Financial Times, four-part series on Bill Gates:
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BILL GATES: Windows on the world
On the eve of the FT's four-part serialisation of his new book, Bill Gates tells Louise Kehoe how the digital era will change work, home - and Microsoft
Bill Gates still has the boyish looks and geeky style that were his trademarks 20 years ago, in the early days of the personal computer industry. Yet the combative young man who would dismiss any opinion other than his own as ill-informed is mellowing in middle age. Today, thanks perhaps to recent fatherhood, there is even a hint of self-deprecating humour.
This is a little surprising, in light of recent events. Over the past 10 months, Mr Gates has had to put up with gruelling legal attacks, since the US Justice Department and 20 states filed an antitrust lawsuit against Microsoft. The trial has not gone well and he has been demonised and ridiculed in the courtroom and in the press.
At first, he lashed out angrily against government officials and industry critics. Then, he seemed for a while to be weighed down by the constant attacks.
Yet this month Mr Gates was upbeat and relaxed. He has resigned himself to letting the legal process take its course, says a close associate. "He believes that justice will be done eventually." (Mr Gates referred questions about the case to his lawyers). Although the Washington trial cannot be far from his mind, Mr Gates has refocused much of his energies on overseeing Microsoft's software development. Eight months ago he handed over most of the responsibility for running Microsoft's operations to Steve Ballmer, his college friend and closest colleague, who became president of the company.
The change has freed Mr Gates to spend more time doing what he likes best: working closely with Microsoft's product groups, thinking about future directions of technology, writing "visionary" memos that set company goals, and working on his new book, Business @ the Speed of Thought.
The title predicts an era in which all businesses will use technology to accelerate the flow of information, making data instantly accessible and enabling "knowledge workers" to reach decisions and act as fast as they can think.
For many companies, this is the future. But for high-tech companies like Microsoft, it is already here. In the inelegant industry parlance, Microsoft and other high-tech leaders such as Cisco Systems and Intel "eat their own dogfood". These companies have adopted what Mr Gates calls the "web workstyle", built on the use of networked personal computers and the internet.
In the web workstyle, "you take it for granted that you can look at every interaction with the customer, every document...you can work together on a spreadsheet with somebody on another continent," from your desktop PC, he says.
At Microsoft, "the sales results are in digital form, so anytime I want to I can look by country, by product, exactly how sales compare to budget, how they compare to other groups". But Microsoft's information systems are not for the exclusive use of Mr Gates and his lieutenants. "When people first started talking about this, they used the term 'executive information' as if there should be a special system so that the executives of a company could go to meetings and everybody would say: 'Wow, these executives sure know what is going on!'"
This "trickle down" approach to information flow is counter-productive, Mr Gates insists. Everybody in the company needs full access to information if they are to be able to make good, quick decisions and contribute creative ideas. "Whether it is customer service, or product design, they need that information."
It may sound like a sales pitch for Microsoft software, but as Mr Gates points out, many companies already have the basic tools. The problem is that they are not yet using the technology to full advantage.
"People have been used to information impoverishment within their own companies, so we have to show them what is possible, to set higher expectations," he says.
There has never been any shortage of expectations at Microsoft. And, though the drive for market share is what has led the company into the courts, Mr Gates is determined not to sacrifice its competitive edge.
The biggest challenge, he says, is to look three or four years out and predict the direction of software and computer developments. "How is Windows going to be dramatically better than all of the competitors that are out there?" he asks.
Windows' market dominance may already be assured for the next year or two by existing products and new ones already in the pipeline, such as Windows 2000 for business users. The PC operating system currently holds a greater than 90 per cent market share. But what next?
"We have to redefine the way people think about computer operating systems so that they don't even consider Windows to be in the same category as competitors," says Mr Gates. "That is our job." This means constant innovation. The next version of Windows NT, for use on corporate networks, will automatically replicate PC files on a network server and make it easier to distribute software updates to all the PCs linked to a network.
It also means keeping tabs on every would-be challenger: Windows' success is in part due to Microsoft's past vigilance in tracking competition, he says. "The technology business never stops moving and to me it feels as if it is moving faster than ever before," says Mr Gates. He is convinced that if Microsoft does not move fast enough, competitors will gain a critical advantage.
In the midst of the antitrust trial, where Microsoft is arguing that it is not a monopolist, it may be no wonder that Mr Gates emphasises competitive challenges. Yet he has long been wary of every potential competitor.
"The culture of our company is never to dismiss these things that are coming along," he says. "We were one of those things that came along."
Maintaining Microsoft's momentum in existing markets is only part of Mr Gates's mission. He is also committed to expanding the company's push into new areas, such as internet services.
Hotmail, the web-based free electronic mail service Microsoft acquired early last year, will be expanded to offer storage of PC users' text files, calendars, lists of favourite web sites and other important data. "We have a very aggressive plan to roll this out," says Mr Gates. The service will enable users to find all of the material stored on their own desktop or home computers using any internet link, from any computer.
Microsoft is also pushing ahead with home networking solutions, Mr Gates says. A partnership with 3Com, announced last week, will see the software company co-branding home networking kits for the fast-growing numbers of households with more than one PC.
Eventually, home networking will be built into the PC, says Mr Gates. Users will be able to plug in a new digital device, such as a digital video camera, and it will automatically be recognised by the computers in the home. You may want to put the camera in the baby's room, he suggests, and set the PC to alert you when there is motion, or sound. Already, similar "electronic babysitters" are watching children's playgroups and letting working parents see how their children are doing, via the internet.
What's next? Computer tablets that might be used for reading electronic newspapers or books are on the horizon, says Mr Gates. Advances in flat screen display technology, combined with software that displays text with greater resolution will soon have us reading long documents and even books in digital form, he predicts. This is all part of what Mr Gates calls the "web lifestyle". Stretching the reach of information technology beyond the workplace, he looks forward to a world in which internet access is ubiquitous and e-mail is the standard means of day-to-day personal communications.
In the US high-tech industry and in US universities, the "web lifestyle" is already prevalent, Mr Gates says. At Microsoft, e-mail is the primary means of internal communications. That has its pros and cons. On the one hand, it encourages open communication and a free flow of ideas. Mr Gates's own e-mail inbox will frequently contain messages saying: "'Hey, if we don't do this thing I want to do, we will be out of business,'" he says. "I get a lot of e-mail like that. I will get another piece of mail recommending exactly the opposite, with the same conclusion." Then there are the "bad news" e-mails, which typically start with the words: "In the spirit of bad news traveling fast . . . " and goes on to explain the situation. Mr Gates encourages such missives. "Eventually, the bad news is going to be known. Better to get it in a time frame where you may still have a chance to be responsive," he says.
Yet the pervasive nature of e-mail within Microsoft has come back to haunt Mr Gates in Washington. Many of the most telling moments in the trial have involved use of e-mail records to contradict witnesses. Does he feel more inhibited in the use of e-mail today? No, he says emphatically: "I do not have a single piece of e-mail of a business nature that I would be embarrassed to have made public."
"Every piece of e-mail I have sent over the past decade has been read by 50 government lawyers. So there is nothing new. I live the examined life."
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Interview with Bill Gates:
Bill Gates on Business March 18 1999
Ride the inflection rocket
Not long ago I had a talk with the board of directors of a German financial institution. These were experienced business people. The youngest was probably 55, and many were in their 60s. They'd seen a lot of changes in banking, and they'd lived through a lot of technology changes, too. The bank had not yet, though, embraced the new internet technologies. On the day of my talk they'd heard a series of presentations from Microsoft employees. When I walked in, they were all sitting with their arms folded, looking unhappy.
"Okay," I said. "What's the problem?" One of them replied, "We think that banking is in the process of changing completely, and we're getting technical presentations from people here at Microsoft - more technical than we're used to."
He took off his glasses and rubbed his eyes. "It's good that you're just going to make all of your products better, but what is the overall plan? To view you as a long-term vendor, we need you to give us a vision of the future."
I was thinking, Oh boy. We've spent eight hours talking to this bank and we haven't answered the customer's central concerns. Now I've got to do it off the top of my head...
I went to the whiteboard. "What I'm about to write down are 10 inflection points that I think will fundamentally alter all industries," I told the bankers.
"I'm going to ask you whether you believe each of them will happen. Never mind for now how quickly. If you don't believe they will, then you shouldn't change what you're doing with technology. But if you believe they're going to happen, and it's only a matter of time, then you should start to prepare for that change today."
Do you believe that in the future people at work will use computers every day for most of their jobs? I asked. Today a lot of people use computers occasionally, but many knowledge workers may use their PCs only a few times a day. They may even go a couple of days without using PCs.
Do you believe that today's paperwork will be replaced by more efficient digital administrative processes? They did. Their only concern was how to make the transition from a paper to a digital world.
Do you believe that one day most households will have computers? I asked. In the US today, about half the households have PCs. The percentage is a bit higher in some countries but much lower in most. Do you believe that one day computers will be as common in homes as telephones or TVs? They did.
Do you believe that one day most businesses and most households will have high-speed connections to the World Wide Web? I asked. They nodded.
Do you believe e-mail will become as common a method of communication among people in business and homes as the telephone or paper mail is today? Currently not everybody uses e-mail even if they have a computer. Would that situation change? They agreed it would.
Now, if most people have computers and use them every day, I asked, do you believe that most information will start arriving in digital form? Do you think your consumer bills will arrive electronically? Do you think you'll be booking your travel arrangements over the internet? They agreed that these changes were on their way.
Do you think digital appliances will become common? I asked. Do you believe that digital devices for photography, video, TV, and phones will become ubiquitous? Do you expect that other new digital devices will proliferate around the home and be connected to the web? Only a matter of time, they agreed.
Do you foresee a time, I asked, when notebook computers become computer notebooks? I described what I meant, a computer notebook being a new device that enables you to take notes as you do today with a notepad and lets you carry with you all the personal and professional data you need. This will probably be the last inflection point to occur.
"The great thing about a computer notebook," I said, "is that no matter how much you stuff into it, it doesn't get bigger or heavier." They laughed. There was a 30-second conversation in German before one said, "We thought you said something funny, and then we realised you said something profound."
"Am I wasting your time?" I asked. "Do you believe these changes are ever going to happen?" They had a short conversation in German. "We hired a management consultant, and we've been going through the same discussion at home, and yes, we believe it's going to happen. It's going to completely change the nature of banking."
"When is it going to happen?" I asked. "What do you think?" They had a longer and more animated discussion in German. They came back and said, We didn't expect to make this decision here, but we have. First we were going to tell you 20 years, but then we decided that inside of 10 years these inflection points will either have arrived or be very imminent. Banking will be different.
To prepare for that change, I told them, you need to make digital information flow pervasive in your organisation. I talked briefly about needing to take advantage of existing digital tools they already have for their knowledge workers; about digitally linking their knowledge systems with business operations systems and ultimately creating a new infrastructure around the PC and internet technologies.
If you do these things, I told them, you'll be prepared for the three fundamental business shifts that will occur as the result of all the digital inflection points: 1. Most transactions between business and consumers, business and business, and consumers and government will become self-service digital transactions. Intermediaries will evolve to add value or perish. 2. Customer service will become the primary value-added function in every business. Human involvement in service will shift from routine, low-value tasks to a high-value, personal consultancy on important issues, problems or desires for the customer. 3. The pace of transactions and the need for more personalised attention to customers will drive companies to adopt digital processes internally if they have not adopted them already.
Life's going to be pretty exciting as these changes come about, I concluded, and within a decade it's likely that most of them will occur. This world will be radically different from the one we live in today.
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