Dick Brass was a vice president at Microsoft from 1997 through 2004. According to Brass, his former employer has fallen far behind the competition when it comes to innovation. Instead of bringing us great new products like Apple's iPhone, Amazon's Kindle, Facebook, or Twitter, the company contents itself producing endless updates of its Windows operating system and Office applications. The result is that the company's dominance is slowly eroding, as it loses market share in Web browsers, high-end laptops, and smartphones. It's Xbox gaming system is no better than any of the other consoles, and its Zune music player can't hold a candle to Apple's iPod.

Make no mistake about it -- Microsoft is making plenty of money: $6.7 billion in profits in its last fiscal quarter. However, it makes the vast majority of its profits from its old-line Windows and Office cash cows. However, nothing lasts forever, and these products will someday be surpassed by the offerings of other companies.

So, what happened?

According to Brass, Microsoft's primary problem is that it never developed a true system for innovation. In fact, it is institutionally set up to stifle innovation. Says Brass, "Despite having one of the largest and best corporate laboratories in the world, and the luxury of not one but three chief technology officers, the company routinely manages to frustrate the efforts of its visionary thinkers." Brass goes on to say that this problem is largely the result of unabated internecine warfare within the company. When a new product with promise arrives on the scene, managers of competing groups try to shoot it down. They are often successful.

I don't think Microsoft is going away anytime soon, but other companies are clearly surpassing it when it comes to innovative technology. Consider your own company. Are there barriers to the development and productization of innovative new techologies? Are leaders able to shoot down the efforts of competing groups? Are you in some way enabling this kind of environment?

Take time to look within -- there are lessons to be learned from Microsoft's decline. And these lessons might enable you to avoid the same fate.