Kevin Turner: University of Zurich

University of Zurich
Remarks by Microsoft Chief Operating Officer Kevin Turner
Zurich, Switzerland
March 5, 2010

KEVIN TURNER: Well, Frau Professor Schenker-Wicki, that was a wonderful introduction, and I’ll do my best to try to live up to it. It was a lot of high expectations were delivered in those opening remarks.

Well, it’s my pleasure on behalf of Microsoft to be here today, to be able to share a little bit about — I was asked to talk about operating in uncertain times, and clearly in the last 18 months this has been one of the world’s most uncertain times, at least in our generation, from a macroeconomic standpoint. There has been a lot of currency decimation and different issues that have happened around with GDP shrinking and contracting, PC growth, server growth in our business declining in double digits, and it’s just been a very interesting time from a leadership perspective.

What I thought I’d do today is share a little bit about, sort of open it up with what did it feel like, a time like no other; and on September 15th I was in New York, and I was flying to New York, ironically to talk to all the big global financial houses there on Wall Street. And I’d had meetings set up that day. I landed in New York. There was a guy there in the bag claim. Only in New York, he says, hey, did you know the market was down 350 points? Only in New York can you get the market update from a baggage claim handler, but it happened that day. And I said, no? And he said, no, Lehman collapsed and the market is in turmoil. So, here I am, I’m going, my first stop was to Citigroup on that particular day, and as they say, the rest is history, but clearly a lot has changed.

But I thought about a picture, what would it have felt like? We were just rocking along, really making progress, and doing our work, and really growing nicely in a double-digit way, and then all of a sudden, bam; within four weeks’ time, between September 15th and October 15th, the world changed — very, very dramatic.

And I thought of a picture you guys might appreciate for what did it really feel like to be in charge of an operation during that particular time. About like this donkey right here: a little overworked, and really a little bit upside down as it relates to not be able to carry the load during that time. And I added that just for fun, but there is some seriousness to it as well. It’s been a very, very difficult time.

But you know what, we learn a lot more from adversity than we do success, and that’s an irony in life. And nobody likes to hear it when you’re on the other end of the adversity. It’s one of those things that when someone tells it to you, because you’re going through a tough time, it’s not the thing you really want to remember here, but it is so true about life.

And clearly in this approach we decided, hey, look, a crisis is a terrible thing to waste. This was sort of a mantra that we adopted inside Microsoft to really figure out how do we maximize our opportunity with this very difficult environment.

So, what I thought I’d do is really share with you some of the things that we began to think about, and it all starts with, we’re a company that aspires to greatness. We want to be the best we could possibly be.

And sort of falling back on this being a compass, true greatness is awarded to those companies that solve problems and to those who master the ability to overcome challenges and adversity. I think that really says it well, because that’s really what we were about during this difficult time, how do we really get closer to our customers, because the conversations get difficult in tough times, because every customer we were dealing with, their budgets were shrinking, they were getting cut, and the conversations weren’t, hey, what can you buy today; they were, hey, we’re not buying anything.

So, we decided to really take a different approach, and really figure out how could we partner with our customers, lean into the conversation, and find ways to save them money, to help them become more efficient and effective, and that was a campaign that really launched and really galvanized us as an organization over the last year, and that’s been most helpful.

And so what I thought I’d do, because I had to prepare this for our board of directors, they wanted to know exactly what lessons did you learn this past year for this particular first once-in-a-lifetime macroeconomic environment, and this is actually the list that I shared with them at the company, and I thought I’d bring it to you today, because this is sort of a look under the hood for my leadership style and what I basically went through and the things, some of them I learned for the first time, some of them I relearned that were actually lessons that I had learned earlier in my career, so I’ll talk about that.

The first is execution is strategic. You know, a lot of people like to work on strategy, a lot of people like to work on the future, a lot of people like to work on plans, but what really makes a difference in the world is when those plans meet execution. That’s what turns it into reality.

And in tough times you really have to fall back on your execution muscle that you’ve built within the company, and that is the thing that helps carry you through. So, this was a very important relearning, if you will, about the importance of execution.

The second one was, growth hides mediocrity. And what I mean by that is Microsoft is a 35-year old company. We sell products and services out of 191 countries around the world; very global. Sixty percent of our revenue comes from outside the United States. A billion-plus people use our products every single day for all kinds of activities: from fun to pleasure to lifesaving. And that is an incredible obligation and responsibility.

But for 34 of those 35 years, we had grown double-digit growth; high growth rates. And this year we shrank as a company 3 percent.

Now, 3 percent, ladies and gentlemen, was better than 99.9 percent of the technology companies on the planet, but it was still shrinking, is shrinking.

And we’re that didn’t know how to shrink, and we didn’t do it very well, candidly. And I tell our team I hope we never get good at it, because that would be the wrong thing to build a competency around.

But what it exposes for you when you’ve been growing and then all of a sudden you’re not growing anymore: all the things that were sort of mediocre, just OK, just barely acceptable, get exposed, and it sort of unveils and highlights and really expands your problems and opportunities.

So, this was a very important thing for us to take advantage of and harness that so that we could put some things in place to change that, and drive different behaviors.

So, growth hides mediocrity, and you have to create your own crisis in times of growth when you don’t have one, and I think that’s a good lesson again to make sure that you’re staying as honest about your performance as you can be.

The next one was a lesson that I learned directly from Sam Walton. He’s the founder of Wal-Mart. And he told me one time to never put things in, in good times, that you have to take out in bad.

And where that really hit home in this environment is, as we had cut down and cut back on costs and different things for different events and different seminars and different, you know, all kinds of activities that we had in the company, we took a list and said, hmm, we’re going to zero-base that. We’re not going to do about two-thirds of those things.

And so it’s interesting, because when times were good, nobody really was challenging why these things weren’t necessary. In fact, people generally had good arguments on why they were pretty important that we do them. But in really, really tough times it became, OK, just cut that, yeah, we don’t need to do that. And so it’s an interesting exercise that you go through.

So, one of the lessons that we’ve got to internalize at Microsoft, as new things come along and as we make decisions, we need to ask ourselves if it was September of 2008 would we put this in the system, would we actually do this. And if the answer is no, then we don’t need to do it as the economy recovers.

Next, making government relations a core competency. In every country in the world, in every region in the world, government regulation on business is getting more and more sophisticated and complicated. And you have to embrace all the local laws to be able to ensure that you’re in complete compliance. And it’s not easy because it’s fluid, it’s ever-changing. So, what may have been in compliance yesterday isn’t good enough today. And if you don’t adapt your organization to that, you can get behind and get into some serious issues.

And certainly as you go through this macroeconomic environment there’s going to be more and more regulation on businesses. And certainly in the financial services area that’s warranted, but everyone pays the price for that, not just that industry. All of us in business, particularly with publicly held companies, will have higher and more intense regulation.

The next is, market share is the key. So, as the market is declining and shrinking, the only way that you can grow as a company is to increase your share of the pie, to grow your own market share.

So, in tough times you really have to fall back on execution and growing market share. In good times, if you’re not careful, you can take your eye off market share. So, we’ve institutionalized this idea of having a great culture around having incredible market share analytics and optics by market, by product, for every single region and country in the company, and that’s something that we’ll carry on that was a big learning that we got through this past year.

Next is the importance of moments of truth. In a tough environment it is important that every single person in your company really understands the one or two things that is most important to the company and that they have to do to contribute to the overall success of the company; just one or two key things. And clearly identifying what those key things are for every level in the company is creating what I call a moment of truth, and that’s an important thing to really get clarity and alignment so that you can improve your efficiency and effectiveness. And this again had never been more true than it was last year.

The last point is professional and personal growth. Now, I’m a person, ladies and gentlemen, I read a lot, I study a lot. I’ve got people that I admire that I’m constantly either getting mentorship from or learning from in some sort of way. And I thought I had a pretty good rhythm around professional and personal growth.

Well, what last year taught me was that no matter how much I thought I was capable of accepting and internalizing and really, really processing, I can always do more.

And here at the university, I mean, I think it’s great because this is where the most important thing I got out of my school years was learning how to learn, which is an ongoing journey and a gift, candidly, that gives back your whole lifetime. I mean, what a wonderful opportunity to collect answers to questions you haven’t even been asked yet during your education years. And that only continues, it doesn’t end with your studies, and so that’s an important part.

But last year taught me that it is interesting that no matter how much you think “that’s all I can really afford to take in,” you can always do more, and that was certainly a big lesson for me this past year.

And if you look at the world and the global marketplace, it’s in a reset world. We’re not going to go back where we’re just going to hockey-stick back from a growth standpoint and it would be like it once was. The dynamics and forces of outside change are incredible, and they’re only going to continue. And they’re going to continue across a lot of changing landscapes when you think about the competition and the fact that new competitors can come online now in real time and obsolete your business really quickly if you’re not careful.

You think about new business models and new way to get monetization, how rapidly that occurs these days, is an incredible opportunity for business.

You think about society and cultural change. I mean, think about the opportunity for sustainability and power and clean energy. Those are all cultural and societal issues that are sweeping across the country, and it’s an important change that’s happening that every company, no matter what country they operate in, is beginning to embrace.

And raising customer expectations; I don’t know of any customers that are lowering their expectations in any industry anywhere. They want more, they demand more, and in business you have to find a way to match up and hopefully exceed those when you can.

And lastly is the volatile macroeconomic environment. I mean, think about what’s going on in Greece right now, the questions around Spain, the opportunities in Hungary. It’s an incredibly volatile market that’s not stable, although it is stabilizing, and there’s still plenty of volatility in the system. And so we believe again it’s going to be a gradual climb-out, not simply a speedy recovery.

But the most important thing about change, if you operate a business, is that you have to have a company that can change faster inside than the world is changing outside or else you will become obsolete. And it may not happen overnight, but it will happen over time.

So, driving that culture with incredible change I think is very, very important, and certainly is one that we’re going to continue to experience.

Now, 2010 was a unique opportunity for Microsoft to really reexamine our approach and our strategy, to really figure out what do we want to be as a company. We’re only 35 years old, which is not old in business terms. In the technology area it might be, but in business it’s not.

So, we had to really think through what do we want to be, what do we want to become, what is it we’re going to aspire to do, and we took a look at our mission and our values.

And the reason I joined Microsoft really is largely based around Bill and Steve and this mission statement right here: enabling people and businesses throughout the world to realize their full potential.

This is a company that does the right thing not to get the credit, but because it’s the right thing.

Last year, we gave away $500 million in cash and software to help from an education standpoint and to help in the countries in which we operate, a half a billion dollars in the most difficult macroeconomic environment the world had ever seen. Not to get a press release, not to — people don’t even know about the schools we opened in rural China or the computers that we installed in colleges and universities and schools around the world. It’s an incredible opportunity for this company to continue to find ways to bring the magic of software to everyone in the universe, in every country, and that’s our big, bold aspiration and what we stand for.

And then we have our six values as a company. Those provide a moral compass for us to make sure that we make the right decisions for the long term.

So, this is who we are, this is what we stand for, and we said, you know what, these are right, OK? So, this is the only thing in Microsoft that’s not subject to change. Everything else is subject to change, but our mission and our values, they’re going to stay the same.

And we look a look at our technology approach, and we said, what should we be doing, and it really became a ying and a yang, and it’s all about this idea of investing in innovation and making sure that we can find ways to grow our market share, which enable the investment in innovation.

And when you look at this, we take a long-term view of R&D. This is a snapshot for you in 2009 of who the biggest technology investors were in R&D. You can see Microsoft there at $9.1 billion.

So, when we started out in 2010, when most companies said, hmm, what should we do; since it’s tough, we should cut back on R&D. Not this company. This company said, you know what, this is an inflection point, this is a window, this is a time when people are going to cut back on R&D. So, what we decided to do was invest another $400-plus million in R&D, and raise our R&D investment.

That $9.5 billion in R&D that you see there, ladies and gentlemen, is now the most per annum investment in R&D in the world for any company. We passed the largest oil and gas company in the world, and we passed the largest pharma company in the world this year with annual, per annum R&D spend.

Now, that’s an awesome thing, because if you’re a Microsoft employee, that’s an investment in our future. If you’re a Microsoft customer, bet on Microsoft because they’re betting on innovation for the future.

It’s also an awesome responsibility, because it’s not the popular thing to do with financial analysts. They simply want you to give the money back to shareholders, take a short-term approach, and that’s not the Microsoft approach.

So, that was a big thing that we as a company made sure that we were clear about the importance of R&D investment.

The second thing was, is, we decided we needed a new aspiration and vision as a company. Bills original vision when he founded Microsoft in the mid-’70s was he aspired for the company to be the company on the planet that could help put a PC on every desk and in every home. And in mature markets that’s mostly fulfilled and true. In emerging markets it’s happening in real time. PC growth is going through the roof there.

But it was time for a more contemporary vision, and this idea of us having three specific platforms and being a company that could connect the digital work style and the digital lifestyle became, is now the center of what we’re trying to get done as an organization.

Because you see today data on your PC or on your mobile device or on your television or home or entertainment center all lives in a silo, and it’s very difficult to get that data to cross from one platform to the next.

In the future the cloud and cloud services are going to allow your data to follow you no matter what the device and allow you to connect anywhere, anytime, and anyplace with your technology.

So, Microsoft aspires to be that company that can connect that digital work style and digital lifestyle, because how people work, when they work, and where they work continues to have more and more overlap between the workplace, computing on the go, and the home or the living room. And so that connectivity between lifestyle, work style is at the very center again of our vision as a company.

So, now I’d like to show you a little bit of a snapshot into what might that look like coming out of Microsoft Research.

(Video segment.)

KEVIN TURNER: And you’ll be happy to know some of that’s available right now, and a huge opportunity again for us to continue to find ways for new screen technology, information in the cloud, the ability to connect and where we’re going to go.

And this time that we’re in here in 2010 is a very exciting time for us at Microsoft on the power and the magic of software. Windows 7, our flagship operating system we’ve put in market, we’ll have over 300 million copies of Windows 7 in market this year. What an incredible opportunity that is.

You think about “Project Natal” with our Xbox platform; you may not know what that is, that’s our gaming console, but “Natal” is a new platform that we have coming out this fall that eliminates the physical controller. So, when you walk up to your gaming console, it recognizes you as a person and the human being becomes the game controller. So, if you want to drive a car, you move your hands like you’re driving a car in the race game. It has all kinds of technologies, and you’ll see that this holiday, and it’s going to be an incredible product.

New releases of Office, Office 2010, with Web apps, Office is now in the cloud. You can connect and get Word, Excel, PowerPoint in the cloud with the newest release of Office.

Windows 7 Phone Series, you’ll also hear about it this fall, that’s coming out this fall, is our new phone platform. And it’s not a me-too product, it’s an incredible social piece of lifestyle technology that has both cloud services with it that allows you to do Xbox gaming to Facebook to your music and movies and everything you want to watch on your mobile telephone, and it is an incredible product that we just gave some sneak peek demos of it last week or two weeks ago, and stay tuned for it.

And last but not least is Bing, our search product, which is taking off in colleges and universities and other places around the world, because again it’s a differentiated product, and something that I encourage all of you to check it out.

So, we’re really jazzed about the power of technology, the power of software, investing in innovation and R&D, and again helping people, enabling people to really realize their full potential is at the heart of those investments.

Now, with that, it’s going to take great operational excellence. So, there’s about six things that I’ll share with you just briefly of some things that I think are important to lead with that operational excellence. Because the innovation, the technology is great, but now you’ve got to turn it into action.

The first is maintaining that real-time connection with reality. Boy, is it difficult in this environment, because it’s so fluid. Audience perceptions, customer perceptions, competition: How do you gauge real-time reality? It’s so important that you have wonderful listening systems throughout your ecosystem to make sure that you can really harness the most important things and separate the important from the urgent. That is something that constantly we work on.

Two is keep that focus on growing market share, even as the economy recovers.

Three, be an energy carrier while managing with intensity. You know, intensity is not the enemy of enthusiasm, ladies and gentlemen. You can have fun and work hard at the same time, and certainly that’s an important thing for all the leaders at Microsoft to make sure they carry that energy.

Next is making sure that we’re being bold for the future, betting big. We’re betting our company on cloud services. We’re betting our company on the future that you saw in that envisioning video. And again that’s because we’re a company that has big dreams. And I find that big dreams attract big people, and that’s something that makes me proud to work at Microsoft.

Five is eliminate the unnecessary. It takes every single person in our company to find the things that aren’t necessary, that don’t add value to customers or better help our employee experience; find those things and eliminate those. And that’s something that we have to enlist every one of our people to do.

And last is around keeping the accountability clear and making sure you’ve got differentiated performance. Taking care of the top performers and dealing with the bottom performers is important. Having clear understanding of the moments of truth are paramount in being able to drive that.

And you know what, whatever it is, it’s all about people. You win in life with people, ladies and gentlemen. You have to inspire, you have to motivate, you have to teach, you have to discipline sometimes, but it’s all about people. Because when your career is done and you look back, it’s not the work that you’re likely going to remember, it’s the relationships that you have with other people that really make the most difference and give you meaning.

And I find that people will work hard for money, but they’ll give you their heart for meaning. So, that’s an important aspect to making sure you think through that.

And so when I look at it, technology has never been more exciting than it is right now. So, if you’re thinking about a field in technology, I encourage that. It’s a great place to be, and think about whether it’s medical technology or energy technology or information technology or whatever it may be, the sky is the limit, and we think that has an extremely bright future.

And Microsoft, you’ve got our commitment, ladies and gentlemen. We’re going to work hard to help you reach your full potential.

So, with that, it’s been my pleasure and honor to be here today. (Applause.)