Microsoft often gets a bad press for not being an innovator. Having worked there, spent time with the Microsoft Research (MRS) team and seen what is in the labs, I can assure you that this isn’t true. There is absolutely no lack of smart people and brilliant ideas at Microsoft. Bringing these to market quickly … that is another matter. It is always disappointing to see technologies that initially started out as a Microsoft research project being brought to market first by another company.
The way that Microsoft develops new technologies is to typically to build prototypes, demo these internally and seek feedback from across the company. These prototypes can be developed through product groups, as part of a formal MSR initiative or as part of a spare time project (done in addition to your main job). Once a person or team has a working prototype, this is then demoed at one of the numerous fairs that are held annually (some of these are open, some are closed). This provides an opportunity to gauge interest, build a supportive community and possibly identify an executive sponsor. When this works well, the developer or team is then provided with the resources to continue to the next level of development.
Below is a good example of an early stage project. Somehow, I don’t quite see Apple demoing technology this visionary, this early.