Forget the Recession? Microsoft CEO Says Innovate

Posted by: Roger Crockett on June 18

ballmer.jpg I went to hear Microsoft CEO Steve Ballmer address a crowd of some 1,000 business types in Chicago today. From the podium at an Executives Club of Chicago gig, Ballmer gave a characteristically upbeat talk (he always speaks as if he’s just slammed a bottle of Red Bull) about innovating in tough economic times. But to Ballmer, we’re not in a recession at all. We’re in a “reset.” This is the “new normal,” as he described our current economic malaise.

I was thinking, “Egads! Will these doldrums last?” Actually his point was that we mustn’t let the tough times discourage us. Then it dawned on me: His talk sounded an awful lot like the message coming out of consumer goods giant Procter & Gamble. After all, Ballmer is a Procter alum. He worked there for a couple of years as a young assistant brand manager before leaping into the tech world. Procter’s current CEO A.G. Lafley—whom Ballmer referred to in his speech when asked how one goes about being a good CEO—has a similar vigor and outlook. “There’s never been a more exciting time for innovation,” Ballmer said. “The next 10 years are going to be as good or better than the last 10.”

In the face of the nation’s mounting debt, and despite shareholders peppering him to cut costs at almost all cost, Ballmer warned: “Now is NOT the time to pull back!” Heck, Microsoft is going to pump from 5% to 10% of operating income into its new search engine, called Bing, over the next five years. Bing has a measly 8% market share to Google’s roughly 80%, but Ballmer was remarkably optimistic. “We’re the little engine that could,” he chortled to an amused audience. "We’re going to get there.”

Wow! I wonder for a moment if packaging and putting such optimism up for sale might do better than Microsoft's new Windows operating system. The folks over at P&G, though don't need to buy it. They're marching ahead, similarly undaunted by the nation’s cloudy economic outlook. Lafley told me recently that 2009, “in the middle of a global financial crisis, will be one of our biggest innovation years ever.” The company’s R&D spend is estimated to swell by some 4% to $2.3 billion in 2009. Procter is building 19 new manufacturing plants over the next three to five years—the largest capacity expansion in the company’s 171 year history. Workers also handle 72% more product these days—172 cases per person vs. 100 in 2000.

Here’s how Bob McDonald, Lafley’s No. 2 and the man anointed to take over Lafley’s job, put it to me: “What’s important is that we we’ve built the capability that enables us to install the same or more capacity and yet it doesn’t break the bank,” he said not long ago. “We can do this in tough times and it doesn’t work against our financial goals.”

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BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.

See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.

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