Rather than try to predict the future, Gates created a population of competing Business Plans within Microsoft that mirrored the evolutionary competition going on outside in the marketplace. Microsoft thus was able to evolve its way into the future. Eventually, each of the other initiatives was killed off or scaled down, and Windows was amplified to become the focus of the company's operating-system efforts. At the time, Gates was heavily criticized for this portfolio approach. Journalists cried that Microsoft had no strategy and was confused and adrift; they wondered when Gates was going to make up his mind. Likewise, it was difficult for those working inside the company to find themselves competing directly with their colleagues down the hall. There is no evidence that Bill Gates looked to evolutionary theory or was thinking about fitness landscapes when designing this strategy. Yet, regardless of how the approach was specifically developed, the effect was to create an adaptive strategy that was robust against the twists and turns of potential history. Microsoft has continued this approach and today has a portfolio of competing experiments in areas ranging from the Web to corporate computing, home entertainment, and mobile devices.
There are some general lessons that can be learned from a portfolio-of-experiments approach to strategy. First, management needs to create a context for strategy. Constructing a portfolio of experiments requires a collective understanding of the current situation and shared aspirations among the management team. Second, management needs a process for differentiating Business Plans that results in a portfolio of diverse Plans. Third, the organization needs to create a selection environment that mirrors the environment in the market. Fourth and finally, processes need to be established that enable the amplification of successful Business Plans and the elimination of unsuccessful Plans. We will discuss each of these key points in turn.
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