IBM was rushing the production of their IBM-PC, and was in a hurry to find a suitable operating system for it. After negotiations with another company fell through, IBM turned to Microsoft's Bill Gates, who bluffed his way through negotiations with IBM management about having an operating system ready for them (he didn't). Microsoft acquired an already-existing operating system from Seattle Computer, named QDOS (Quick and Dirty Operating System), modified it to suit the IBM-PC, and rechristened it simply DOS.

Microsot's innovation wasn't designing an operating system - they simply bought one that already existed, and which was derivative of CP/M, another company's operating system. And it wasn't creating a great product - as its original name suggests, DOS was by no means the best operating system in existence. Rather, the most innovative Microsoft decision, and one which would set its future, was Gates' insistence that Microsoft would be free to license DOS to other hardware companies, not just IBM.