The most powerful innovations occur in the way managers and entrepreneurs think about how they do business. Strategy guru Gary Hamel has argued this powerfully for years. 

Take for instance, Bill Gates. Microsoft has been trying to make money in China for 15 years. They began by sending sales managers to China from Taiwan. According to an article in the recent European edition of Fortune, “How Microsoft Conquered China”, Microsoft already had a near-100% market share for Windows. Only the copies were pirated. Microsoft made no revenue.  

Solution? Fight bitterly to protect intellectual property. Hire lawyers. Litigate. Prosecute. Right?

Wrong. Microsoft had five China country managers in five years, and none made any headway at all. When Microsoft executives in China tried to explain why this policy was futile and wrongheaded, the geniuses in Redmond, WA. Would not listen. And Chinese officials began to use Linux.

Then led by Craig Mundie, Microsoft executive who now leads the China strategy, a new approach – an ‘innovation in thinking’ occurred. Microsoft began to work with China’s leaders and governments to help build a Chinese software industry – a top priority for them. Microsoft offered China the right to look at parts of Window’s source code. A Microsoft R&D facility was set up in Beijing. And Bill Gates himself said in 2001 that while it was terrible China pirated software, if they were going to pirate anybody’s, he’d prefer it was Windows. 

Today Windows is used on 90% of China’s PC’s. When China’s leaders visit America, they stop first at Bill Gates’ home – then go on to see another Bill (Clinton) or George (Bush). Microsoft’s China revenues total no more than $7 per PC ($100 or $200 in rich countries), but – the old notion that if you sell a toothbrush to each of  a billion Chinese, you’re a billionaire is working out well. You succeed on volume. 

The old cliché says, Think global, act local. No way. It should read: Be global, but think local, act local. ALWAYS think local. That is how Microsoft finally succeeded in China.