It's become a sort of truism over the past 10 years or so that Microsoft is last in innovation. If you want hardware or software that will stir your soul or open up new and better ways of living, you turn to Apple or, better yet, a scrappy startup in the Valley or New York. Google Chairman Eric Schmidt, when naming the handful of companies that will drive the future of personal technology and the Web at a conference early this year—the so-called "Gang of Four"—famously left Microsoft off the list. But in 2012, Bill Gates's old, creaky ship proved that it still has some wind in its sails. Windows 8 represents a truly radical (and risky) shift, leapfrogging the industry's traditional period of iterative gesturing toward the future and boldly declaring that the future starts now. From here on out, touch will be the default method of interfacing with not only mobile computers, but all computers. And that's a transition that only Microsoft could have made happen.
Redmond's other big shift this year was in the hardware business. Surface, the company's first ever attempt at designing and producing its own computer, arrived to mixed reviews and apparently less-than-awe-inspiring demand from consumers. But Microsoft is only getting started. It has entered a new era where, like Apple and, increasingly Google, it will sell end-to-end experiences that unite hardware and software. The company has the right starting point in Surface, which aims for the sweet spot between tablets and PCs. If it can fix some of the device's pain points and pull off the same level of innovation on the physical side that it has with the digital one, then consumers—and Eric Schmid—might finally be forced to alter their assumptions. —Reggie Ugwu, Complex (@ocugwu)