Kevin Turner: Potomac Officers Club Executive Business Breakfast

Remarks by Kevin Turner, Chief Operating Officer, Microsoft Corporation
Potomac Officers Club Executive Business Breakfast
Washington, D.C.
September 21, 2007

KEVIN TURNER: I’d like to thank you for allowing me this opportunity to share a little bit of our perspective on how we see technology trends in the marketplace, and how we’re mapping our business to align ourselves to take advantage of those trends. I think that’s really the crux of what we want to talk about, and sort of the transformation that’s going on at Microsoft. There’s a lot happening there that I think is good.

But before I get started, I’m also proud to be able to say today we’re not going to ask that you make a donation to the campaign. (Laughter.) That would be a competing audience in this hotel, so certainly there is no money involved in the campaign (inaudible).

To jump into it, there’s a couple of things that I wanted to set up first. I want to talk about business excellence, and this is really just sort of a look under the hood of what we’re doing at Microsoft and how we’re aligning it and, really, the things that we’re working on. We have a lot that we’re working on and a lot of areas that we need to improve. I’ll talk about some of those. But I’ll talk about some of the approaches that we’re using to address them, and then I look forward to a robust Q and A session where we can have a dialogue about what’s on your mind or what questions you may have, or feedback for us.

Before I get into it, I would like to say thank you to the big customers and partners in the room. I want to thank you for, a) your attendance today, and b) certainly for your partnership and belief in Microsoft, and certainly you’re a large reason that we’re able to do this to talk to you today.

There are four areas and, you know, I’ve got responsibility for all the field offices. We sell products out of 191 countries around the world, it’s truly a global organization of unbelievable proportions. In my travels, and I’ve been around the world I guess close to seven times now in the last two years, there are really four key trends that we see in the marketplace, and feedback from our customers and partner channels, these are the areas that we think are very hot and are certainly, over the next three, five, seven years are really going to transform from a technology standpoint.

The first area is around mobility. And, certainly, cell phones have been around a long time and there is a lot of activity in cell phones. What’s happening right now from a mobility standpoint is the ability to do a lot of different things via a cell phone or smart phone or a portable device. And in that we see the opportunity being unbelievable as it relates to — you think about the things that you can’t do today on a mobile device, we think most of those will be taken care of down to the level of, you know, when you do an airport check-in, being able to have your data show up on your smart phone and being able to, when you’re waiting for a plane, if the gate changes, it’ll automatically notify you and tell you to go to another gate, being able to get bank account balances and recent history and all those things at your fingertips on a mobile, connect anywhere, anytime environment is something that we see exploding, and certainly from a mobility standpoint, we believe that, you know, people — how they work and where they work and when they work continues to (inaudible). And I’ll talk a little bit more about that in a second.

The second area is collaboration. Certainly you go to Facebook and My Space and a lot of the social networking trends that we see in the marketplace, and those are very powerful and impactful. We have something called Xbox, which is a gaming system, 2 million people a night play Xbox Live online against one another, from around the world, the ability to play Xbox Live and create that social ecosystem that goes along with a connectivity event is something that’s very, very impactful, and something that we’re, you know, again, still trying to figure out where the network is going to take us from a social networking standpoint.

We’re also seeing that move into the workplace. So in the workplace, things (inaudible) SharePoint that allows people to share information, store, retrieve, find information. So the social networking isn’t limited to simply the consumer side, it’s also moving into the work space in a very big way. So we’re lining up our solutions to be able to allow people or enable people to find, use and share information. That’s something, again, from a collaboration standpoint, where it is going to go is very exciting as we go forward with where it’s going to end up.

The third one is software plus services, and this is the newest entrant in the last 18 to 24 months — it’s been very impactful. When you think about software plus services, you might know things — ring tones where people can key in some things on their cell phone and get a ring tone. That’s software as a service.

If you think about things around the area of American Idol, one of the most-watched TV shows in the United States and Europe, the ability to vote for a singer that you like is software as a service. And so there’s all kinds of manifestations of software as a service that are popping up out there. The thing that we think is most unique about our proposition in the marketplace to leverage software plus services is this ability to build out our current portfolio of products and build those out and extend them so that there are services attached to them. So this new subscription model where today you’d buy a traditional license, then you’d go from the standpoint of saying, hey, look, now I want to pay for what I use, or I want to pay my utilization, or subscription-based, or a balance of those, for that matter, that would be enabled as software plus services continues to emerge and get into the marketplace. So we see that’s an exploding area.

Unified communications is the fourth trend that we’ve picked up on in the marketplace, the convergence of voice and data and video in the PCs and the telephone and the smart phone and the cell phone, when you think about the ability for that to all be connected, and having the unified communications (inaudible) across these trends that allow you to connect up, hook up, and be able to access information anywhere, anytime, it’s a very good opportunity for us.

When you map out software plus services, we actually believe that people will want more and more data (inaudible). What that basically means to us is somebody else is going to host it. So wherever you’re at in the world, you have the ability, using software plus services or unified communications, to access that data, to be able to do whatever you need to do when you need to do it and where you need to do it. The strategic advantage of putting these four things together is it’s really about mapping — how do we map our investment across these trends?

And so when you look at it, some of the things that we see in the marketplace, we had to evaluate our current aspirations as a company. Microsoft is 32 years old. The original vision that Bill had for the company was, look, we want to be the one company that can help enable a PC on every desk and in every home. And certainly in mature markets that vision is well on its way to being achieved. Big opportunity, though, exists in emerging markets because there the PCs are just rolling out with a lot of people in those markets, it’s a huge opportunity for us.

But the fact of the matter is, based off of those four trends, our vision for Microsoft and aspiration has now changed. And our new vision for the company is, look, across these trends and what’s happening internally, we want to be uniquely positioned in the marketplace to (inaudible) the digital work style, and the digital lifestyle. Because where people work and how they work, again, continues to grow. And the ability to enable that is something we’ll focus very hard on. So this is the new aspiration for the company, and this is important because in a technical company like ours, rallying people around the cause that’s bigger than themselves is important for us to get the consistency, the energy, the passion for being able to take advantage of the technology.

With technology, as you know, the landscape changes very, very rapidly. So having people capturing the hearts and minds (inaudible) around specifically connecting these two things, lifestyle and work style, is very important for us. But it also goes back to our mission as a company, and I’ll share with you our new aspiration, but our mission as a company has not changed.

I think we have one of the coolest mission statements in all of business. Our mission statement, again, is something that pulls us all together and unites us, enabling people and businesses throughout the world to realize their full potential, that’s the mission statement of Microsoft. But also noteworthy are the six values of the company because it’s important as you map for an aspiration, linking the values of our company is something that we spend a lot of time on. Of course, integrity, honesty, passion, respectfulness — then there’s one on here, taking on big challenges. That’s one of the six values of Microsoft, getting people that are not afraid to take intelligent risk. Having people stretch versus (inaudible) and that’s something that we spend a lot of time on making sure that we have that intelligent risk as a culture and an attribute and a value.

The next one is one I want to talk about, constructive self-criticism. Self-critically, we’re not (inaudible). I think this is a very strategic value for our company. Having our people have a divine discontent, never be satisfied, good is not enough, is something that, again, is very important for us to continue to get people to stretch and reach beyond their comfort zone. And then, of course, accountability. So it’s not enough for us to sort of settle for software and hit our numbers, we have to live our values, and that’s an important part about how we’ve directed and made sure that we’ve — as I show you the (inaudible).

We have to become good at both innovations and operational excellence to achieve excellence, and these are the two things that I want to share with you, how we’re approaching those to really take advantage of those four trends that we see in the marketplace.

When you look at innovation, this year we’re going to invest 7-plus billion dollars in research and development this year alone, US$7 billion, more than any technology company in the world. We’re going to invest it in about four different areas. The first area that we’re going to invest it in is the first pillar, it’s the pillar that built Microsoft, that’s where Windows Vista lives, where’s where the 2007 Office system lives, that’s where our client-based, PC-based software is. And it’s important to us, we’re going to continue to invest in it and continue to grow that.

The second pillar is a pillar that’s very important to us because it’s the fastest growing both from a revenue standpoint and from a profitability standpoint, and that’s the server and business application area. And that’s an area that says, hey, Microsoft, you need to move beyond a PC company and get into the infrastructure, and we’ve successfully been able to do that over the last 10 years, so that’s important for us to have (inaudible) both the desktop and the server.

The third area, entertainment and devices, that’s where Xbox is, that’s where Zune is, that’s where Microsoft TV is, Windows Mobile, the mobility server that I talked about. You may not know that Windows Mobile runs on Blackjack, Q, a lot of the smart phones that you can buy today run Windows Mobile. And we sold more Windows Mobile units than BlackBerry for the first time, and so we’re beginning to really get traction in that space and learn a lot about the mobility space. But, quite frankly, this is a pillar that we’ve invested in for a long, long time. The last probably five years we’ve been very focused on gaining share in this space. Also, candidly, we haven’t figured out how to make any money in that space. And so the big opportunity for us over the next three to five years is now figure out how to make money.

And one of the things that I’m also very excited about is we’ve got a little launch coming up called Halo 3, you all may not have heard of Halo 3, some of you if you have kids probably have. Halo 3, on the day it launches, we project that it will sell more on that opening day than any movie, any DVD, any CD, and any other media type than has ever been done in the history of media, on that opening day. That’s how impactful the gaming systems are. And so we think about it — and I know now you’re saying, gosh, if you’ve got that, you should be able to figure out how to make money on it. I can honestly tell you, we’re working on that very, very hard. But we’re excited about what’s going on, again, with Microsoft titles and Halo, so look for that.

Software plus services is the fourth area we talked about. Again, it’s about extending our current portfolio to include software plus services, not simply shifting our entire portfolio to software plus services, but enabling so the customer can choose. We want the customer to be able to choose what things would they like to find based on (inaudible) or what would they like to actually control, what would they like a partner to control, and if they want Microsoft to host it, then Microsoft will have the ability to host. And so that ability to be able to let customers choose we think is a differentiator for us.

Our aspiration is to be a multi-dimensional, multi-pillar company as it relates to innovation and, certainly, that’s where we’re focusing the investment of $7 billion a year in R&D. I also wanted to show you just briefly the breadth of the products that Microsoft has. These are just some of the products that we’re going to release this year. And when you think about it, we’re one of the few companies that sells to end users and consumers, all the way up to the largest companies and the largest governments in the world. And, again, with that there’s been a lot of (inaudible) of portfolio. And I know for some of you in the back of the room it’s a bit of an eye chart (inaudible) to show you the different areas that as a company Microsoft has basically played, and we have a big opportunity, again, to leverage that. Quite frankly, there is more innovation coming into the marketplace than we’re able to catch and land, which brings us to the operational excellence piece that I want to talk about next.

The key to operational excellence — so when we come into the company, 32 years old, a billion people every single day use Microsoft products. A billion people in the world. You should know that only 500 million pay us for it. (Laughter.) So therein lies an opportunity. But the salesperson in me also says, hey, look, there are 6 billion people in the world, let’s figure out a way to go get that over five billion — even if only half of them pay for it, that’s still two and a half more billion people using our stuff every day.

We think we have a big opportunity. But that strong foundation of being the great innovation company also means balance with becoming (inaudible) operational excellence. And so we’ve really been on a journey in the last couple of years to figure out how we incorporate, institutionalize the element of operational excellence within a technology company without stifling the innovation. And so what we’ve done is really start with this thinking and we say, look, the key to operational excellence is elimination before automation.

As a technical company, our natural tendency is to say, hey, if something’s complicated, let’s automate that. The danger you get into is if you don’t follow this model first, you end up automating that process or automating things that, quite frankly, are unnecessary. And so enlisting our people to eliminate the unnecessary and become a simplifier is something that we’re actively working with, because it has to start at all levels of the organization to really make progress.

Again, the opportunity that we have is to pull out the things that just simply aren’t relevant to customers, and aren’t relevant to us becoming a (inaudible) company. And that’s our challenge. And, again, this is an early journey as we transition the company. But there are three key areas that we’re working on to build the muscle. And so we’re actively building this muscle of operational excellence, which will take some time, but we’re doing it across three areas.

The first way we get a call to action you say, hey, what do our customers say? What do our partners say? Having that external focus is important to us. What do they say? They say at Microsoft it’s (inaudible) doing business with you. And so using that as a rallying cry inside the organization to say, hey, here we go, eliminate before we automate. What we can’t eliminate, then let’s automate. But as we go on focusing on taking care of customers and partners, making that really the first anchor and the flag that we plant in the sand to say, look, this is what we all have to get rallied around, things begin to change. We reduce our licensing programs effective this year by two thirds. We’ve taken the number of programs down by two thirds in one year, which is a big opportunity for us to do better with licensing (inaudible). And we’re not done, we’re just getting started in this space, but I wanted to share it with you.

The second opportunity we have, as I’ve talked to you about 191 countries where our products our sold, the opportunity we have is how do we get this global organization on the same page? How do we do that? How do we get all the visions, all groups, all departments to be on the same page? Well, we spent a lot time looking at thousands of metrics across the company, literally thousands and thousands of metrics. And everyone sort of had their own definition of success. And in some ways you could say, well, you know, (inaudible) and depending on the subsidiary or the country, it could be dramatically different.

And what we learned out of that process is, look, we need to focus the organization on a few things. And so we created a scorecard. We have a balanced scorecard that has both short-term and long-term company objectives. And it’s not complicated. I mean, the scorecard is red, yellow, or green, depending on how you’re doing. And so at a glance you can tell in a subsidiary or a country how we’re doing, and we align all of our general managers and country managers and all the way up the organization, across the product groups, around these common 30 objectives.

And why did we pick 30? The only answer I can give you is it was all I can fill in a page. I wish we could have only fit 20 on the page so that we would have had 20, but there’s no science on 30, we just picked 30. I figured if you could get it on one page, you can read it, the font wasn’t so small that you couldn’t read it, and we didn’t try to (inaudible) and they’re very strategic, but some short-term objectives like revenue and profit, but also some long-term objectives like how do we grow new products, how do we bootstrap a new product and get scale in the marketplace? Customer satisfaction, employee morale — those type of things are on there as well. Thirty things.

So that common scorecard which was, you know, at first let’s say — not as well received as we would have liked. And so everybody says, yeah, now this too shall pass. We’ve always had thousands of vendors. But being able to then align people’s compensation and evaluations around that, certainly people (inaudible) lined up when they realized we weren’t going to change it. And so we’re entering year two of the balanced scorecard approach, and we have a lot of traction around it.

Now, the scorecard with 30 metrics, around 80 to 85 percent of those will be common year over year. But you know what? Fifteen to 20 percent will change based off of what’s going on in the marketplace, what our customers are telling us, and what new things come along that we need to be bootstrapping and really scale on. So that’s really an opportunity to really institutionalize that discipline around the scorecards.

The second pillar I want to talk about is enabling our people to create business value. We have a campaign in the marketplace called the people-ready business. I think you’d all be interested to know that the people-ready business, which is simply around enabling people to create value for customers and within the company is at the heart of how we’re trying to reorganize and structure Microsoft. So the people-ready business, which is in the marketplace as a campaign, is also what we’ve adopted internally around how are we to equip our own people to enable them to create value and turn them loose? And that’s something we’re very focused on.

A lot of that’s around the IP system. How do we eliminate things? How do we automate after we eliminate and pulling those things apart? The other bullet up here that I think is of note is, you know, in business schools we’re all taught that, hey, we need to think globally and act locally. Well, we’ve blown that theory up at Microsoft. In fact, that was getting in our way. And so we now have institutionalized, we want our people to think local, but act globally, and flip the model around so that we can define the boundaries which are the scorecard metrics, but turn them loose and allow them the flexibility that they need. And that’s really what the balanced scorecard approach allowed us to do. Of course you have non-negotiable issues, things that you just can’t compromise that, again, you’ve got to rally on as an organization.

The third one is around build strong industry partnerships. And you know what? As a company ten years ago, our competitors said, hey, Microsoft, you’re closed, you’re proprietary. The fact of the matter is today we’re reaching out to our competitors and creating interoperability and (inaudible). Intellectual property agreements with Novell, a competitor, Cisco, a competitor and a partner, SAP, a competitor and a partner, and others. We’ve offered the other big technology companies to do the same. At this time they were, of course, rejected, but we’ll continue to work on that.

We’ve proposed an open data standard called Open XML that allows data interoperability across platforms. So repositioning ourselves to really stand for interoperability with our applications is a transformational shift that we’re making inside the company and getting the word out about, hey, our solutions (inaudible) and being able to bring that, again, is very strategic for us for the long term.

The last thing is around our partner program. We have an unprecedented partner program at Microsoft, over 600,000 partners in the partner ecosystem at Microsoft. Now Bill and Steve had a vision when they first created the company to enable our solutions to really include partners, to allow them to help us get scale so that our applications can be viral across the world.

Sure enough, the partner ecosystem is one of our biggest strategic advantages we have as a company, we’re very committed to our partners, and I’m proud to be able to report to you today that for every dollar of Microsoft revenue, between $14 and $21 is earned from and through the partner ecosystem by partners. And that varies because it’s different for each country around the world. But, again, that’s a big opportunity for us to help the software ecosystem bringing software support and services to the table with a very strong partner channel.

So these are three key areas that we’re working hard on to build the muscle. We’re in year two of the operational excellence muscle and, certainly, we have plenty of room for improvement. I also wanted to highlight the fact that operational excellence takes great discipline. Discipline, ladies and gentlemen, is not the (inaudible) of enthusiasm, but it is the thing that all great teams have. All great teams have great discipline. In our organization, we sort of have a tendency to say, hey, look, how about some empowerment, some flexibility? You know, hey, give me some space here. What we’re doing is reengineering the company around — while we’ve become great at the discipline and the basics, that enables empowerment and flexibility, not the other way around.

So maybe (inaudible) we have those in the right sequence, and our people understand the value of discipline is how we institutionalize and galvanize the organization around having great discipline. And, again, this is a journey. This is something, you know, to stick to, and we’re very committed to from that standpoint. But it also opens up doors for people who do it well to allow them to think local and act globally, which is where we, again, define the boundaries to allow them the flexibility to reach and stretch and continue to grow. But great discipline is something that, again, is a journey, we have to continue to work on it, get it better and better as that muscle builds.

So innovation plus operational excellence is our formula for business excellence. And when you think about it, there’s very few companies in the world that are good at both. Most companies are either good at one or the other, and there’s only a handful who are really, really global in nature that are really good at both. And this is a big aspiration, and we know that. But, again, it’s about taking the big, bold moves, those big bets, and being able to place yourself toward excellence and rally people around that common cause is what we’re focused on as a company.

The last thing I wanted to say, again, thank you for your time, thank you for your partnership, but also I want to thank the way you give us feedback, because we need the feedback. The only way we get better is by hearing your feedback and making sure that we react to that and respond to it and course correct where necessary. So I appreciate those of you in the room that are pushing us to continue to simplify, to continue to get better, because that’s making a difference at Microsoft.

I think now we’re going to open it up. We’ve got a microphone here and a microphone over here —

(Break for direction.)

QUESTION: Thank you (inaudible) there are some stories in the press lately about the Microsoft (inaudible) strategy and — (inaudible) could you comment, please?

KEVIN TURNER: Well, we have decided within that software plus services pillar, to become a great advertising company. So we’ve acquired a lot of assets. I mean, the largest acquisition in the history of Microsoft was the $6-billion acquisition of aQuantive, and we, for the first time in the last two reports, we’ve turned the momentum on search and are gaining share and winning share against Google and Yahoo, and that’s when something (inaudible) you know, certainly we feel good about it, there’s energy around it. The fact of the matter is, while Google has (inaudible) or so, thereabouts, and they have one of them that makes a lot of money, and that’s advertising.

And so when we looked at our portfolio and said, gosh, what should we do to become a great advertising company? We began to then acquire the assets. We bought an exchange, we put some resources and some investment behind search and MSN and our portal, and then we made an acquisition that gives us the ability to look at our properties and figure out close to 500 million visitors that visit the Microsoft properties on a monthly basis. The problem is there are about 26 properties that they visit, and those aren’t connected and they aren’t — we have to monetize those.

The second part is the software plus services strategy, one of the differentiators that we have between us and Google is that their philosophy, as I understand it, is, we’ll host it for you. That’s the philosophy that they operate. Ours is not going to be built that way. Ours is going to be built around the fact that, look, we’ve got a lot of scale, we’ve got a lot of applications, we’ve got a lot of products up there, we want to extend those, and it still allows you, the customer, to host what you want. It still allows you, the customer, to say, “I want a partner to host this.” Or the customer can say, “Microsoft, you should host it.”

So having those three different models, we believe in allowing the customer to choose differentiates us from Google’s software in a cloud strategy in the marketplace, as well as the other competitors. So, in a nutshell, that’s really where we’re headed and what we’re working on hard to make sure we bring those solutions to the marketplace. Right here.

QUESTION: Two questions somewhat related: One is when you have a large company with, you know, tens of thousands of employees, how do you create an environment for employees to take risks where the up side is a pat on the back and a nice plaque, and the down side is a stagnant career and perhaps moving your job? And then, two, what sort of disruptive technologies do you see coming (inaudible) Microsoft in the next year or so?

KEVIN TURNER: The first one is, obviously, an art more than it’s a science. You know, one of the things we have is we’ve put accelerators in place, people that exceed their plan are more favorable to their budgets or quotas or allowing them to be exponentially rewarded based off of the over achievement. So making sure that our rewards systems actually align them.

The other thing is, as an organization, particularly in the technology area, we have to have a willingness to fail occasionally. And having that willingness to fail to give people space is important. You know, things like IPTV we’ve been investing in for nine or 10 years. Most every company out there got in and got out of that business over that decade. We stayed with it, we kept investing, you know, we kept not succeeding, we kept having opportunities. Well guess what? This year, last year, we got the biggest telcos in the world signed up, and IPTV is going to become mainstream.

So part of it is having the conviction to stay with a good idea over the long term. Part of it is allowing the space for people to have an occasional willingness to fail, allowing that space is an important part of letting them grow and learn and develop. So it’s not being afraid to try new things, giving them the space, making sure your rewards systems aren’t counterintuitive or counterproductive are some of the things we’re working on.

That said, it’s something that management has to step in and override also. So you can put all the systems and processes and HR processes around it, the fact of the matter is that it requires some management supervision and some real leadership to make sure that we create the culture, the environment that allows people that space and the flexibility and autonomy that they need to be able to do that.

And, again, the discipline part and operational excellence part of landing, enabling those basics, and enabling that flexibility is what really drives the right behavior. It’s when they get those two confused that they can sometimes become counterproductive. But we don’t have it perfectly figured out. I’ve just given you some context about how we think about it.

When our review cycles come up, we ask the question, is there anyone or any group or any team that necessarily didn’t meet their commitments that we would make an exception for because they tried some things that, quite frankly, didn’t work? And I personally grant about six — for teams, I granted about six of them this last review cycle from around the world on different initiatives that caused people to not make their standard commitments that we would have in our review system, that they actually took some big, bold bets that didn’t pay off. And it’s not perfect, but certainly the management supervision part helps make sure you do the right thing. Right here?

QUESTION: I wondered — we heard some of your comments on the insufficient size of the workforce in basically the IT and engineering areas. Certainly in Norfolk, Virginia, we see this as a major problem, (inaudible).

KEVIN TURNER: Well, we think it’s a crisis, quite honestly. We can’t hire enough people. You know, we see a third of the graduates coming out of the technology field that we saw in 2000 right now. And we’re short. The second thing is a fair number of those that are educated in the finest universities and institutions in the world, we can’t keep. And they come here through student status, and then when they graduate, we can’t get them a green card and pass through the process, they have to go back to their native country.

And, you know, that has been very difficult with a lot of lobbying and a lot of trying to encourage people to help loosen some of those restrictions that will allow us to keep people here to create the ecosystem and continue to grow the ecosystem. We cannot hire enough people. It’s forced us to go to where the engineers are. There’s a lot of engineers coming out of India, there are a lot of engineers coming out of China, there are a lot of engineers in Russia that aren’t graduating, but who are in their workforce. And so we look at the markets, it’s a daunting problem. And, you know, I think figuring out — I was — yesterday I was at the school of the future. Microsoft did a partnership in Philadelphia for 9-12 education and, you know, it’s just a magical place where we’re trying something to really — all the kids have laptops with no textbooks. It’s an inner-city school, it’s a phenomenal school, but really trying to reach out and find ways to increase our pipeline is something that we believe, pre-college, is very important.

We all speak at a lot of universities, and there’s a perception that sometimes that’s too late, and I believe that’s true. But continuing (inaudible) the industry and the environment cool, and it is, you know, it’s not — when you ask people would you rather work on Windows core or would you rather work on Xbox? We don’t get a lot of people signing up for — (inaudible) (Laughter.) versus the Xbox, you know, gaming system.

And finding ways to make the environment for our technical people, you know, change the perceptions that have been out there and, quite frankly, earned. Those perceptions were earned over the course of time. We’ve got a lot of work to do, this is a huge problem for us. Right behind you.

QUESTION: Could you describe your vision or Microsoft’s vision five years out to what an international company’s communications and computing environment will be like? Let’s say for a company that has an office in Dubai, Houston, and Shanghai.

KEVIN TURNER: Managing the complexity of our offices, you have to be somewhat flexible in when you take your video conference or your conference call. It can be on your standard time zone, depending upon where we’re at — and I think the ability for people to connect up. We have a product called SharePoint, which is a collaboration story that actually allows for people to have common (inaudible) across countries, across the visions, across departments.

I believe that more and more — it’s the hottest single product we have in the company, and we’re chasing it right now. But the reason it’s hot is because everybody’s trying to figure out how to get people on the same page worldwide, how to take advantage of the time zones in such a way that we can maximize our opportunity.

You know, unified communications, the integration of voice and data and video and the merging of the PC and the telephone allow for a whole different level of connectivity than we’ve seen in the past. So I think there’s a lot of business productivity and transparency that will happen through unified communications, through collaboration, and through common alignment. I think that over the next three to five years, arguably, that will be the hottest space in commercial business, and certainly will globalize a lot of companies.

I mean, when you take a look at small business, which has grown nicely in this country for a while, the ability for a small business to sell globally now, because of the Internet, has completely changed the game both from a fulfillment and a supply chain standpoint, as well as a customer satisfaction standpoint. So it’s a big opportunity to take advantage of the marketplace technologies to bring those into the commercial space through collaboration and unified communications.

QUESTION: Follow up on that. Do you anticipate that because of the global nature of business that this company that has an office in Dubai, Houston, and Shanghai will actually have to staff those offices on a 24-7 basis?

KEVIN TURNER: No. And I don’t believe that. We don’t do that today. You know, I think that’s sort of the old way of looking at the way business is done. I don’t think that’s the case in the future. I think it would be more real-time. That doesn’t mean you don’t need some personal interaction via the telephone or video conference at times, but no, I don’t believe that staffing it 24-7 in case there’s an issue or in case something comes up would be what productive companies do in the future. Other questions? Yes.

QUESTION: (inaudible) you’ve had a great career at Wal-Mart and left them quite a success — (inaudible). My question is this: Is there anything that you saw at Wal-Mart you’d like to see at Microsoft (inaudible)

KEVIN TURNER: I think that on the Microsoft side, I think, clearly, we looked at sort of that formula, the operational excellence piece of the supply chain and the technology and the processes is pretty respectable at Wal-Mart. And I worked on this a lot of years, so I don’t want to be too self-fulfilling in this statement. But, certainly, those are pretty tight processes, pretty efficient processes. And I think there’s an opportunity for us to continue to do that at Microsoft as we balance.

The other part, though, that I think Wal-Mart’s gotten away from (inaudible) is that willingness to fail. If you read Sam’s book, it’s in there, and Microsoft’s institutionalized that. So it’s interesting, you know, kind of a unique vantage point of working with Sam and working with Bill Gates, kind of an interesting career for someone. But there’s a lot of similarities that I think people would realize. Having that divine discontent, never being satisfied with excellence, you know, believing it is about people are very common characteristics between them, and it’s been a real interesting learning for me. Other questions?

All right. Well, I’ll close out by, again, saying thank you for your time today, thank you for the partnership. We’ve got a whole lot of things we’ve got to do to get better, so keep pushing us with your feedback, keep giving us ideas, and again, we believe that the biggest room in our house is the room for improvement, so we need your feedback, thank you very much. (Applause.)