a number of the sessions here over the last two days relates to this very topic, stem education; how do we get young people interested in stem education when a lot of young people are feeling that science, technology, engineering and math are very difficult subjects, difficult to get good marks in? What do you think we should be doing to encourage more young people into this area of education?

CRAIG MUNDIE: I think there are three things that are important. One, we’ve developed a media culture that tends to celebrate athletes and entertainers more than they celebrate the science community, and I think it’s important to be able to expose kids to the feats that are accomplished and produce the life that they live in by other people.

I think that the teachers also have to become more comfortable. Even as you said, you’re a little nervous sitting down and having your first avatar-based interaction, but in a sense, teachers face a similar challenge every day. They encounter children that are incredibly adept at using these technologies. Recently we did a report for President Obama, and one of the things we recommended to him was that we have to develop a way of getting the teachers to feel more acclimated to these kind of capabilities. And I think that things like that are going to be important as well as just exposure to the technologies.

MÁIRE GEOGHEGAN-QUINN: I like the whole idea that Robert Jan Smits talked about in his introduction about us being  you know, avatars of old were gods, and I think when I go back to the commission, and to the Directorate General for Research and Innovation, we can’t start behaving in a way like a deity of old. But if we come to a modern life now, and talk about innovation and how we can do exactly what you talked about, thinking outside of the box, finding solutions to global societal challenges. This is something that Microsoft and many other companies have really been in the lead in finding solutions to these kind of issues. I need to explain to ministers, and to people like Professor Roy, who is here with us this evening from the European Parliament, that we can do this, and we should invest money in this area, and that it’s money well-spent. Can you support that theory for me, so that it makes it easier to explain to the minister?

CRAIG MUNDIE: I think that’s absolutely true. There’s no way that we’re going to be able to solve these big problems without a big investment in basic science. I think many people have argued, even in the conference, that we’re nearing a point where many of the basic investments that were made sort of in the post-war decades have served us well. But to some extent, much of that has been realized.

And over the last few decades, in Europe, and the United States, government has shifted away from a lot of the basic science to more applied. At the same time, we have seen in the U.S., for example, that businesses and venture capital are really good at harvesting. And so, I think it’s going to be essential that the government recognize and support its role in getting this basic science work done. And without that, we’re going to cut ourselves off from the fundamental advances that are necessary to create not only solutions to these giant problems, but are going to be the bread-and-butter solutions to the things that will create jobs and drive the economy forward in the decades ahead.

MÁIRE GEOGHEGAN-QUINN: Talk to me about creating jobs and driving the economy forward in the decade ahead; of course, the biggest challenge for a politician, a minister in any member state virtually in Europe at the moment is they’re all dealing with austerity. They’re putting in place difficult budgets. They’re trying to decide where to cut, where to invest.

And obviously we’re trying really, really strongly to insist that they invest, and help them to invest in research and innovation, but, as you know, a politician or a minister wants to be able to deliver jobs next week, next month, next year. Investment in research and innovation doesn’t do that.

So, you know, give us an explanation, if you like, that we can use with the ministers and the governments that really focuses their attention on the fact that research and innovation investment is an essential, is a necessity. We create the growth and the competitiveness that we need in Europe’s economy.

CRAIG MUNDIE: I think that one of the essential elements of understanding how to deal with this is to separate the research part from the developed part. Almost everybody talks about R&D like it was one thing, but in fact it’s two things. One has a very basic role to play, it’s a foundational capability and you have to be willing to make risk-based investments in that.

The other is essentially harvesting and the creation of these things, or the products that everybody uses every day, and I think that one of the challenges that governments face, particularly in austere times, is that they don’t have a good intuition about what’s R, which I think is perhaps their most primal role, and what’s D, where there are many other components that contribute. The private sector, businesses, venture capital, all of these are supplemental in that domain. And so I think, particularly when you have to focus on these things, the government can spend less money.

I think, on the developmental part, as long as what they do is create the right environment for these other factors to be able to flourish, having the right infrastructure in place, making sure you’re supporting the education system, including at the STEM education level. Having favorable environments for investment, at the end of the day, the business community globally is going to invest a lot more to make the products that create the jobs than the governments ever will. And so it’s all about leverage in my mind.

And if you, in a sense, subtract a little bit away from the short-term, and put more of the government’s money on the long-term, and then make sure that the role of government is charged properly with respect to creating these favorable conditions, then I think you get the best of both worlds. My great fear is that if people confuse a government investment with the immediate creation of jobs, what you get is sort of an unsustainable stimulus model of how this is working, and we in a sense can see in Europe and elsewhere that we really can’t afford that any longer.

So, I think it’s sort of a question of back to fundamentals, and fundamentals mean long-term science investments, that’s got to be supported by the government, getting kids and others involved in that environment, and then creating a favorable climate for business and private investment to solve the current day problem.

MÁIRE GEOGHEGAN-QUINN: So, finally, Craig, and obviously we very much appreciate your taking the time to talk to us at the conference today, and be present, and give of your time, which is very precious, I know. If I were to say, or to ask you, when Microsoft sits down to decide where to invest in the world, whether it’s an R&D facility or not, what are the elements present in a location that would really encourage Microsoft to come and invest in that location?

CRAIG MUNDIE: If you look at how the company has evolved, I think the first thing that has guided us always is availability of talent. Microsoft is almost a pure intellectual property business and as a result the only input to our factory is smart people, and the only output is their ideas encapsulated in a technology. And so we have a much more pure assessment than other people might because we don’t build giant factories, we don’t have some of the traditional kinds of incentives that other companies might look for. So, for us it’s first and foremost the people. In research activities the thing that has always guided us is the quality of the elite research universities. We see the collaboration with them as essential. Interestingly, for example, in our pure research activity we have as many interns and visiting scholars every year as we do employees. And so, the proximity of these students and the ability to collaborate with them in the academic environment is an essential part of how we do our research.

On the development side, we’re invested in many places in Europe, some through acquisition and some through organic growth of our own. But, again, the key is the right business climate in which to operate these businesses, and in particular be able to have and hold great people. And so I think in the end, much like venture capitalists, many people think venture capitalists invest in projects. My own experience, having been the recipient of that is that in the end they really pick people because that’s where all the leverage is. And I would just say that your colleagues, it all starts with your people, and everything else good flows from that.

MÁIRE GEOGHEGAN-QUINN: Thank you, Craig, for joining us. And thank you also for the tremendous support that Microsoft has given us in the preparation of Innovation Union and indeed in all of the elements that we have set out there in Innovation Union that need to be pushed aside, the barriers, or the obstacles that prevent companies from coming in and innovating, and companies, indigenous companies being able to expand and develop and grow from being a small to a medium-size to a large company.

I’m thinking this evening, I have a six-year-old granddaughter in the United States who is watching, and she thinks that it’s perfectly normal that her grandmother should talk as an avatar. For me, it’s an extraordinary experience. I know for everybody here they probably think, well, where does she think she’s at, but thank you for giving me the opportunity and for showing what we can do on both sides of the Atlantic by virtue of Avatar Kinect.

Thank you, Craig, very much for being here. (Applause.)

CRAIG MUNDIE: I appreciate being here. I wanted to say it’s fantastic for you to participate with me this way. I wish everybody a good evening and the end of a successful conference. (Applause.)