STAGING A SECOND ACT: MICROSOFT How does one of the most successful companies of the 20th century reinvent itself for the 21st? That was the question Microsoft faced as it sought to bring new life to its thriving operating systems business. Since the appointment of Satya Nadella as CEO in 2014, Microsoft has refocused on organic innovation. The company especially seeks to find the place where unmet customer needs intersect with today’s advanced “technology curve.” Nadella notes that “when those two come together, magic happens.” 6 The art of innovation is finding that precise intersection point. The company’s outlay on R&D increased by 43 percent from $11.4 billion in 2014 to over $16 billion in 2019. 7 Microsoft understood that it had to quickly reposition itself from selling incrementally improved “software in a box” to perpetually updated software as a service. In transforming and continually growing its core business, Microsoft has kept up its profitable legacy Windows business. And this has given the company a healthy platform from which to invest in cutting-edge technology. In addition to investing in AI and cloud computing, the company is developing innovations in areas ranging from “holoportation” to instant voice translations, and even an HIV vaccine. 8 Microsoft’s capital expenditure stands at 11 percent of revenue—eight percentage points higher than the industry average. BREAKING THROUGH DISRUPTION 18