BusinessWeek has a great article on Microsoft’s recent stumbles in online search. It’s reflective of Microsoft’s - and, indeed, any successful company’s - attempts to cast itself in a new mold.

If Microsoft can’t keep pace, it risks seeing its Windows and Office software franchises erode as Google and others launch Web-based rivals. “It behooves Microsoft to be there,” says Charles Di Bona, an analyst with Sanford C. Bernstein & Co. (AB ). “If they don’t get there, it gives others a platform from which to attack Microsoft’s core business.”

Just as troubling, Microsoft’s search problem reflects its approach to new markets in general. It spends little time focusing on tiny, emerging niches that generate little, if any, sales. But those are precisely the markets that can quickly blossom on the Net into meaningful businesses. “Bill [Gates] and Steve [Ballmer] and the leadership don’t understand the value of small things,” says Robert Scoble, a former Microsoftie whose blog recently took the company to task for its Web missteps. “That cripples their entire Internet strategy from the start.”

This is the same trouble the company has had with open source, though I believe it has generally been more successful with open source than with these other, product-related decisions. Once Microsoft figured out that open source is a development methodology, and not a traditional competitor, it has responded much more productively to the “threat” than it has to search, online applications, etc.

In open source, I believe Microsoft’s best strategy is to start creating entirely new products completely in the open. It doesn’t have to sacrifice its Windows or Office cash cows to open source. Rather, it can experiment in safer territory.

What Microsoft can’t afford to do is sit around and wait for open source to happen to the company. It won’t. Open source requires a complete restructuring of how one thinks and behaves as a company. It’s asking too much of Microsoft to make this shift (just as my old company, Novell, failed to make the corporate shift). But it’s not too much to ask of a division within Microsoft. Or a product. It needs to happen sooner, not later.