Most organizations worry about the negative consequences of the things they do. Google, thanks in no small measure to Larry and Sergey's leadership, tends to worry more about missing out on the potential benefits of things they don't do.For better or for worse, I love this way of thinking. I think most companies have a CYA policy in place. First, a bunch of process leads to risk assessment for each decision that is made. Okay, fine. Then, if any line item on the risk assessment leads to "Might be sued for doing X" or "brand/image may be tarnished for doing Y", the idea is generally shot down -- or "tabled for this release" (i.e. indefinitely put on the backburner".)
Without getting into specifics about all of the things that Microsoft might not have done for legal or image reasons, I've seen several specific examples of this way of thinking in my work experiences over the past 6 months (luckily, none on my project.. so far). I'm not suggesting anyone jump in and take every risk that presents itself blindly, but sometimes erring on the side of caution is NOT good policy!
In the worst cases, the risk isn't even as severe as a lawsuit or negative publicity. Rather, it's a risk that some technology/standard won't be adopted. For example, why will Internet Explorer be the last major browser to support RSS, and why doesn't Windows Media Player natively support Podcasts? Because hardly anybody had heard of these technologies and there was a significant risk early on that hardly anybody ever would! Lame.
I think this is actually one of the primary reasons why people do not perceive Microsoft as being "innovative". It's not that the company isn't innovative, but rather that Microsoft products aren't usually the first to jump on the 'latest trend' bandwagon and be first to market with the latest trendy features (even though we can point you to research papers and proof of concepts from 3-5 years ago in which a variant of the trend was pioneered at Microsoft).
How does a company change? I'm not sure it does, first and foremost because I'm not sure this policy is bad for business all of the time. It pisses off the innovators and early adopters (tech geeks aka the Slashdot crowd), but does it hurt the bottom line? I'd actually argue that historically, for Microsoft, it hasn't.
But now that Google... and Firefox... and others... are on the scene... doing all of the things that Microsoft might not have ever considered doing for this that or the other reason... and doing them first... who knows... perhaps a culture change is already in the works.
Evolve or die, right?