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William Henry Gates, known to his friends and the rest of us as Bill, is probably the world’s most prominent entrepreneur. From a teenager’s interest in computer programming, he founded and built Microsoft to its position of global dominance of the vast personal computer market. He is certainly one of the world’s richest individuals. Entrepreneurs, entrepreneurship and enterprise are today very fashionable topics. The self-made, intelligent and visionary individual, who sets up a business that eventually arrives on everyone’s ‘must have’ list and sees off all rivals, is now the focus of press, film and TV. Entrepreneurs are now role models. Yet, in 1955, when Bill was born in Seattle, very few people ever mentioned the word ‘entrepreneur’. Even as recently as 1975, when Bill Gates and Paul Allen founded Microsoft, calling a business person an entrepreneur was often a term of abuse in Britain, if not in the US.

Bill Gates.
[image © copyright BBC]

However, merely being extremely rich is not the same thing as being an entrepreneur. There are plenty of people with inherited wealth who did not have to lift a finger or take a risk. The term was first used to refer to merchants and traders who were prepared to bear the risk of buying goods and services at certain (fixed) prices, to be sold elsewhere or at another time for uncertain future prices. They were people who had the skills and energy to spot opportunities in trade and to act on their judgement. In the 1920s, Joseph Schumpeter, an Austrian economist, took the view that entrepreneurs are not opportunists but are energetic and competitive people who seek to gain an edge over their rivals by creating and adopting innovations. By this, he meant not only new goods and services but also novel processes, marketing, distribution, financing and ways of doing business. Thus, ‘modern’ entrepreneurs, in contrast to ‘classic’ entrepreneurs, create their own luck and opportunities. Furthermore, they are controlled rather than unbridled risk-takers. Schumpeter, however, was also interested in the motivation of the entrepreneur, which he ascribed to three main drives – a desire for social status, the joy of creativity or a desire to conquer, win and beat rivals (what is now often called need for achievement). So, what sort of entrepreneur is Bill Gates – classic or modern?

"merely being extremely rich is not the same thing as being an entrepreneur"

Bill Gates was born in Seattle to a father who was a leading lawyer there and a mother who was part of a prominent banking family. So, young Bill had no problem with social status and the family was not short of money. However, there is evidence that Bill was driven by a joy of creativity. As a boy, he was fascinated by computers and programming. He even managed to convince his teachers to let him drop maths so that he could pursue programming. At the age of 14, Bill and his school friend, (and future Microsoft partner) Paul Allen, converted an Intel processor into a traffic counter and earned $20,000 each for themselves. Six years later, in 1975, Paul talked Bill into dropping out of Harvard and travelling halfway across the country to New Mexico, in order to develop an interpreter of the BASIC programming language for the new Altai microcomputer. This opportunity gave birth to Microsoft but was clearly driven not by a desire to beat competitors but more by a love of doing something new, with new technologies, in a new industry.

Within ten years, however, Microsoft was creating its own opportunities and was on the path to becoming the $50 billion, 80,000 employee, multinational, dominant force that it is today in computing. The big opportunity came in 1981, when IBM turned to Microsoft to produce the operating systems for its new personal computers. To meet the IBM deadline, Microsoft bought the rights to an existing system for $50,000 and adapted it into the PC-DOS. Each IBM PC sold included the Microsoft system yet Microsoft retained the rights to sell to other customers. As clones of the IBM PC began to flood the market, they too were mostly using the Microsoft disk operating system (MS-DOS). As the money poured in, Microsoft stepped up its R&D so that it soon began to lead, rather than follow, market developments. So, Bill moved from being something in between an enthusiastic hobbyist, and a classical opportunity spotting entrepreneur, into a thoroughly modern entrepreneur who savours the creating of new opportunities. Bill now clearly enjoys being a winner.

Weblinks

• Join the discussion
• What makes an entrepreneur?
• Are you an entrepreneur?
• Just Do It
•  
• Watch the trailer
• Video extras: Bill and Paul's excellent adventure
• Is Microsoft finally breaking the mould?
• Bill Gates: The skills you need to succeed
• Profile: Bill Gates

Courses

• Professional certificate in management
• Investigating entrepreneurial opportunities

About the author

Colin Gray is Professor of Enterprise Development at the OU Business School, where he is responsible for research and teaching in small business and entrepreneurship.

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Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

One afternoon in the late 1990s, I was sitting in traffic on the mile-long floating Lake Washington Bridge, driving back home to Seattle from my office in suburban Redmond. My flatmate and I, who shared the 12-mile commute, were talking about our respective days at the office. “Do you think,” he asked me suddenly, “that one day, we’ll be telling our kids about how we were a tiny part of one of the most revolutionary movements in American history? That one day we’ll look back and say, ‘You know, I worked at Microsoft in the late 90s’?”

There’s no doubt that it was a heady and exciting time. The Seattle area, where we lived, was home to some of the most impressive names in technology. There was Aldus (later Adobe), who revolutionized desktop publishing; Real Technologies, who created one of the first platforms for streaming audio content; Amazon, who turned the relatively new Web into a marketplace; and hundreds of others.

Bill Gates.
[image © copyright BBC]

As a young university graduate in the mid 1990s, I began to hear rumblings about how the Internet, which at that time was still very limited in scope, was changing everything. And the west coast was the place to be. Fortunately, I had family in the Seattle area, so I packed my bags and, like generations of Americans before me, headed west.

Within days I had a job with a large software company at twice what I was making on the east coast, and within a few months I realized the reality of high-tech work in Seattle: sooner or later, almost everyone ends up working for Bill Gates. The company couldn’t grow fast enough and soaked up every talented body that came to town – from computer programmers and math geeks just out of university; to English graduates like me and many of my technical writer and editor colleagues; to people like my flatmate, who had dropped out of seminary on a summer field trip to Seattle and parlayed his technical abilities into a well-paying job formatting and producing technical manuals at Microsoft.

"known by his email alias (as was almost everyone at Microsoft), billg was always present and active in the company"

The culture of the company was exciting and new at the time, even if it has now become something of a cliché. We worked hard and it was an exciting intellectual challenge, and late nights and weekend work were common. Holidays – just two weeks per year – had to be taken around the cycle of product releases, and when things went into “ship mode,” usually about four to six months prior to releasing a product, everything in your personal life went on hold. But at the end of the cycle, once the product was released, the company always sponsored a massive party. Sometimes lasting over a few days, they consisted of everything from bouncy castles and a barbecue in the car park to weekend ski trips to Canada.

Known by his email alias (as was almost everyone at Microsoft), billg was always present and active in the company, even as it grew to upwards of 20,000 employees, and it was common to see him around campus. Occasionally, I saw him doing that same cross-lake commute, just like many of his employees. Tough and demanding, he was passionate about the company he created, and he wanted nothing less from all of us who worked for him.

In return, the perks of working for the company were second to none. The health insurance, which is a must in the US, was gold plated; the stock option grants made millionaires of thousands of early employees. Set carefully in stands of evergreens, almost every office in the campus looks out onto the beautiful scenery. And every building featured the necessities: a coffee stand and a café open from early in the morning until late in the evening, so you never need leave the campus (or your work).

When I started working at Microsoft, I was just 25 years old and the Internet revolution was just getting underway. I remember thinking, naive though it was, that it might just be the pinnacle of my working career – it may be the last place I worked. But as I sat with colleagues in the Redwest café one sunny summer afternoon, eating lunch under a section of the Berlin wall (part of the company’s permanent collection of art and historical artifacts), looking out over the evergreens to the stunning snow-capped Cascade mountains, and discussing a new feature for one of the world’s most popular software products…well, maybe I could be forgiven for getting caught up in the moment.

Weblinks

• Join the discussion
• What makes an entrepreneur?
• Are you an entrepreneur?
• Just Do It
• Watch the trailer
• Video extras: Bill and Paul's excellent adventure
• Is Microsoft finally breaking the mould?
• Bill Gates: The skills you need to succeed
• Profile: Bill Gates

Courses

• Professional certificate in management
• Investigating entrepreneurial opportunities

About the author

Gabriel Reedy is a lecturer in learning and teaching innovation in The Open University Business School. His research focuses on the social and cultural impacts of teaching and learning technologies, and he studies how technology can support professional learning.

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Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world – and down your street, in The Money Programme.

The launch of Microsoft’s new Xbox 360^TM challenges some of our assumptions about firms and their capacity to innovate new products. Can a company previously focused on software become an apparent leader in hardware products?

Experts writing on innovation suggest that it tends to be ‘path-dependent’. Firms innovate in areas they know something about, where they have a track record and cumulative capabilities. There are comparatively rare examples of firms moving into very new areas – Nokia from paper and forestry into mobile phones for example – but such transitions take a lot of time and require the growth of radically new capabilities.

Developing and distributing software is a very different process to hardware innovation and production. Software producers write computer code, which once written is easy and very cheap to replicate. In the software world, post-development production costs are virtually zero.

Not so with hardware. Hardware manufacturers have to think about materials, design for manufacture and production engineering. They must consider tricky things like how will the heat generated inside the box be dissipated. Or in the case of games consoles, will the product still function when subjected to the rough and tumble of the family home - children and pets can take their toll!

And with the economics of manufacture drawing production to China and the Far East, they have to learn how to manufacture and distribute complex technology on a global scale.

These issues are likely to be compounded when the company in question is not well known for its innovative capabilities in its core business: software. Microsoft has been a follower rather than leader in the main software innovations in the personal computer arena. The graphic user interface (that enables PCs to be accessed using a mouse) and the web browser are the most obvious examples where it has lagged well behind other firms.

How can such a company successfully leap to the forefront of games console technology, as is claimed for the Xbox 360^TM?

"Microsoft owes its phenomenal dominance ... to a ‘once in a century’ business error by IBM"

But then, Microsoft’s own success story is hardly typical. Microsoft owes its phenomenal dominance of the PC software business to the market share created by IBM. IBM established the industry standard for PCs and allowed Microsoft to own the rights to the vital operating system software. This gift has been described as a ‘once in a century’ business error by IBM.

How fitting that the new Xbox should be labelled ‘360’ since that was the name of the IBM range of mainframe computers that underpinned IBM share prices in their 20th century heyday.

IBM used to be referred to as ‘the environment’ because of its market dominance. Today Microsoft is arguably in a similar role in the PC software arena. But in the world of the games console their current Xbox is some way behind Sony’s PlayStation2 in terms of market share. Not being the dominant player is another new experience for Microsoft.

And in an intriguing twist of fate, in this new area of business for Microsoft it is now dependent on a clutch of software developers for the games that run on its Xboxes. This is a classic case of the hardware producer being dependent on having essential ‘complementary assets’ provided by external organizations over which it has no direct control.

The first Xbox established a bridgehead in the games market, albeit a way behind PlayStation2 in terms of market share. The Xbox 360^TM is intended to leap to the next generation of powerful games machines with new levels of processing power and support for multimedia, high definition graphics and other features.

Presumably few people buy a games console unless there are games programs to run on it. Here the Xbox 360^TM is presenting games developers with big technical challenges in exploiting its potential. A key question is whether the games producers have the resources and skills to do this fast enough. The extent to which they are prepared to invest in Xbox 360^TM developments is dependent on perceptions of the potential market. And the even more powerful PlayStation3 is looming on the 2006 horizon, attracting developer attention.

There are some indications that Microsoft have wider ambitions for the Xbox 360^TM. Though Microsoft’s marketing emphasises games, the 360 could be seen as an entertainment hub for the home. It may broaden its potential market by having the capability to run the same software as a PC, as well as functioning as a media centre for audio and video.

Microsoft also emphasises Xbox Live® – the internet link that enables gamers to interact with each other and also download upgrades. As well as providing new revenue streams this potentially adds a new dimension to the console’s repertoire, downloading music and video files. Who knows, these could even become as significant as games as a market driver.

"Microsoft’s move out of its software comfort zone ... is a bold step"

Previously only Apple has succeeded in matching innovation in both Personal Computing hardware and software, and innovating new classes of products such as the iPod. Microsoft’s move out of its software comfort zone into hardware design and manufacture, and beyond the PC business into games consoles, is a bold step.

The company does not have a distinguished record for managing innovation. But in the Xbox 360^TM they may for the first time be the primary mover in a new class of products. Whether they can replicate Nokia in building world-class capability in a new area remains to be seen.

Further reading

• Managing innovation – how do companies get the creative juices flowing?
• Network effects – the interplay between products and markets is complex
• 'Managing Knowledge and Innovation Across Boundaries' by Paul Quintas, in Managing Knowledge: The Essential Reader, 2nd Edition edited by S Little and T Ray, published by Sage
• The Nokia Revolution: The Story of an Extraordinary Company That Transformed an Industry by D Steinbock, published by AMACOM
• Managing Innovation: Integrating Technological, Market and Organizational Change (3rd edition) by J Tidd, J Bessant and K Pavitt, published by John Wiley & Sons Inc

About the author

Paul Quintas is Professor of Knowledge Management at the OU Business School. He has been researching, teaching and advising in the area of the management of knowledge and innovation for over 20 years.

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