With its announcement that it is coming to an agreement with the European Competition Commission over what is known as the ‘interoperability issue’, Microsft made big news today. What it boils down to is this: instead of demanding 3% of all future revenues, Microsoft will open its interoperability code to European developers of server-side group software who pay a one-time only fee just north of $14,000 U.S. There’s also a patent license agreement that calls for developers who use MS software in their products to pay a .04% patent royalty instead of the 5.95% that MS sought to charge.

In the Industrial Age, this move would have been perceived by the Microsoft audience as ‘losing a court case’ and in fact that’s how it’s being covered in a lot of media. In the Networked World, however, it’s a move that deserves applause. Here are some of the reasons I think this move is what the scene needed, and why the Microsoft brand will benefit from it:

- It gets a stalled scene moving again. The case had been in the courts for four years. (From the standpoint of audience engagement, negotiating scenes almost never go anywhere.) Plus there was a $357 million fine hanging over Microsoft’s head. Furthermore, MS competitors like Sun Microsystems had already signed the ECC agreement and were gaining ground in the development of third party apps.

- It holds true to the brand’s themes. Hey, what was Microsoft but an upstart company that seized an opportunity afforded them by IBM? That’s their heritage. I don’t see IBM collecting 3% of all MS revenues. ‘Giving the little guy a shot’ is a theme as entwined with the MS brand as improv comedy is with the city of Chicago.

- Third, it signals to the developer community that Microsoft is warming up to the idea of open source programming. This generates a significant amount of goodwill on the ‘cool tech’ front where Apple continually kicks their ass.

Microsoft CEO Steve Ballmer entered the scene and changed the game by saying “Yes and.”

Saying “Yes and” is the most fundamental improvisation move there is. In the book I call the act of yes-anding The Agreement Principle. When you say “Yes and” in a scene, two very important things happen. First, by acknowledging and agreeing to the other player’s reality, you build a bridge of communication between the players in the scene. Microsoft accepted the reality handed to it by the ECC — that its proposed royalty structure was onerous and would kill innovation among smaller developers. By saying yes to this reality, MS agreed to both the (economic) environment for the scene, and to the character of the small developer described by the ECC. That’s the bridge.

Second, and most important, by saying “Yes and” MS adds its own reality to the scene. Namely that it’s flexible enough to change direction and embrace open source. Namely that it’s friendly to the upstarts and innovators of the world. Saying “Yes” is okay. But the improvisational magic happens with “Yes and.” The Agreement Principle transforms a scene that would otherwise be about two separate points of view — a tug of war played out in an expensive and time-consuming court case to the yawns of the audience — into one that’s about a new reality, shared by the players in the scene. A new reality loaded with potential. That’s when scenes get good and the audience applauds.