Steve Ballmer: Cambridge Energy Research Association Week

STEVE BALLMER: Well, it’s a real honor and privilege for me to have a chance to be here with you. I will say I’m a little intimidated. (Laughter.) The after dinner speech I think of as generally the kiss of death, and yet it is the straw that I have drawn, so I will try to do my very, very best to hopefully keep you entertained here for a few minutes and then Dan and I will have a chance to take questions and have a bit of a dialogue.

You know, for me, this is a great honor. The oil and gas industry to me is really quite phenomenal, everything that’s going on in energy, its importance to the world. We’ve made a serious commitment as a company to build an expertise in understanding the industry so that we can, with other partners, be very good at hopefully providing important technology innovations that are transformational in what they do for the oil and gas and energy industry.

So when we got the offer from Dan and the folks at CERA to come speak, I’ve got to say it was fantastic, although for me this is a new organization, a new institution, new event and I think I was telling Dan earlier I was at a board meeting for Accenture where I’m on the board, and one of our directors passed me the Wall Street Journal that had the ad for this event in it with my picture. And so I told Dan, I said, wow, this is bigger and bigger and bigger then I knew. So I’m really pleased and delighted to have a chance to be here.

Dan talked a little bit about our R & D budget and spend, and I’m going to talk some about innovation, but I don’t want anybody to kind of feel jealous of the fact that we get a chance to spend money on R & D; the truth of the matter is I don’t think most people in the world would aspire to be in a business like ours where essentially the product never gets used up and it never gets worn out. I didn’t say it never breaks because I think people have experiences to counter on that — (laughter, applause) — but it never breaks in ways it wouldn’t have broken on the first day.

And so in a sense, the lifeblood of our business is that R & D spend. There’s nothing that flows through a pipe or down a wire or anything else; we have to continuously create new innovation that lets people do something they didn’t think they could do the day before so they get the newest version of a Windows or an Office or a new program, new application that we put in place. And so in a sense you could say all we have to live with is our innovation.

I would say that to understand how we think about our industry, let alone innovation, it probably is important to talk a little bit about how we see our mission and our industry’s mission. Mission statements, certainly when I was younger, I was always a little bit, what shall I say, skeptical about mission statements. Every company, every division, every group, everybody’s got a darned mission statement, and I think in most places the employees don’t even know what the heck the mission is anyway so it made a bunch of leaders feel good that the wrote it down.

Our mission has actually always been important to us, but basically on the theory that necessity is the mother of invention.

I dropped out of Stanford Business School 25 years ago to come to Microsoft, joined my friend Bill Gates. I’d been at Microsoft about 30 days, and I felt like maybe I dropped out — there were 30 people in the company, I didn’t have a desk, there was no office — and I guess I thought I dropped out of Stanford Business School maybe to be the bookkeeper of a 30-person company.

So I went to Bill and said, ‘Bill, maybe I should just go back to school.’ And Bill looked me in the eye — his dad I remember was at the dinner we were at — and said, ‘Steve, you don’t get it. We’re going to change the world. We have the opportunity to put a computer on every desk and in every home.’ That was our mission statement for almost 20 years, and I swear those words were born as part of a sales pitch to keep me from going back to school. (Laughter.)

But a mission is a powerful thing to guide innovation. Our people knew what we were about, they knew we were about somehow making there be enough power and enough ease of use to propel this essentially form of free intelligence onto every desk and into every home. It was beautiful also in the sense that it was actually a mission statement where all of our employees could count how we’re doing — a million computers this year, 2 million the next year, 3 million, whatever. I remember a day in the late ’80s when Andy Grove from Intel said, ‘Some day there will be over 100 million computers shipped a year,’ and Bill Gates and I looked at each other — we’re both imbued with this technology and love it and everything — and said, ‘Andy’s lost it.’ (Laughter.) ‘This business will never be that big.’ This year there will be 200 million computers sold around the world, and even still, this mission of a computer on every desk and in every home is unfulfilled.

But about six, seven years ago our employees came to us and said, look, this is not good enough. The mission is not good enough. We didn’t have to do anything, the employees said. The mission is not good enough because we’re trying to actually take this, let me call it, “free intelligence” that the microprocessor represents, and we’re trying to put it other places. We’re trying to put it in the pocket. We’re trying to put it in the datacenter. We’re trying to put it in the television set. We’re trying to put it in the plant controller. We’re trying to put it here, there, here, there; we can’t talk about every desk in every home.

And we worked on it and we tried a v.1 — the employees didn’t like that. We worked on it again and we really latched onto a new mission statement. It’s less perfect actually than our first one, but I think it captures a lot about not only our company but our industry. We talk about enabling people and businesses throughout the world to realize their full potential. No mention of technology particularly, it’s a lot of blah, blah, blah, a little soft in some senses, but if you really stop and think about it, that’s the fundamental promise of information technology. It is an enabler for creativity, for productivity, for the human imagination in every sense.

In some senses, you could say IT is to the human brain what power or energy is to the car or to the stove, to anything else. It is a fundamental enabler, and in our case we think it’s a fundamental enabler of human potential.

And so it draws you into all kinds of places to innovate. What are the things people want to do? People want to access information to make smarter decisions. It’s still basically very difficult today to pull information from multiple systems and then, boom, see the view that you want of your information. I mean, just think about your own daily life. How many times a day do you wish ‘I wish I could just give a simple command in English, the computers would go find the darn information, pull it and put it in a form where I can look at it.’ Huge opportunity for innovation, huge unmet needs, huge unmet needs.

You know, people kind of like Internet search today. It’s kind of a cool thing, and yet if you think about how primitive it is versus where it will be in ten years, how much poking around and pushing and pulling you do and how less good in some senses the information access and retrieval is on corporate networks. So we think about how to bring this information alive and empower it for people.

The way we communicate is still primitive relative to being assisted by information technology. What is different about the speech I’m giving tonight than the speech I would have given when I started at Microsoft 25 years ago? You’re all sitting there at your tables. I’m sitting here with a mike. There is some PowerPoint up here that I’m not going to change tonight because I don’t want to bore you to death. There’s this person here shooting videotape that nobody is ever going to watch, no offense to the video man (laughter), but every — not true, Dan says. I’ll bow to that, but come on, we all know there’s video taken of every meeting, and the number of people who watch the videos is really de minimis at the end of the day. (Laughter.)

Well, come on, where’s the information technology? Why aren’t my remarks being broadcast over a wireless LAN in this room? Why don’t you have a little device in your pocket that’s recording it, video, audio, everything else? If you want to take a note, why isn’t your note synchronized with exactly what I’m saying when I’m saying it? Why aren’t we improving the way people communicate and collaborate?

Think about this industry. You’re spread far and wide, as far and wide as any industry around. How do you bring together the best ideas that the engineers in Kuala Lumpur, in Nigeria, in Houston, in Dhahran — how do you bring those best ideas together and let people communicate and collaborate in some kind of way that is reasonable relative to time zone, relative to real time interactive communication, relative to information sharing?

Why do I go on and on about the things you can’t do? Because it points to the need for innovation. It points to the uncapped potential in this notion of enabling people to realize their full potential.

And we talk about speech and we talk about natural language and information access and better communications. I was with the Sprint guys — in the telecom industry, we talk about digital convergence and RFID for tracking important things that will happen certainly in this industry and many others.

The number of areas in which information technology properly harnessed in the right innovative hands can make a difference we think is absolutely unbelievable — this industry and a variety of other industries.

So our lifeblood is innovation. We sit there all day every day and say, ‘How do we push ourselves fast enough?’ When we’re not the first company to have an innovation, our people, that’s a depressing day. We had a couple depressing days in the last year. I mean, nobody likes to be beat out the door by Apple, with something like iPod as an example. (Laughter, applause.) But the truth of the matter is that means what you have to do is foster an environment where you’re letting people dream, you’re letting people be creative, but you’re also focusing people because you can quickly degenerate into what I might best call chaos or anarchy, and how do you hit that balance between encouraging people to follow new ideas and yet actually do what I’ll call the production, development and engineering of innovation.
So there’s kind of an art side, there’s kind of a market understanding side, but then there’s really a production craft. And particularly in the environment where we live today, people worried about security, cyber security, our engineering craft is all the more important — that we’re able to produce these products not only on time but with the kind of quality and security requirements that are very important.

One thing we have learned about innovation is you’ve got to be willing to invest in some flowers that may not bloom or may take a long time to bloom. I think if I was to use an analogy from your industry, we are less wildcatters than we are tenacious pursuers of important ideas.

Bill Gates, Paul Allen, they believed that what we call now graphical user interface, a screen that looks like Windows or Mac, and not a screen that looks like old style screens from the mainframe days, would be the way of the future. We started our effort on Microsoft Windows in 1983, we shipped it in ’85 and failed, we shipped it in 1987 and failed, we reshipped it in 1988 and failed and we finally got some success in 1990.

We learned two important lessons that I think are important in any innovation company. Number one, it is important to be tenacious. Most innovation doesn’t really happen in some magic room, stroke of genius, ta-dah! You occasionally get one like that but you look at most of the great things in our business, SAP was at it for years before they broke through. We were at many of our innovations for years before we broke through. Google was at it for years before they broke through. And so, innovation is not just a process of immaculate conception. It is a process of tenacious belief in some fundamental vision and some fundamental opportunity, but it is also a requirement that you believe not only blindly in your innovation, but you have strong muscle that is customer-focused and customer-responsive.

Some people tell you all they do is listen to their customers. Any innovator who tells you that is not an innovator who’s going to succeed.
Some innovators tell you ‘I’ll follow my mission and vision to the end of the earth.’ They too will not succeed. You need a vision, you need a mission, you need to know what you’re going to do, you need to be tenacious about it, but you’ve got to listen and hear the problems people are having.

You’re having security problems. We’ve got to listen. We’ve got to hear. We’ve got to respond. We built a technology into our Windows product which everybody here I’m sure is familiar with. You can get a little message on your screen: An error has occurred, blah, blah, blah; do you wish to send to Microsoft, yes or no? I’ll bet a few of you have seen this message. (Laughter.) Statistically, that was a safe bet. (Laughter.)

Now, I can stand here and say I’m embarrassed, I’m ashamed — how could we do that? Or I can tell you that what we now have is a statistical way to understand the experience our customers are having — a statistical way to train and channel and focus the innovation that our engineers bring to a problem. I can tell you we are a better innovator because we have better understanding of what’s really going on with the customers, in addition to our vision and belief in what is possible.

So I think there is a lot to being a good, innovative company and I don’t think we are at the end of our road in our learning. On my commitment sheet for our board of directors, commitment number one: enhance our innovation capability and agility. And I think we’re really good, and I think we need to be really better, and I think that’s probably true of most companies in most industries and specifically in the oil, gas and energy business.

I’m not an expert in what you do. I get briefed and re-briefed, I get a chance to read, I’m going to read Dan’s book, he was kind enough to send it to me, which I’m pleased about, but I think it is fair to say that we will need and we will get innovation and change in the energy business over the next 10, 20 years.

When I’m in front of IT audiences I just ask people, ’10 years from now do you think our world is going to be substantially the same or substantially different?’ And people uniformly say substantially different. I think you’ve got to ask yourself the same question and then what premium does that put on innovation.

When we think about this from our perspective, what we’re trying to say is how do we not just deliver word processors and spreadsheets — and let me call it our generic software to this industry — but how do we work with partners to really deliver solutions that bring next generation, benefit to the work that you do?

I had a chance to sit down today with a partner of ours, some of the folks at Schlumberger, and we’re talking about the next generation of their software and what it needs to look like, and how they give better information — better predictive information — to the geoscientists and the engineers. Where can software aid in that process? What kind of decision support? Where can the technology go? They’ll deliver the real solutions the folks in this industry will use, we’ll partner with them on that.

In the area of capital, I don’t know what the estimate is, how many trillions of dollars over the next 10, 20 years this industry will invest in capital equipment. There’s a huge opportunity for information technology to help optimize the implementation and use of that capital.

We’ve got a great partnership with Accenture and Avanade, a group called The Project Group, working on project management, enterprise project management systems, to help with these kinds of projects. We’ve worked with Gazprom on the pipeline across Russia, we’ve worked with the folks in Qatar on some of their new Liquefied Natural Gas plants, on technology to help them optimize capital investments.

We’ve got a partnership with a host of folks around something we call the Oilfield Connectivity Framework — that’s as technical as it will get tonight, I promise — but it really is a set of companies, including folks like Emerson and Honeywell and Microsoft and Invensys and Accenture, and a group of folks who share the passion that some of our customers, folks like Shell do on what they call their Digital Oilfields or SmartFields initiative. How do you use technology really to optimize the portfolio management that you can get out of one of the productive producing assets in this business?

And the range of value that IT, that information, will bring and what that will enable I think will continue to be amazing, and frankly be one of the places of great innovation in your industry; how does information technology in its generic form meet the specific, whether it’s information analysis, what we call business intelligence, how do those things come together in a way that really improves not just the productivity of the industry and doesn’t just lower the cost of the industry, but really gives you the capability to model, to simulate, to do things that people never dreamed they could do before.

And we’re certainly keen on that, and that’s why we’ve invested to build capability. We’ve brought on board geoscientists at Microsoft so we have some ability to relate and connect and understand, not only with our customers, but with our partners really in this industry.

Our industry, information technology, and our company will be doing a lot of good and exciting things, important things, things which I think are not only exciting — new communications technologies, new collaboration technologies, some of the things I described earlier — but I think we’re actually also approaching an important milestone which is maybe where the rubber ultimately meets the road.

In the Internet world, there has developed kind of a new standard called XML for the way computer systems talk to each other. You could say, OK, it’s dinner, Steve, we’re after dinner, we’re done. Why are you going here at the end of your talk for darn sakes? But in a sense, part of what this is all about is letting the best innovation from companies like ours, from individual companies in the room, from companies like Schlumberger and Accenture and others of our partners be integrated seamlessly.

What’s the best innovation? The innovation you don’t have to reproduce. The innovation you can pick up and use and tailor and customize. Why was the wheel a great invention? Because you could reuse it. Why was the 2×4 a great innovation? Because you could reuse it.

We’re at the dawning of an era, really, where software and information technology can be plugged together in the same way, so you can take the kinds of generic innovations that we bring with the specific innovations that people in this business bring, tailor them in unique ways for any company in this room, and really have that be part of the lifeblood of building a whole new scale and level of innovation in this industry.

So I was delighted to have this opportunity to be invited here to speak with you. I hope I’ve whet your whistle at least a little bit in terms of thinking through not only how your industry maybe should think a little bit differently or could think a little bit differently about innovation, but maybe even more importantly why information technology will be an important part of the way next generation innovation happens in the oil, gas and energy fields.

I thank you for your time, I appreciate it. It’s been a real pleasure. (Applause.)

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