04 May
Collaborating Across Microsoft
THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN APRIL 2013
By Maria Shao
When it comes to coolness, San Francisco’s South of Market district has the creds. SoMa emerged as a trendy precinct during the dot-com heyday and has burnished its reputation in the newest wave of Internet innovation. The former industrial district has been a spawning ground for tech luminaries such as Twitter, Zynga, Yammer and Instagram, scores of digital ad agencies, software innovators and social networking start-ups. Now there’s a new neighbor: Microsoft Corp.
So what’s an elephant doing among the gazelles?
The 38-year-old, $74 billion-a-year software behemoth wants to inhale a bit of SoMa’s start-up mojo. In December, the Redmond, Wash., giant opened Studio 415 at 475 Brannan St. in the heart of the entrepreneurial hot spot. It is a collaborative retreat where Microsoft can work with its biggest corporate customers to create consumer products and immersive digital experiences. The 18,000-square-foot converted brick warehouse sits a few blocks from AT&T Park and South Park. It’s the first in a series of design studios that Microsoft hopes to open in major cities globally, including New York and London. With an open floor plan and minimalist casual furniture, Studio 415 was conceived to inspire creativity and teamwork.
“We’re running this as a start-up venture,” said Rick Chavez, general manager of the marketing solutions group in Microsoft’s online services division. The studio “will bring together Microsoft design-led thinkers and technologists to co-create innovative solutions in partnership with our customers,” he said.
Microsoft says it created Studio 415 because advertising and marketing are changing dramatically as consumers go digital with smartphones, tablets and mobile apps. Marketers must come up with new and compelling ways to reach customers. “People are no longer going into dealerships the way they used to. They’re not just watching ads on their browser like they used to. The whole world is changing pretty dramatically,” Chavez said. “There’s this big morphing of how industry monetizes digital.”
Microsoft has been courting companies in consumer products, autos and retailing for studio engagements. They can range from one-week workshops to full-year projects for which Microsoft will charge undisclosed fees. Hypothetical projects might include developing an in-store application with a map locating a jacket in a specific size or color, or an auto-navigation system embedded with Windows technology, or a showroom car with motion-sensing technology from Microsoft’s Kinect gaming device that tracks a shopper’s facial expressions to let the dealer know if he or she liked a vehicle.
The software giant believes its business can benefit, too. Technical or marketing innovations could be incorporated into Microsoft’s products and bolster its online advertising business. By collaborating, Microsoft aims to cement its relationship and its brand with its biggest corporate customers. And because the studio can draw on talent throughout Microsoft, it should promote cooperation among different parts of the empire.
Studio 415 is a notable departure for a company that stakes its fortunes on the Windows operating system, Office productivity software and Xbox videogame consoles. Indeed, the studio is only a blip on the Microsoft org chart. Chavez’s marketing solutions group is part of Microsoft’s online advertising operation, which in turn is within the online services division that is also home to the Bing search engine and MSN Internet portal. The online services division had an operating loss of $647 million on revenue of $1.6 billion for the six months ended in December, the first two quarters of Microsoft’s fiscal 2013. That was dwarfed by Microsoft’s total operating income of $13.1 billion and revenue of $37.5 billion.
Microsoft says the studio will have profit goals like any business venture but emphasizes the vision is long term. “I do have a P&L here, but I’m an innovation business,” Chavez said. “I don’t have to capture full value of [a customer] relationship in the first year.”
