Chapter 1: Microsoft and AEC Digital Strategic Affinities

The first core course, Business and Industrial Economics, focused on learning analytical approaches to understand the role of markets, their functioning, and their outcomes.

In my recent Executive MBA journey, some of my most memorable insights came from conversations with classmates, where we unpacked case studies, debated strategic moves, and reflected on how these lessons apply to our own industries. The first discussion, happened in late 2023, was about the core course “Business and Industrial Economics”. The discussion stands out focused on Microsoft’s strategic decisions in the 1990s and early 2000s — decisions that shaped the company’s market dominance and transformed the tech industry. Then we continued discussing about the more recent moves done by Satya Nadella from 2014 until now. It got me thinking about parallels in my own field of Digital Engineering in the AEC industry, especially in relation to barriers to entry, opening standards, and creating value for a broad audience. This article will make a parallel analysis between the discussion on Microsoft and the AEC industry I am working in.

Microsoft decision to package Internet Explorer as a Windows’ web browser was a successful strategic barrier that Microsoft put in place to discourage other firms to enter the market. The reaction was that new competitors were forced to create more competitive browsers significantly more powerful and innovative to convince users to adopt other browsers rather than the IE installed by default in Microsoft OS. And this happened, for example, in 2002 (after several years of development) with Mozilla 1.0 release, which was a result of the Netscape browser suite source code releasing in 1998. Putting such an entry barrier, Microsoft forced Netscape to open the source code (opening their standard) to all developers aiming to have more chances to get a better and more innovative product that could have defeat Internet Explorer. From a Digital Engineering perspective, this reminds me of how certain infrastructure or design standards can establish de facto “barriers” in project delivery.

Personal Insight:

As a professional in Digital Transformation, I often think about how we can establish strategic barriers to enhance client retention and differentiate our services. For example, by developing and integrating advanced modeling techniques unique to a company, we can raise the bar for competitors and establish our workflows as industry standards for efficiency and reliability.

Being a trailblazer in a particular approach and gaining traction with others is a powerful strategy. It builds a competitive advantage that reinforces success through innovation. This contrasts with a common strategy of keeping know-how internal to prevent competitors from imitating it. In my opinion, if a company wants to set the foundation for both cooperation and competition (or “coopetition”), the goal should be to push boundaries while others play catch-up. By the time competitors replicate an innovation, the company will have already moved on to the next advancement, maintaining a position as a market leader.

In 2001, Microsoft took a strategic turn by agreeing with the Department of Justice to make its software more compatible with competitors. This pivot transformed a potential legal setback into a “win-win” scenario. By opening Windows standards to other companies, Microsoft made it easier for competitors’ software to integrate closely with its operating system. From a Game Theory perspective, this move found its Nash Equilibrium, with Microsoft as the leader and other companies as followers. This cooperative approach avoided a standard war, allowing developers to profit within Microsoft’s ecosystem and fostering industry-wide compatibility, ultimately benefiting all players while helping Microsoft retain its leadership.

Personal Insight:

In Digital Engineering, we see a similar need for “coopetition” where openness can benefit everyone. By creating interoperable systems and engaging with other firms to develop shared standards, we could build a foundation for growth in the whole industry. For example, developing data structures that are platform-agnostic enables diverse tools to integrate seamlessly, improving outcomes for clients and the broader community. Developing these platform-agnostic systems internally requires significant effort, but partnering with the market through an Open Innovation approach can bring even greater advantages. This collaboration enables us to focus on what we do best while leveraging industry insights and resources. Ultimately, this approach leads to a “win-win” scenario for both the company and its competitors — or “coopetitors” — as it strengthens the industry and opens new avenues for growth.

Our discussion highlighted how Microsoft’s accessibility-focused approach helped democratize software and hardware for a wide audience. By making PCs widely compatible and affordable, Microsoft reduced switching costs and brought immense social value. In our field, reducing “switching costs” translates to making design processes simpler, faster, and more accessible to a variety of stakeholders.

Personal Insight:

One of my goals is to reduce the “barriers” for customers (or internal users) to understand and engage with our products. From the side of internal users, effective change management is crucial — especially communicating the “why” behind our approaches. This communication forms the foundation of any successful transformation, as users need to understand and feel part of the process.

For external stakeholders, we use innovative data visualization and transparent sustainability metrics to make complex engineering insights accessible to communities and policymakers. This aligns with my commitment for using technology not just for efficiency but to generate positive social impact by fostering trust and transparency in infrastructure projects. For more on this topic, see my recent article, “DigitalGreenTwin: Leveraging Technology and GenAI for Streamlined Carbon Footprint Analysis”.

We also discussed Nadella’s transformative vision, which shifted Microsoft’s focus to software and cloud-based solutions, making its ecosystem platform-agnostic and more accessible to diverse devices. Moreover, the statement of Microsoft vision is to “empower every person and every organization on the planet to achieve more”. If we consider that the market in the last 20 years had seen a differentiation of products with new technologies coming out, such as (smartphones and tablets), Microsoft is still taking a big part of the pie, having its global incomes growing up constantly until now. This happened because of Nadella’s vision to make it a software oriented and platform-agnostic company, making products with high level of compatibility, reducing switching costs for the community and, finally, helping to improve the welfare.

Personal Insight:

Nadella’s vision of an open, platform-agnostic ecosystem aligns closely with my work in digital engineering, as we also aim to foster interconnected and accessible solutions (for more on this, see what That Open Company and Speckle are doing). Democratizing platform usage stands to benefit the entire industry, reducing monopolistic barriers and encouraging fair competition. This is evident in the growth of open standards like Industry Foundation Classes, which allow for seamless data exchange and integration across platforms. Supporting and advancing these standards is crucial, as they lay the foundation for a collaborative, future-ready industry focused on interoperability and shared success.

Finally, we concluded by discussing Nadella’s leadership style, which brought Microsoft back from a downturn by focusing on four core pillars outlined in his book “Hit Refresh”:

• Growth Mindset: Nadella emphasizes a “learn-it-all” culture over a “know-it-all” approach, fostering adaptability at every level, from entry roles to C-suite executives. A growth mindset, as Nadella explains, is key to long-term success and innovation.
• Culture: To drive a company of over 200,000 employees, Nadella spread a culture of innovation, resilience, and fearlessness. This culture of experimentation encourages employees to embrace failure as part of learning, which is fundamental for any innovative organization.
• Empathy: In a rapidly evolving, tech-centric world, Nadella believes empathy is essential. Leaders must connect with their teams by understanding their challenges, fostering a trusting environment that inspires people to bring their best.
• Inclusivity: Moving from a purely competitive mindset, Nadella has cultivated a collaborative culture, one that values partnerships and a broader industry ecosystem.

Personal Insight:

In my leadership experience I have always applied the above approaches in a smaller scale of course and they definitely work. I have reflected extensively on management behavior and developed and applied what I named “NoRulesManagement” style. This approach is inspired by multiple readings on leadership, but above all, by the book “No Rules Rules: Netflix and the Culture of Reinvention” (for more information refer to my interview given to Manchester Business School which is the base for foster innovation and get successful result from cross-functional teams.

When we discussed about this in the past, the big hype of GenAI had to happen and we could not discuss all together about this aspect. However, I would like to spend a couple of personal opinion on how Microsoft is reacting and adapting to this big change.

We are witnessing a transformation comparable to the dot-com era. GenAI will disrupt every industry, and I am eager to see who will be the “chameleon” and who will be the “dinosaur.”

What Microsoft is doing under Nadella is incredible: they are backing multiple start-ups or participating in various VCs, in order to “have their feet in any place” an minimize the risk of left out.

In a major transformation like this, when the uncertainty about who will be the winner is high, having as a strategy of multiple investments is crucial to get competitive advantage and increase internal know-how simultaneously.

Consider how they are developing Copilot or how the AzureAI platform was created. Pay attention to Microsoft for Startups Hub, another strategy to stay present in the market with the latest ideas and innovations leveraging GenAI. This is a great strategy that will definitely pay off once the uncertainty becomes more certain.

Looking back on these conversations, it’s clear that many of the lessons we discussed — strategic barriers, cooperation, accessibility, and adaptability — are not only relevant to Microsoft but also hold valuable insights for our work in Digital Engineering for AEC.

My EMBA journey continues to inspire me to think about strategic decisions and leadership behaviours that position our teams and clients for success in a fast-changing world.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of my employer. The framework, technologies, and methodologies discussed are based on the author’s personal insights and experiences. This article is intended for informational purposes only and does not represent my employer’s proprietary solutions or corporate strategies.

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