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Steve Ballmer and The Innovator's Curse

The most common, almost universally accepted reason for company failure is “the stupid manager theory”. It’s the corollary to “the smart manager theory” which is used to describe almost all company successes. The only problem with this theory is that it is usually the same managers who run the company while it’s successful as when it’s not. Therefore for the theory to be valid then the smart manager must have turned stupid at a specific moment in time, and as most companies in an industry fail in unison, then the stupidity bit must have been flipped in more than one individual at the same time in some massive conspiracy to fail simultaneously.

So the failures of Microsoft to move beyond the rapidly evaporating Windows business model are attributed to the personal failings of its CEO. The calls for his head have been getting loud and rancorous for years. Taking this theory further, now that he’s leaving, the prosperity of the company depends entirely on the choice of a new (smarter) CEO.

It’s all nonsense of course.

Microsoft is composed of people, processes and priorities. And nothing else. The CEO is but one person, admittedly one with a high degree of authority. However, that authority is not unlimited. A change of leadership in a company may have some impact on a larger set of people, at least in the short term, but the bulk of existing resources, institutionalized processes, and priorities set by customers and cash flows limit what any one person can do.

What really causes a company to fail is disruption. The business model around which all products, customers and priorities are built; the culture, the skills and “DNA” of the company; is vulnerable. This vulnerability is why companies have considerably shorter lifespans than the people who work there. They are one of the most fragile of organisms: high infant mortality, with short, unpredictable lives.

Microsoft ascended because it disrupted an incumbent (or two) and is descending because it’s being disrupted by an entrant (or two). The Innovator’s Dilemma is very clear on the causes of failure: To succeed with a new business model, Microsoft would have had to destroy (by competition) its core business. Doing that would, of course, have gotten Ballmer fired even faster.

Steve Ballmer’s only failing was delivering sustaining growth (from $20 to over $70 billion in sales.) He did exactly what all managers are incentivized to do and avoided all the wasteful cannibalization for which they are punished.

If anything, Steve Ballmer avoided The Innovator’s Curse. Being successful with new market innovations would probably have led to an even shorter tenure. Destroying prematurely the pipeline of Windows in favor for a profit-free mobile future would have been a fireable offense. Where established large companies are concerned, markets punish disruptors and reward sustainers.

Steve Ballmer will not be remembered as favorably as the man who created Microsoft. But at least he won’t be remembered as the fool who killed it. That epitaph is reserved for his successor.

  • Walt French

    I don’t remember The Innovator’s Dilemma being so harsh — stating that you have to kill yourself for your children to prosper.

    IBM had the luxury of almost a decade from the first use of “PC” until it fielded the 5150 in 1981, and it had a run of 24 years before selling its PC business to Lenovo in 2005. That was plenty of time to look at its customers, expertise and other resources, and plan the transition to what it is today. Lou Gerstner raised a lot of hackles when he came in, but methinks history remembers him a lot more kindly than “the fool who killed it” would suggest.

    • Ted_T

      Sure, but that’s because he successfully transformed IBM into a services company. If Balmer’s successor can do as well, s/he won’t be judged harshly either, but it is far from a given that s/he will succeed like Gerstner did.

      • davel

        By the same token IBM is not the leader it used to be. IBM was at the core of computerized automation of the Fortune 500 for decades. They did basic research and offered them to the world like the modern filesystem, SQL, Relational Databases, the Winchester Hard Drive and numerous advances in CPU design.

        While they are a successful company no one is looking to IBM for technology innovation anymore.

    • StevenDrost

      I agree, with smart long term thinking, you can avoid the innovators dilemma. IBM is a great example, they fled the consumer PC market at the right time. Apple stayed in the game, but fled upmarket with the MAC and avoided being disrupted by net books and then smartphones and tablets. The Microsoft of the future will not have it so easy, because time is not on their side. If Windows and Office are to survive the migration to mobile they will need to drastically reduce how much they take from the average user or OEM. The right move may be very costly.

      • Walt French

        I’d say that if the right move is very costly, the wrong move would be disastrous.

        The arc of the PC’s dominance has already been painted. New form-factors, mostly not using Windows, will dominate purchases in the consumer space; the Enterprise will continue emphasizing Big Data (in which Microsoft is dominant despite being down to 50% market share in servers) and more mobile workforces will increasingly use devices with the same attributes that consumers are favoring.

        It’s not exactly as if this hasn’t been predicted, analyzed and charted at this very site.

        Either Microsoft has resources — codebase, engineering, business relationships, etc — that can be effectively deployed in the new lines of computers, and it should choose a couple of initiatives to start as skunkworks.

        Or it should forget about the fantasies of being a consumer darling. Sell off the XBox line while it’s profitable and not-visibly-disrupted. Spin out Skype. Sell Surface to HP for $5 and WindowsPhone to Nokia.

        But the current arrangement, where Microsoft “competes” with decent products as if they have forever, will doom it.

    • normm

      I agree that seems like the biggest flaw, to me, in Horace’s analysis. A company with highly constrained resources can’t afford to shift major resources to a different approach without killing its current business, but a company like MS (or Apple) that’s swimming in cash is much less constrained. In this context, the CEO has a lot of scope to try new things and start new businesses, particularly ones that don’t directly compete with existing ones.

      • Walt French

        MS is constrained in tht they have plenty of cash, but didn’t think they needed to spend any of it to develop the consumer and mobile markets. Just put some touch features into Win8, and put a decent 21st century interface onto WinMobile, and all will be well by version 3.

        They’re STILL not trying to disrupt themselves. They supposedly morphed into a “devices and services” company but don’t look for any phone innovations for a year (thanks to the merger) and don’t look to have Office Lite available on every platform (thanks to their desire to protect their Office Heavy revenues).

        Apple gratuitously adding iWork to all iOS devices? They certainly gave Microsoft plenty of time to try to make a buck there (and let’s not call a suite that doesn’t have native iPad versions a service), but now Microsoft has had its OTHER main revenue source (after Windows) completely disrupted by a FREE product.

        Disruption is predicated on companies being unwilling to meet new, lower-cost competitors, in order to try to protect their current profit stream. All the Innovator’s Dilemma examples I can recall are based on multiple waves of competitors eventually hollowing out the incumbents, almost by invitation. Yes, eventually Microsoft won’t have any money left if this continues playing out as I just described, but you can see it’s not the cash-on-hand that’s the problem, rather the lack of a will to compete on the terms that keep changing against you.

      • Scott Engler

        Exactly. Microsoft bought companies that innovated and killed them.

        The spent billions in online and consumer tech and failed. The truth is that they had no capability to win in those areas and a divisive culture.

        They had money. They even had innovation.

        They didn’t understand what was needed to win.

  • Walt French

    And there’s a bigger point to my previous post’s quibbling: Microsoft’s being the dominant, #1 tech company in the 90s and 00s meant that by definition all other tech firms would need to carve out territory from the periphery of Microsoftdom. To my mind, Ballmer’s failure was not that disruption inevitably went after them, but that he squandered billions in ineffectual countermoves, efforts in music, mobile phones, search, advertising, tablets, games and others; not once is there evidence that he asked “how can Microsoft excel in this line?”

    No better example than the recent, alarming re-org. There’s no sense of the slightest awareness of what it takes to build the type of culture that would allow the unitary model to succeed at Microsoft. Instead, it concentrates all the decision-making on the same guy who oversaw all those day-late and a dollar-short poor imitations of others.

    The challenges remain. But if the Board can be clear about what it wants from the management, and if they help rebuild the talent and culture, the next CEO has a chance at success.

    • mjw149

      He has had real failures in the last two years around Windows 8 and xbone. The Windows RT business model and Surface’s weird half-way existence are the best examples. Not everything is his fault, but not providing the leadership around fundamental monetization and partner relationships is certainly HIS responsibility.

      Plus, his employee ranking scheme is famously merciless. He wouldn’t have been kept around with is performance if he had been just another employee.

    • simon

      To me that started from Gates. Gates built Microsoft based on horizontal expansion across as many devices as possible while following the examples of successful products from innovators. Microsoft has always asked the question “how can we make this product used in as many devices and places as possible?”

    • mhikl

      Walt, always so lucid and insightful.

  • http://sumocat.blogspot.com Sumocat

    You’re being too charitable. Microsoft held commanding leads in tablets and mobile, going back more than a decade, only to today be considered “late” to both markets. If Microsoft under Ballmer had only focused on PCs and never attempted to compete in other markets, then yes, we could argue Ballmer successfully avoided the Innovator’s Curse. But instead billions of dollars were poured into projects like Zune, Kin, Windows Mobile, Tablet PC, and Origami only to become mostly forgotten memories (Surface is next). He should not get credit for dodging the Innovator’s Curse because their costly attempts to innovate failed.

    • Walt French

      Costly but remarkably ill-thought-out. Doomed to fail by not embodying the careful planning that Apple is famous/hated for.

    • jonathan oberg 

      Incumbents should do exactly what MS did: embrace and extend new technologies (eg mobile) to make them sustaining.

      That’s why the Surface is marketed as one more way to use Windows rather than a completely new solution that is inferior to Windows on some dimensions.

      From the outside it’s not credible that MS neither saw the threat nor failed to execute. Rather, it’s that they were incapable of making and selling a device that would jeopardize their dominant position l

      • Kizedek

        Except that doing so has made Windows inferior. All of MS’ “embracing and extending” always seems to either dilute its own products, or mess up the ones they take over (Kin, etc.)

        That’s why the only real long-term prospect is to either redefine yourself, like IBM, or disrupt yourself, like Apple. You can’t be an incumbent forever, because markets get redefined and your products have to change beyond all recognition to adapt to the changes.

        Actually, before tablets, we could say MS tried to *extend* the PC into Mobile with the Netbook. Apple had the lucrative MacBook and MacBook Air; but instead of *extending* itself into Netbooks, it more fully *embraced* mobile and came up with the iPad instead. Now, the iPad has fully supplanted netbooks and comprises the dominant and growing share of the PC market. By *embracing* the future, it has *replaced* the past. You can’t have one foot in both.

      • http://sumocat.blogspot.com Sumocat

        “Actually, before tablets, we could say MS tried to *extend* the PC into Mobile with the Netbook.” — No, we really can’t. Netbooks caught Microsoft completely off-guard. Intel introduced netbooks as little notebooks with small SSDs that ran light versions of Linux. Microsoft had no OS capable of running on them. Instead, vendors were forced to adopt clunky HDDs and bigger screens in order to accommodate Windows, effectively destroying the features that set netbooks apart. Microsoft’s foray into netbooks was a subversion of the form factor. Today’s Chromebooks are what netbooks were originally meant to be (especially that “net” part of the name).

      • Kizedek

        Right, they “tried” to extend PC/Windows everywhere, ie, onto netbooks… and in the process destroyed the features that set netbooks apart. Kind of my point (whereby they either dilute Windows or mess something up).

        MS have effectively killed the golden goose by driving away their OEMs or creating situations in which their OEMs have to race to the bottom. Now they want to replace the golden goose by producing their own hardware.

        Anyway, what I was trying to get at was your notion about how “incumbents should embrace and extend new technologies (eg. mobile) and make them sustaining”. My point was that this starts to look suspiciously like “disrupting yourself” if you are going to do it effectively or in any meaningful way. For a start, “mobile” is a little more than just “a new technology” — at the very least, it’s probably what Horace would call a Priority.

      • http://sumocat.blogspot.com Sumocat

        “The Tablet takes cutting-edge PC technology and makes it available wherever you want it, which is why I’m already using a Tablet as my everyday computer. It’s a PC that is virtually without limits — and within five years I predict it will be the most popular form of PC sold in America.” — Bill Gates, Nov 2001.
        http://www.microsoft.com/en-us/news/press/2001/nov01/11-11comdex2001keynotepr.aspx

        Saw the threat, failed to execute.

      • Walt French

        I’m not getting the logic: incumbents should do exactly what MS did. But MS failed because they were incapable of doing what they needed to do.

        As Horace tweeted this morning, Operating System Software is Dead—the retail price of OS’s has gone to $0.00 — at least for Android, RedHat, iOS and WindowsRT.

        Yes, techies care about the OS, and OS’s are different, but they are only a minor aspect to the differences between platforms; those differences being dominated by the app, media, hardware and support ecosystems. The protestations a year ago by BlackBerry advocates, that QNX was a game-changer, were pitiable.

        IOW, it’s impossible to extend “Windows” by embracing new tech; the core has been hollowed out. The services that people care about—take Dropbox and its ilk as an example—are as identical across OSs as the service provider cares to make them.

        And now to contradict myself, we’re not completely there yet. Windows has all sorts of cruft that’s inappropriate to mobile, just as OSX does; there are important tuning decisions based on the hardware and usage models. In that sense, Windows hasn’t yet become irrelevant to mobile; it’s an active impediment the same way that OSX would’ve been had Apple merely tried to slap a bunch of touch interface stuff on OSX.

        Microsoft’s failure in trying to extend Windows to mobile is then maybe that they tried to stay too close to that hollow core, and failed to move aggressively enough to mobile—tried to enter a distinct market with a product not suited for it, leading to embarrassments such as start menus, keyboard/mouse-only settings and options, etc.

  • peter

    Ballmer did what a CEO is supposed to do according to textbook management practice. He optimized, maximized and protected the profitable Windows/Office franchise.

    He also invested heavily in R&D, but the return on R&D was miserable. The reason is that Microsoft-the-Windows/Office-company (with their massive market cap, revenue and profit) just cannot get excited about and focus on a little ‘inferior’ disruptive businesses because they are too small to register. Maybe Apple is different in being able to get excited about little new products, even if they are — financially speaking — not much more than hobbies.

    The tragedy of Ballmer is that he played a crucial role in building Microsoft in the 80s/90s and expanding it in the 00s, but that he is seen as the guy who did not get it and lost their dominant position. The reality is a more subtle progression from roommate to entrepreneur to hard-nosed business man to monopolist and finally buffoon.

    I agree with Horace that Ballmer is not the cause of the failure, almost any other professional manager would have made the same mistakes (because Microsoft’s structure, procedures, incentives all point away from disrupting their own business). Perhaps businesses are not meant to last forever, maybe it is just more efficient to start new businesses in new entities than to ‘remodel’ existing entities to house those new businesses.

    Rather than hoping that a new CEO will do magic (ask HP how that is working out), it is better for Microsoft to brush up on the history of Wang, DEC, Kodak and IBM. Microsoft will need to reinvent itself like IBM or else fail like the other three.

    • mjw149

      If Dediu is right about disruption, then there’s only one answer: to retrench along business software and give up on mobile OSs.

    • davel

      I disagree. Microsoft’s failures are the failures of its CEO. The CEO charts the course for the company. Clearly the course currently followed by the company is not the right one if you want to have the impact on technology that it used to have. It makes a lot of money. It will continue to make lots of money, but that will not make it a leader in the technology field.

      • Walt French

        You play the cards you’re dealt. I’m no apologist for Ballmer — see above — but most companies, Microsoft apparently included, are NOT looking to make an “impact on technology,” but rather to help their customers and therefore themselves.

        And you’re not likely to accomplish something that you don’t set out to achieve.

        You can see companies’ objectives change as their market position changes. Fr’instance, 5 years ago, Android was all about open source and “anything goes.” Many parts of technology are changing so rapidly that the benefit from some specific tech you enable, essentially disappears before you, or customers, can profit from it. (Maybe Nokia’s excellent cameras are an example: much less-capable, $15 subsystems, take fine photos and Nokia’s probably high development costs are no longer available to fund other enhancements that might matter more.)

        Apple is of course famous for wanting to make a ding in the universe, but Jobs’s last decade was marked by huge commercial adoption, not the pinch-n-zoom patents that enabled easy-to-use touchscreens.

  • Dick Applebaum

    The other “Executive”.

    I was heavily involved in the desktop nee personal nee micro nee hobbyist computer business in Silicon Valley from 1978-1989 — with many direct dealings with with Apple, MicroSoft and other major players of that era.

    Many people, today do tot realize that MicroSoft had another key executive: Jon Shirley.

    “Jon A. Shirley (born 1938) was president of Microsoft from 1983 through 1990, and a director until 2008.

    Shirley was born in San Diego, California. He attended The Hill School in Pottstown, Pennsylvania and the Massachusetts Institute of Technology. Shirley started at Tandy Corporation in 1958, holding various positions in sales, merchandising, manufacturing, and international operations. He left Tandy as vice president of computer merchandising in 1983, to become president, chief operating officer, and director of Microsoft.[1]”

    http://en.wikipedia.org/wiki/Jon_Shirley

    In many ways, Shirley was said to be to Gates/Microsoft as Eric Schmidt was to Larry Page/Google — bringing tested, seasoned and mature executive experience to a then small startup [or upstart] company transitioning into a major corporation.

    It was during Shirley’s era that MicroSoft set in place much of the groundwork for its future growth, and its IPO:

    “Microsoft’s initial public offering was on March 14th, 1986. The stock was offered at $21. After its first day of trading, the stock ended the day $27.75.”

    http://www.ehow.com/facts_5014777_microsoft-stock-price-history.html

  • Canucker

    Ballmer managed and he managed well. He knew the core business and squeezed it for profit (much like Steve Jobs suggestion that he’d milk the Mac for all its worth while preparing for the next great thing – although the Mac wasn’t so much milked as gently stroked and developed). Ballmer also showed longevity – he didn’t cut and run with Bing, Xbox, Windows Phone. This required significant confidence and recognition that each would take many years to gain a foothold but were too fundamental to abandon. Few other companies have the stamina for that – due to the deep pockets. There were many mistakes along the way and missed opportunities but none of these were game-changers that risked the company.

    What Ballmer utterly failed to do was groom a successor. Instead, he apparently chopped off the heads of the most aspiring. That decapitated list is long and suggests that, for a while, he jealously protected his own position. Whether this will force a parachute successor will become clear over the next few months but there is no current face of Microsoft other than Swetty Ballmer.

  • davel

    Microsoft killed many companies, Lotus, Wordperfect, IBM, Apple, etc. They were smarter than all their competition and laid waste to them.

    The last time Microsoft was disrupted was the birth of Netscape which Mr. Bill killed.

    Ballmer has been a great executive ( or rather coo ) who maintained and extended the Microsoft franchise and made lots of money for its shareholders. However as you have noted he has not done well when the rules changed. In my mind he does not see the future and does not recognize the present. In trying to fix their current problem he is still trying to leverage Windows ( using the tried and true lever ) to build/gain marketshare. However he fails to recognize that the web as it exists today marginalizes the effect of the OS and so his strategy may not work unless the users covet the OS.

    Here is a fable of Ballmer and Apple:

    http://stratechery.com/2013/if-steve-ballmer-ran-apple/

    With regards to Microsoft’s future, I think the next CEO has a difficult job. How to run a large, complex, successful company that caters to the enterprise while changing course using its considerable talents and resources to chart a new approach to the future. Microsoft is the largest and most successful software company in the world with assets that are unrivaled by any other company. However the company is structured around Windows which has been marginalized by the web.

    If they choose to target the consumer they will have a problem in that the consumers needs are different from the enterprise. This is one of the problems with their current mobile strategy.

    • Shameer Mulji

      “If they choose to target the consumer they will have a problem in that the consumers needs are different from the enterprise.”

      Not only that, but the type of CEO needed to successfully run a consumer-focused business is very different than the type needed to run an enterprise-focused one. Maybe MS should be split up into two companies – MS Enterprise & MS Entertainment & Devices.

  • Mark Howard

    YES! For most of the 2000′s I believed that all their failures were partially a smokescreen to prevent people getting pissed at all the monopoly profits they were taking in from Windows and Office.

    “Look what losers we are!” they screamed, hustling their bags of money to the bank.

  • ankushnarula

    There are so many problems with this line of thinking. Fine, he didn’t kill the golden goose. I agree that would have been imprudent. However, the short-sighted arrogance and abundant hubris at Microsoft was evidenced by Ballmer’s total lack of respect or regard for changes in the market and competitive innovations over the past 12 years. Instead, Ballmer’s voice (Microsoft Marketing) insisted on Windows Everywhere!

    BUT, you just can’t make good products if you try to cater to everyone with one solution!

    Under Ballmer’s watch, Microsoft went from top 3 mobile OS provider to no longer relevant. Ballmer was also unable and unwilling to imagine a world beyond Windows/Office – possibly because there was little or no hardware innovation happening outside of Microsoft Research. Ballmer couldn’t fathom the risk of cannibalizing Windows/Office sales by *leading* the industry to cloud based software delivery. The same applies to servers, datacenter, and development tools. Microsoft Azure was a reaction to Amazon Web Services and emerging PaaS and IaaS market. No industry innovation or leadership.

    And finally, I can’t see why Windows 8 didn’t continue as a standard desktop/laptop OS for business (and consumer) while “Metro” went on to become the touch OS for tablet/phone. The desperate but typical Microsoft marketing strategy is to jam everything in one box (a.k.a. Windows Everywhere). This nonsensical approach has now leaked into the XBox One marketing strategy as well and will functionally poison the platform. Hopefully, Ballmer’s successor will realize this and put a stop to it.

  • CEO

    MSFT ascended because of IBM, and remained thanks to its monopoly.

    Today MSFT is getting killed because lack of good tasteful products. You even said it yourself – even if inadvertently:

    “Microsoft is composed of people, processes and priorities.”

    There is no “Products” on the list above.

    ceo

  • gprovida

    I think the previous HP CEO who tried to do an “IBM” and get out of PC business, Apoteker, was nailed by exactly the same excuses. CEO who delivered on quarterly growth would have weathered, but daring to put the cash cow PC and Printer on the sunset route to make the next leap is what did him in. “… HP’s board said the company needed a change at the top. The company cut its financial outlook three times in Apotheker’s tenure, and on Thursday, HP said it was not confident it would be able to meet its sales targets for the current quarter. Shareholders sent the stock down more than 40% this year beforeFortune and other outlets broke the news this week that the board was considering letting Apotheker go ….” http://money.cnn.com/2011/09/22/technology/hp_ceo_fired/index.htm Current CEO is now facing what Apoteker was essentially predicting. You can see the same behavior in DELL and even trying to get out of the “stockholder value” trap by going private is having a rough go and may well fail.

    • https://twitter.com/#!/azulum azulum

      And yet if Palm was given a chance to get the quality parts they needed, to wait until the software was baked for release, to price it aggressively and quickly iterate, Palm would probably be a successful number three phone maker and number two in tablets, with the OS working across all of their devices. Apotheker killed Palm. He foresaw the future he made damn sure would happen.

      • simon

        I don’t think there was anyway Palm could’ve succeeded. Other than a few nice touches on its GUI, it was lacking in too many things in both hardware and software to be competitive against the juggernauts.

        The only way would’ve been if HP somehow brought in Nokia into the fold but HP wouldn’t have been rich enough to entice Nokia over Microsoft’s offering.

        It’s harsh but that was the reality of the post-Android world where the major OEM OS is available for free.

      • https://twitter.com/#!/azulum azulum

        You do realize that Palm lacked the funds to get access to parts, leaving them behind in the spec race, so the company sold itself to another company that could bankroll the development. That company was HP. Then Hurd was ousted, rightly or wrongly, and the access Palm had to funds was effectively cut off. And then Apotheker made it clear that the TouchPad had to be released one year after the Palm purchase went through, or it wouldn’t get released at all.

        From Chris Ziegler’s excellent postmortem:

        It quickly became evident, though, that HP’s financiers (up to and including CFO Cathie Lesjak) didn’t share Hurd’s enthusiasm. At that time, Apple was almost singlehandedly dominating the smartphone supply chain and it took an enormous commitment — the kind of commitment that only a giant like HP could offer — to tip the scale. “We told HP we needed better displays [for the Pre 3]. They’d come back and say, ‘Apple bought them all. Our suppliers tell us we need to build them a factory if we want the displays’ and they weren’t willing to put the billion dollars upfront to do that,” one source said. “The same thing happened with cameras. We’d pick a part, turns out Apple picked the same part. We were screwed left and right.” Without HP’s full financial support to buy its way into relevance, Palm was essentially left to pick from the corporate parts bin — a problem that would strike particularly hard later on with the TouchPad.

        And suddenly I cannot paste, so just search for “theverge pre to postmortem” and you should find it.

      • Walt French

        As I’ve recently noted elsewhere, the smartphone game is not just about having a bunch of good players and showing up.

        Years of planning, preparation, questioning, busting your ass, setting up relationships, …

        This is NOT a state secret. Jobs’s choice of Cook as successor was just one of many obvious reminders that even brilliant people like Mark Hurd, Thorsten Heins and Steve Ballmer don’t just waltz into the room and dominate.

        So Ziegler’s no dummy, but this “waaah, parts!” thing grates on me. If it took as little as that suggests, *I* would be the CEO of the world’s biggest tech company.

      • https://twitter.com/#!/azulum azulum

        I’ve waited to say this, since I respect what you bring to the community here and elsewhere, but there is nothing so grating as hearing someone whine about how grating it is to hear someone whine — especially when they probably know far better than you what it takes to run a successful company.

        Sure, parts may not have saved them, but they invested blood and sweat and tears into fielding a genuinely interesting and truly innovative product — and to fail because of incompetence and deceit on the part of other companies and people gives anyone the right and the privilege to cry like a baby if they so desire, because dammit, it sucks. This is life. Things die. Death is sheer loss. And we can and should mourn that loss for that is what makes us human.

        And I disagree that sharing a fact-based opinion as to the underlying reasons of failure is whining.

        If it took as little as that suggests, *I* would be the CEO of the world’s biggest tech company.

        No, you wouldn’t. Probability basically prohibits it. And because of that, it may take as little as that suggests, because randomness and merit are not always aligned.

      • Walt French

        It seems as if you were citing http://www.theverge.com/2012/6/5/3062611/palm-webos-hp-inside-story-pre-postmortem
        …but the narrative I see there is 180° at odds with what you’re saying.

        Long before the HP acquisition,

        the Pre wasn’t the blockbuster that everyone had been hoping for. The decision to launch as a Sprint exclusive was frequently cited as a killer…The launch of the Motorola Droid in November of 2009, then, sucked the air right out of the room…Verizon ended up refusing shipment on a majority of the devices that Palm had manufactured for it, a devastating blow to the company’s bottom line — in fact, multiple sources have described it to us as the final nail in Palm’s coffin.

        (I trust, given the context, that you’ll forgive my hitting you over the head with my emphasis.)

        So the post-acquisition inability of HP to source parts at scale only came well after Palm collapsed due to too many failures, missed dates, bugs, lousy reviews, lousy sales in Europe, carrier refusals to promote the devices and the May, 2010 resignation of Matias Duarte—“the soul of webOS,” per Mr. Ziegler. Palm’s stock, worth about $46 billion before the dot-bomb bubble burst, went to HP for about 2½% of that, $1.2 billion.

        I was a fan and active user of Palm even through their debacle. But there is just no question that the company was already in trouble with failed OS updates before the iPhone, and the rushed WebOS attempt, while it made for some good demos, had awful problems:

        “large swaths of critical functionality were still missing under the covers. “The emperor had no clothes.”

        Overall, the story that Ziegler—your preferred source—tells is almost textbook-perfect: massive disruption of an incumbent that could not deal with the new realities of both Apple and Google overturning the industry.

        I am quite perplexed that you see me as attempting to rewrite history when your preferred narrative includes so many devastating examples of how the failure happened well before the details of which cameras or screens HP would get. There were many other cases of finger-pointing, published rumors that the OS ran faster on an iPad than the HP hardware, for example; I long ago wrote off the whole fiasco as blame-casting by those involved.

        Since I took your characterization earlier and only re-read the Ziegler post today, I’ll retract my statement that despite his smarts he was wrong in blaming minor logistics issues—that seems your cherry-picking of a quote from after the smartphone effort had collapsed. Despite your smarts, you seem to have confused a nifty concept as being enough to offset a bug-ridden, incomplete, slow, late entrant by a firm that was several years out of date when they started.

      • https://twitter.com/#!/azulum azulum

        That was the end of Palm as an independent company, not the death of webOS. I was citing the death of webOS under Apotheker. You may call it cherry picking, but that’s what the thread was about — Apotheker creating an environment in which to ditch all hardware when the peak of Windows box sales had already occurred and the future of computing was mobile.

        As for bug-ridden, incomplete, slow, etc., explain to me how, when they slashed the price, it took down HP’s entire store because so many were slamming their servers, and created lines outside of Best Buy. Bug-ridden or not, it had value. It would have had more value with access to better hardware and a release date a month later, when the rough edges were filed off. And that is what we trade — value. That may not have been enough, but we’ll never know that, will we?

      • Walt French

        azulum wrote, “I was citing the death of webOS…that’s what the thread was about…”

        But you replied to @simon saying, “I don’t think there was anyway Palm could’ve succeeded…it was lacking in too many things in both hardware and software to be competitive against the juggernauts.”

        And you replied to my complaint against what I deemed to be a bogus excuse for the failure of WebOS with, “they probably know far better than you what it takes to run a successful company.”

        You apparently don’t realize it, but WebOS was dead when HP bought Palm for a tiny fraction of its original value, and merely failed to resurrect it. It was shot through with flaws, was incomplete and the team that created it had left.

        WebOS would have been the ideal vehicle for Google—a solid HTML approach to the web that could be implemented quickly on a whole host of hardware, guaranteeing that no competitor like Microsoft could lock them out from the mobile web. But it just didn’t work well enough; 3 years later the Chrome OS is only now getting close to the utter destruction of the value of an OS.

        Palm was a vertical player and needed to monetize the way Apple does; the notion of a ubiquitous OS for the web could never have made them money. Ditto for HP. Whatever the technical merits of WebOS (and I believe its objectives never came close to being realized), neither Palm nor HP would have been able to support the product properly.

        We all have soft spots in our hearts for interesting efforts, quixotic or otherwise. WebOS might be one of those for you, but it’s not part of Horace’s objective of the site being an “experiment in collaborative and peer reviewed analysis.”

      • https://twitter.com/#!/azulum azulum

        It ain’t over till the fat lady sings. In Palm’s case, it was 2011. End of story.

      • https://twitter.com/#!/azulum azulum

        There are many little things that still could have killed the company, but cashflow is the lifeblood of all business. Near the end 2009 Palm had something like a 3 – 5% share in smartphones and the Pre did see some success, but a sale ultimately did them in, because they had no cashflow.

        I believe that better stewardship from HP with a longer term vision — think of it as platform insurance against a Windows failure (or Windows hegemony for that matter) — *could have* signaled to consumers that this platform was going to be here for the long haul. HP didn’t. The ham-fisted release with Apple-like margins for last-gen hardware and a hard date for release of the software were evidence of that.

        Say what you want about the software having issues, Android and iOS have had software issues as well, and most of their remedies came from webOS, and time to fix them.

        But regardless, this argument is moot. Palm is dead. All counterfactuals are specious, except for this — there absolutely was a way — many ways — that Palm could have succeeded — but they were already an underdog. Contrast their failure with that of BB née RIM.

    • Tatil_S

      Way too much credit for Apotheker. He did not get fired for losing money while transitioning away from hardware. He deserved to be fired for overpaying for Autonomy, announcing the sale of PC business without a buyer lined up or a reassuring story about the future roadmap for enterprise hardware customers and, of course, for quick scuttling of Palm, the chance to become one of the winners in mobile computing despite the billion dollars spent by his successor.

  • R Bohn

    Any single-cause theory of company decline is bunk. “What really causes a company to fail is disruption.” That is one of many many possible causes.

    • https://twitter.com/#!/azulum azulum

      Disruption is like cancer — hardly anyone dies of cancer, they die of secondary effects caused by the cancer. So yes, disruption can be the cause of death, even if it isn’t what made a person stop breathing.

      • Penny

        So no-one dies of anything else, then?

      • https://twitter.com/#!/azulum azulum

        Nope. Just cancer.

        But seriously, I may have misread R Bohn’s comment: my response was to the notion that a single cause can be put as a theory of why a company declines, not to the notion that companies only decline due to disruption — though an argument can be made that anything is disruptive, but that’s outside the scope of the disruption theory and would be rather dishonest. So yes, a company can be run into the ground by bad management that has little to do with plucky upstarts, but retrospectively bad management may also have been the result of not recognizing and reacting to plucky upstarts soon enough.

    • Childermass

      Absolutely correct. Which negates the whole piece.

  • afwaller

    Ballmer didn’t kill the goose that laid the golden eggs. But he watched it get old without looking for another magic farm animal, and laughed at the farmers next door who raised cows that produced golden milk, and sheep that produced golden wool.

    Failing to see and replicate the iPhone and iPad can be forgiven. But watching Android arrive, and letting it take second place, while mostly just making snarky comments, is unforgivable.

    Microsoft was positioned to rule the enterprise for phones and tablets. But they waited too long, until enterprise IT departments were neutered by BYOD and Blackberry was dying. Then eventually they finally released SurfaceRT, which couldn’t even properly join Active Directory domains.

    • Walt French

      If you’re saying that Ballmer let Android take second place by virtue of not starting a Manhattan Project for WP, because their mindset was tied up in WM and Kin, or because they stiffed WP7 customers with zero upgrade help, yes, those actions were all entirely under Ballmer’s control.

      The snarky comments? Every CEO has to promote the company line.

      • anthony f. waller

        Every CEO has to promote their company line. But I think the evidence is that Ballmer fully believed his own laughing dismissals of the iPhone in spite of reality. It’s the same echo chamber and close minded thinking that led RIM to initially shrug off the iPhone because it “wasn’t possible” – they were sure the demos were faked or stretching reality.

        Where are Microsoft and RIM ‘s smartphone businesses today?

        Making marketing statements in public is one thing. But buying into your company line even when it is grossly wrong and counter to reality is another. Ballmer couldn’t see the iPhone was a game changing product, because he was blinded by his own hubris and bought into his own bluster.

        (It’s worth noting that I think Ballmer was an is an excellent leader for MS in the enterprise sales group, and his characteristics of wholeheartedly believing, echoing, and living — eg my kids don’t have iPods or use Google — the company line are valuable in a salesperson style role. The best salespeople believe they have the best product, even when they don’t.)

      • Walt French

        Agreed, the real sin is when a CEO swallows his own PR. I simply don’t believe it’s possible to tell when that’s happened, but some of the PR is so transparent that I can’t imagine an IQ over 90 would actually fall for it, let alone the guy who was coached on how to help minimize competitors’ strengths so investors & customers don’t think the company’s lagging.

  • David Weintraub

    I think there’s another reason managers fail or succeed, and that is the tools they want to use. Sometimes, due to certain circumstances, those tools make them succeed and sometime those same tools make them fail.

    Imagine a CEO who owns a hammer. He goes to Company “A”. Company “A” is shaky. Company “A” stand on a foundation with lots of loose nails. The CEO come in, hammers them all in, and Company “A” is no longer on a shaky foundation. The CEO is a “genius”. Books are written about the his hammer management style. He gets write ups in Business Week and Fortune magazine.

    Now, the CEO is hired away at another company with problems. This company’s foundation is also shaky because it’s not wide enough on the bottom. Plus, they use screws instead of nails. Our CEO comes in, hammers away, and this company topples over. The CEO is an idiot. He’s overpaid. He is out of step. Again, Fortune and Business Week write up about our CEO, but now declare him as failed.

    Robert Nardelli was a successful executive at GE, and was hired at Home Depot as CEO. At GE, he used Six Sigma to overhaul Home Depot. He destroyed its entrepreneurial culture and centralized everything when being able to respond to local circumstances was important. Under Nardelli’s leadership, Home Depot lost its lead to Lowes. What worked wonderfully at GE, a large conglomerate failed at a centrally focused retail establishment.

    Ron Johnson was successful at Apple setting up the new Apple retail stores. He designed them to be hip comfortable places. Apple doesn’t have a lot of stock and few third parties it has to deal with when stocking its stores. Johnson’s ideas helped Apple stores succeed where other computer stores (Sony, Dell, Gateway) failed. But at J.C. Penney, Johnson stumbled badly. His attempt so make Penney more hip drove away their customers.

    Ballmer’s problems are much the same. He knew how to squeeze out profits from his venerable cash cows. Pushing the Windowfication of everything worked. Even the Windows Mobile devices had Start buttons, taskbars, and menus. As long as Windows integration was important, Balmer’s strategy worked.

    Unfortunately for Balmer, the world changed. Balmer aimed .NET squarely at Sun, and it worked. Sun’s Java platform couldn’t compete with .NET as long as everything had to do with Windows integration. However, it failed to contain Linux because Linux could out evolve whatever Microsoft did. MySQL could work just as well as Microsoft SQLServer. Apache was faster and more flexible that ISS. Java development thrived because Sun no longer was powerful enough to control it. Spring gave it a framework that .NET gave C#. Eclipse gave it an IDE that VisualStudio gave to .NET development. Continuous Integration, and Maven moved Java beyond what .NET was capable of.

    Balmer thought that the Zune could destroy the iPod because the Zune integrated better with Windows. Instead, the iPod drove up Mac sales as users wanted a computer that worked with their iPods. Windows integration no longer mattered. The Mac could do email and browse the web just as well as a Windows machine and did something Windows couldn’t: Work better with iPods.

    Macintosh sales increased not because of Windows interoperability but because it used the same tools as Linux and was better at Linux interoperability.

    Balmer laughed off the iPhone because it wasn’t as compatible with Windows as Windows Mobile. Who wants a phone that doesn’t work well with Windows? Balmer missed the iPad because of the same reasons.

    Windows 8 failed because Microsoft under Balmer insisted that Windows 8 on tablets had to be 100% compatible with the Windows desktop. Windows RT kept the desktop. The Surface was a tablet that pretended to be a PC. The built in keyboard and kickstand didn’t help sales, but killed it. People who need a desktop would buy a desktop. People who want a tablet will buy a tablet. The dual-monster OS pleased no one.

    Ballmer’s problem is that the tools he used as a success failed when the environment changed. Windows integration no longer was the feature most users wanted.

    Back when Vista failed, I talked to a former Microsoft employee who wanted to use the chance to move Windows from its NT architecture to a Linux based architecture. He felt that it could be done rather quickly. Windows would become “cool”. Open source developers could move to Linux systems. Microsoft didn’t have to reinvent everything from scratch. Open protocols would allow Windows in innovate and keep up with modern development concepts.

    Of course, that would mean losing the ability to enforce a Windows service monopoly. Tools like SQLServer, IIS, VisualStudio, .NET ensured Windows dominance in the 1990s. They worked best with Windows and pushed Microsoft solutions.

    My friend left Microsoft. He bought a Mac, learned Java, Python, and JavaScript and went on to several startups. When he left back in 2005, he told me that Balmer and Microsoft were both dead. They simply couldn’t understand how the world no longer needed Windows. He predicted that Apple would take over phones and the emerging netbook market because Windows compatibility was no longer important and Ballmer didn’t understand that. Apple would simply seize markets at their choosing and Ballmer’s response would be to fall back on the Windows monopoly and fail.

    What is keeping Microsoft alive for now is its business monopoly. However, that isn’t as stable as Microsoft thinks. Businesses are looking at iPads, Android tablets, and on line documentation tools. Toss out the PC, you eliminate the employee tethered to a cubicle. You eliminate the need for an entire IT department dedicated to setting up and tracking PCs. That’s real money, and once businesses start to jump, they’ll jump fast. Ask Blackberry how their business monopoly faired once people realized they could use their iPhones at work and didn’t need Blackberries.

    Microsoft needs someone not to restructure the company, but to open it up.

    • Tony

      Excellent commentary.
      Thanks!

    • http://www.noisetech-software.com/Home.html Steven Noyes

      Good write up except: “Macintosh sales increased not because of Windows interoperability but because it used the same tools as Linux and was better at Linux interoperability.”

      I seriously doubt Linux interoperability had anything to do with the Macs success. In short, no one volunteers to use Eclipse.

      • http://omlc.ogi.edu/~prahl Scott Prahl

        I think that linux interoperability meant that the basic tool chain (gcc, make) and web tools (apache, php, perl, sql) were available to everyone using a mac. This drove a lot of developers to buy a Mac because they wanted a unix box that got out of their way and allowed them to get work done.

        In short, no one cried when MPW went away (even those who had Eclipse forced upon them).

  • rational2

    Microsoft started investing heavily in Bing (it’s predecessor, Live Search) in early 2000s, soon after Google went public. Yet, under Ballmer’s leadership, that effort failed to churn out a good service. Note that I am not chastising Ballmer for stealing back massive search share from Google. I am finding fault for spending/losing tens if billions of dollars without resulting in a decent service. If it took a new company Google, less than 5 years to develop a compelling search service, why did Ballmer’s Microsoft fail to create a comparable quality search service? Ballmer ought to take blame for that. He was in charge and could have chosen the right people to build a good service irrespective of how much market share it captured.

    • Jessica Darko

      Not to mention, at one point at least they bought a major cutting edge search service (power search? I think it was called)…. but shut it down, and eventually I think the engineers drifted off.

      • rational2

        Powerset? As far engineers drifting off after their retainer expires, I guess that is fairly common. It’s hard for startup folks to hang around in a mature, gigantic org.

    • obarthelemy

      I’m not sure Bing is “not good”. It’s not successful, but it seems on a par with Google to me ?

      • rational2

        In the US it recently got to an ok level of quality, but still noticeably lags behind Google. Much worse internationally. It could have done much better if quality across the board was comparable to Google by 2010 (about 5 years since live search went live; presumably it was under development for a year or two before that). That is many years of lost opportunity and deep losses (billions per year).

        My point is, Bing was a case where the task and target were very clearly known by 2003 (if not before), yet Ballmer failed to execute in terms of putting out a decent quality product/service. That points to poor execution and is not expected of a company that had and spent huge resources in a very visible, high priority fight for ad dollars against Google.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        I have found Google results of today significantly lag behind Google results of yesteryear. Bing, Yahoo and DuckDuckGo have been getting better. Google is in the lucky position of people judging the alternate search engines against Google from the past and apathy keeps people from comparing Google results of today with the clean results they got a few years ago.

      • marcoselmalo

        Great products are not born from merely throwing more money and more bodies at a problem. Sometimes that can even hurt the process.

        Bing is a good case, and I think it points to the poisonous corporate culture at MS, a culture that discouraged innovation. The idea of using “stack ranking” at a tech company where at least _some_ of the success is supposed to come from innovation — that just blows my mind.

  • http://www.mendeley.com/profiles/brian-p-hanley/ Brian Hanley

    What about posts out on the web like this one? http://quantiger.wordpress.com/2013/03/10/dear-steve-ballmer-wake-the-fck-up-your-software-sucks-your-company-is-fing-doomed/
    I agree with it. Windows is doing everything wrong.
    And let’s just remember a certain CEO named Steve Jobs, when we let Ballmer off the hook. I don’t think you have even described the territory properly. Ballmer has let his mainstay, Windows for regular PCs, be turned into a horrible, stupid-making experience.

    • marcoselmalo

      Hey. Ex-Mac Zealot here. I got to try Windows 7 and will admit it was actually pretty good, so I think the correct formulation of what you are saying is that Windows for regular PCs REVERTED to form.

      (Just joking!)

  • obarthelemy

    Maybe the jury is still out on MS. I don’t like them much, but they still have a fighting chance. The main event in the IT landscape has been the switch (inflection ! :-p) from entreprise-driven to consumer-driven growth.

    First, MS have not fumbled on the entreprise side. Linux/Apache/various SQLs are competing with them, but they have kept a stranglehold on corporate IT.

    MS have badly fumbled Consumer. They thought they could leverage their Entreprise dominance, turns out they can’t. Took them a while to come to that realization, is taking them even longer to adjust.

    They are adjusting though: Windows phones and tablets are now somewhat credible (though still lagging). The Apps issue is not yet terminal. Most importantly, I think MS have laid out their path forwards:
    - get into the devices business directly
    - get a true touch UI
    - do try to get some leverage from their combined mobile/desktop/entreprise presence

    I think this strategy is right.

    Their execution has been severely lacking, especially forcing an unfinished Metro on the desktop. They seem on track to stop forcing it, and to finish it, and the damage is probably still fixable.

    The one need they fill better than iOS and Android is integration. They are trying to make a single UI / a single device work for both touch and non-touch. I’m not sure a multiple-personality device is the way forward more than multiple integrated devices, but right now neither work well, so MS have a window (:-p) to make their case.

    • rational2

      Yes, the problem is poor execution. See my note on poor execution in Search. Same story with phones and tablets. Google responded aggressively and entrenched its android phones and tablets. Microsoft had the same opportunity and people/financial resources to do what Google did.

      I am not faulting Ballmer for his inability to dream up new disruptive innovations. His fault is poor execution when it was very obvious that he had to move aggressively, with the right people charged with the task of following the path carved by disruptors (in search, services, and mobile). He did invest billions upon billions, but poor execution guaranteed that those billions were squandered away instead of resulting in competitive offerings at the right time. Who cares if you eventually figure it out and produce OK quality products and services? Your first response should be at least an OK offering and that buys you time to improve and compete. That’s what Google did in mobile and What Ballner’s Microsoft failed to do.

      • rational2

        Azure seems to be an OK offering and has a fighting chance in sharing cloud market share with the leader, Amazon. If it did something similar in search and mobile, perhaps it would have had better market share and less losses.

      • Tatil_S

        At least MS can argue nobody else was able to come up with a search competitor to Google and it was good enough to become the number two player. (Of course, it is quite likely nobody else spent that much money to merely become a weak number two, either.) In mobile OS, despite the years of head start, MS could not succeed anywhere close to what Google has achieved with its fast follower response.

        On the other hand, after a few years of bungling, MS now has a WP platform with its own unique user interface. I doubt it is in Microsoft’s DNA to design an OS as user friendly as iOS, but if it becomes a profitable third mobile ecosystem, is it such a bad consolation prize? Especially if Android OEMs ends up achieving high volumes with only meagre profits and Google ends up with a huge mind share, but only marginally more advertising profits in the next few years.

      • rational2

        Microsoft had a web search offering (MSN search) before Google started as a company, not to mention desktop and intranet search offerings in mid 90s. They had a head start in search, not just in smartphones and tablets.

        A distant second or a third may be ok if that brings profits. No profits yet in search and phones. It will be a while before the losses in search and phones are recouped, if ever.

        The key word is Profit. That’s what all these efforts are about.

    • Kizedek

      Interesting notion on a jury still being out about something. I think most people could go along with that…. except the gavel was slammed down and a verdict rendered on Apple long, long ago.

      People don’t see that the iPhone business alone is larger than all of MS, or that Apple is the most profitable PC maker WITHOUT counting iPads, precisely because the jury retired prematurely.

      • obarthelemy

        AAPL market cap is about 60% higher than MS’s, while their profit for last Q are only about 30% higher.

        Not sure what you’re whining about.

      • congrats

        Congrats on looking at a single quarter of a highly seasonal business in order to support a flimsy point.

      • luxetlibertas

        You’re cherry-picking numbers. One quarter does not say very much when MSFT occasionally takes a write-down like the $6.2 billion (!!!) on AQuantive, a year ago. Trailing p/e of Microsoft is higher and that’s after Apple’s likely worst quarter (just before the new products are launched).

        No denying that Apple did have a dry spell recently, but expectations are improving a bit.

      • obarthelemy

        honestly, I just took the latest numbers, I’m not fascinated by the stock market side of the business. I have no clue what these numbers were before, nor what they will be next (and I’m pretty sure analysts dont either :-p).

        Sorry if the latest numbers are not representative.

      • Klasse

        That is a pretty short-sighted analysis, wouldn’t you say? Your first post does however have some very good points IMO, and I would have thought you both agree that it may be too late for MS.

      • Kizedek

        Au contraire, I am actually finding a lot of humor in the situation in technology today and the way people speak about it (like how you earnestly deny reality in order to put Apple down at every opportunity).

        Where I find some humour: Apple is declared “doomed” and “dead” every week for 20 years. It is declared dead *precisely because* it never had the marketshare, never did things the way that MS did them; and because it was seen at the same time, ironically, as having to compete directly with MS all those years.

        NOW, MS finds itself trying to be like the biggest company in the world. …Except, MS has ZERO track record, experience or success in doing things like Apple, and has yet to disrupt itself even once. …But, somehow, MS will “out-Apple” Apple, because MS is, well, MS. And, somehow, Apple is still seen as of no concern to MS…because, well, Apple still doesn’t do things the MS way and is doomed.

        It’s all so ironic. But the jury is still out on MS, so it’s all good. For “MS” above, insert “Google” or “Amazon”, rinse and repeat.

      • obarthelemy

        I understand. But try to take the other man’s point of view though: MS have an entrenched position in very resilient markets. Apple have a rapidly declining share of fickle markets.

        Most people here seem convinced that Apple can keep innovating up. It does seem quite risky a proposition. Again, Apple’s way is to find a geeky, niche market and turn it into a mainstream, trendy market. Watches, TVs, home servers, even computers or consoles may be ripe for an Apple intervention next, or maybe Apple can manage for once to fight back on market share and get entrenched too, but again, that doesn’t seem as sure a bet as MS still being at the core of entreprise computing 5 or 10 years from now.

        I’d love to be proved wrong, Apple is certainly more fun than MS. Schadenfreude is OK too, though :-p

      • Kizedek

        Sure, if a “sure bet” is a sure bet.

        The point is, we don’t *have* to know what Apple is going to do about a hypothetical future situation, we only have to know that they will do *something* — that is their spirit of innovation.

        What we do KNOW is that situations change, and that it is a disruptive world. Apple are resilient movers, that’s all we have to know. What we do know is that MS aren’t so resilient and don’t know WHAT to do.

        Having a Monopoly on desktop licensed desktop software, and tying up “enterprise” for a decade or two WAS the most successful approach AT THE TIME.

        It is FAR from a “sure bet” that this is *the way it has to be*. THAT’s the myth being perpetuated. So far, MS has shown no ability or inclination to do anything ELSE — precisely *because* EVERYONE SAYS IT IS A SURE BET and they are afraid to rock the boat and risk their legacy cashcows!

        But, right now, people are making their own choices about their devices and IT depts/enterprise are having less say, and MS is not meeting modern needs with its new products (with ANY products other than Windows and Office). What then? Right now, priorities are shifting from PC to POST PC and companies should shift with them.

        MS “still at the core of enterprise” in 5-10 years? They couldn’t deliver on the Surface! The core is slipping away because their monopoly (and along with it their influence and strategy and priorities and abilities and core cashcows) is slipping. Who ever thought that would happen? It was such a sure bet! It was all over for Apple!

        So, far, Apple has come back and mopped up the profits — in consumer, in mobile, in enterprise, in ecosystem, in media, in whatever they put their hands to. Who ever thought that would happen?

        So, the sure bet? That MS can’t do what MS can’t do; but Apple can do just about anything they need to do, including redefining themselves or disrupting themselves. THAT’s the sure bet.

        Apple is already a cycle or two ahead in terms of ups and downs, and yet Apple still defines the cutting edge in a lot of ways — with big differences from the earlier cycles. MS is on its way down from the top for the first time; yes, let’s talk again in 5-10 years to see how MS got BACK to the top using its same old strategies, priorities and approaches which are SUCH A SURE BET!

        I agree, it will be fun to watch.

    • KirkBurgess

      obarthelemy: “First, MS have not fumbled on the entreprise side. Linux/Apache/various SQLs are competing with them, but they have kept a stranglehold on corporate IT.”

      Can a company have a “stranglehold” on corporate IT when it has under 10% share for enterprise users tablet and phone units?

      • obarthelemy

        I think so:
        1- tablets and phones are at the extreme periphery of corporate IT. I’m sure MS would like to sell their tablets and phones, but whatever mobile devices corps use has very little impact on the rest of their IT (servers, back-end applications, infrastructure…, Office, Exchange, Sharepoint, SQL Server,… are mostly not impacted).
        2- “Mobile devices will account for 20% of all IT spending in 2013, which IDC puts at $2.1 trillion worldwide.” (IDC). That includes consumer spending, so mobiles’ share of entreprise IT spend must be much lower than that, probably 10% (if that). nice chunk of cash, but not a dominant size.

    • Walt French

      obarthelemy wrote, “Windows phones and tablets are now somewhat credible (though still lagging).”

      This is exactly what one would’ve said about all the “badly fumbled” consumer products shortly after their introduction. They’ve been pretty consistently sub-par, hence, the vicious circle of lagging features producing low adoption / low profit / low re-investment / lagging features, and eventual total non-competitiveness.

      You correctly note their skill in integration. But today’s world has IT people leery of letting users integrate their personal info and preferences — there are too many security and identity issues (e.g., that this post be mistaken for my company’s recommendation about the attractiveness of Microsoft’s stock). And on the consumer side, that’s matched in wanting to keep personal information away from HR and busybodies.

      Facebook has found a domain — users and their interests — where integration makes sense. LinkedIn purports to (doesn’t work for me). And even Google+ may get it right, thanks to the huge number of dollars of incentive to knit together all facets of your identity.

  • neutrino23

    Maybe I misunderstood, but in a recent podcast you were contrasting leadership and management. Mr. Ballmer sounds like a competent manager, but isn’t the role of CEO a leadership role? Wasn’t that his role to find new businesses and find ways for MS to succeed in those businesses? Isn’t that what the CEOs at HP, Yahoo and elsewhere are trying to do?

    I also don’t understand why MS has to kill its core business in order to succeed. Why can’t the new business be complementary? Something that would gradually replace Windows would have served as a transition to the new age. Apple is selling more laptops and desktops than every yet that business has been surpassed by the iPhone and iPad.

    I would fault MS in general, maybe not Steve Ballmer in particular, for this confusion of roles where they were so protective of the Windows franchise they couldn’t move on. Steve Ballmer should have been made head of sales or something like that and another person could have been tasked with guiding MS into the future.

    I’m reminded of this opinion piece in The Economist about IBM:

    http://www.economist.com/node/18805483

    “IBM’s secret is that it is built around an idea that transcends any particular product or technology. Its strategy is to package technology for use by businesses.” Because IBM was not tied to any particular technology it has been able to reinvent itself over the years.

    Contrast this with Dell which saw itself as a maker of cheap PCs and MS which apparently saw itself as a purveyor of Windows and Office. When the market changes they struggle to adapt because of this idea of what business they are in is not flexible enough.

  • Sander van der Wal

    People might become more stupid over time, it doesn’t have to be instantanious. But as long as it is business as usual, they can apply the same old recipe and keep on being succesfull. Then the disruption appears, and the same old recipe stops working.

    • Rene Stein

      In this case it is not like “then the disruption appears”. This disruption, mobile computing, took years and years and years. Microsoft had chances, and tried to make this disruption happen. They had Tablet PCs, they had those Compaq iPaq things that some people actually really liked (internet in your pocket), they had Hotmail long before Gmail, they had all of these things in place long before the iPhone came out. They failed to make it work. Somebody came along and made it work. They were not disrupted in anyway, they failed. They had vision, they had resources, they had hardware, they had software. They failed to cause the massive growth in mobile computing. It was not because they were disrupted by the iPhone and by Android and the rise of social networks. It was because those items were much more liked by consumers than the one’s Microsoft offered. The real question is why did Microsoft fail in implementing its vision year after year after year?

      • peter

        The answer to that question includes things like: 1) the new businesses were financially insignificant, 2) the margins were too low, 3) corporate IT departments (their main customers) were not asking for it, 4) scarce resources (especially management attention) were allocated to the ‘real’ priorities, 5) the ‘rainmakers’ in the big Office/Windows division were seeing their careers rise much faster than those in the periphery of the company. Exactly the type of things that disruption predicts would happen.

      • Rene Stein

        Can we go back to 2001 for a moment? In late 2001, Bill Gates got on stage at Comdex. He launches Tablet PCs for the first time, saying that this form of computing will become the most popular form with the next 5 years. He was Chairman of the Board and the Chief Software Architect for Microsoft at the time. He was also one of the leading technology visionaries at the time.

        So, I think that point 1) was not true at Microsoft. They knew the importance of the tablet form factor. They thought it was going to be big business. This failed to materialize with their version of the tablet. The fact that they never learned the lesson of this is a testament to managerial failure.

        2) Margins for “Post-PC” devices were not too low for them to compete in. When the iPhone was introduced, Ballmer laughed and laughed at it. $500? Full subsidized? He laughed. He said they had cheaper phones available that did more than the iPhone. Which was completely true. I believe that they were even willing to take on Android’s free licensing.

        3) Corporate IT departments were not asking for it. This is probably true. Corporate IT departments are notoriously conservative. The Microsoft motto though was “Windows everywhere.” I think they meant it too. The failure to see the consumer space as being much larger than the corporate space is also a failure of management.

        4) The Chief Software Architect, Chairman of the Board. Richest Man in the World, Leading Technology Visionary, Champion of Tablet PCs could not get enough resources to make a popular Tablet PC? That would be a huge failure of management.

        5) Tablet PCs were not in the periphery of the company. They were in the mainstream Windows/Office area. Windows CE was more in the periphery. Pocket PCs and Windows CE were axed pretty quickly after the introduction of the iPhone then Android.

        There is a reason that Microsoft is losing relevance in the world of computing, and it has less to do with being disrupted and more to do with being incompetent.

      • peter

        Good points, but where did it go wrong? They did do the R&D, they got the tone-at-the-top right, they made software changes to Windows and they had hardware partners.

        On the product side they may have been unlucky in that the hardware was not quite there (bulky screens, power hungry CPUs and no cheap SSDs). The software itself was clearly of the Windows-everywhere type and not necessarily a joy to use without mouse+keyboard.

        Commercially I think, a lot depends on how you drive your sales force. If you give your sales people the choice between selling $1m of software (95% gross margin) to eager IT departments or $100k of Tablet PCs (maybe 30% gross margin) to customers that need to be convinced, then they will end up selling the high margin software. Worse yet, the heroic sales person who focuses on selling the Tablet PCs will get passed over for promotion because he/she is not bringing enough revenue.

        The only way to change this dynamic is by giving smaller bonuses to sales people who focus on high margin/volume software and higher bonuses to those who push the lower margin / low volume Tablet PC business. It is not impossible, but the lure of the high margin easy sales in the monopoly business will prove irresistible in practice.

        In FY2013 Microsoft made $21B of profit on sales of $77B, calling them incompetent is overlooking the sheer success of their temporary monopoly. If they cut down on R&D (which does not seem to benefit them much anyway), they’d be making $30B of profit. However, by gorging themselves on these monopoly profits, they cannot focus on other things at the same time.

        Let’s face it, if I were to start a $1B business with $200m profits that would be really impressive, but in the world of Microsoft a success like that would not even register. It is just to small and top management would find it very hard to focus on (however, if I were to do the slides for them, they might present it at Comdex ;-) .

      • Rene Stein

        Where do I think they went wrong? I think you hit the nail on the head in your statement. Their software was always “Windows Everywhere” software. I do not think, and I still do not think that Microsoft understands human-computer interactions.

        Microsoft was always successful in selling software to entities that did not actually use their software. They sell in to big corporations who then force it on their employees, they sell in to computer manufacturers who sell it to end users, they sell it to governments who then force their employees to use it.

        They were successful in the consumer space so long as they were the only offering 95% of consumers could afford.

        How can I say this? Look at Windows 8. A company, making operating systems for 35 years should not be making the mistakes they made with Windows 8. By the time they got to Windows 8, they should have learned their lessons, especially after iOS and Android had shown the way.

        I think that for years, Microsoft made a product that people had to use, while only a few percentage of people actually liked using. I don’t think they saw that. For years in the Macintosh world, they build ports of Word that nobody ever liked. It wasn’t until they separated the Macintosh Business Unit from the regular Office division that Mac users got software they liked and that we thought was better than the Windows version in terms of usability.

        But, you are right, they are highly successful in the corporate area. And they will be for a long time. Their server and web services businesses will be big money makers. They will make billions and billions of dollars.

        I will still say that they are incompetent though, because they had a goal of Windows-everywhere. They tried repeatedly and failed to deliver. They never really figured out why they failed, and they still haven’t figured it out. They will remain huge in corporate computing, and even the xBox will stay viable for a long time to come, might turn into their consumer saviour.

        But, the decline in consumer use of Windows is not because they were disrupted as this article states. They tried and they tried and they tried. They made poor product after poor product after poor product. The market rejected their attempts at tablets and phones before iOS and Android came along. It was a failure that has been in the making for 15 years, not something that happened quickly.

      • peter

        I will grant you that Windows 8, Vista and the dreaded Office ribbon (which hides commonly used functions in unexpected places) are instances of incompetence, where they really should have known better.

        I think that their success in the consumer market (mainly in the 90s and early 00s) was a ‘fortunate’ side effect of their monopoly, but they seem to have mistaken it for the result of a successfully executed strategy and consumers’ love of Microsoft products.

      • Rene Stein

        Precisely. They were the only game in town. They were never really in the consumer space of their own merit.

        And the problem with this article is that it posits that Windows current decline is primarily due to disruption, not the management of the company.

        I would argue that the decline of Windows is because Microsoft failed to make a compelling product long before Android and iOS came into existence. They failed because the management did not understand why some of their products were successful, while others were failures. They failed because of management. The success of iOS and Android really just made their failure obvious.

      • Sander van der Wal

        Microsoft wasn’t the only one doing mobile, and they weren’t the only ones of the first batch failing. Apple had the Newton, which failed. Then the was Palm, who was very succesful, but eventually failed. There was Psion, who’s OS became Symbian, and they bailed out. The was Nokia, who had the most success with smartphones, starting with the Nokia 9000 Communcator, and they failed. There was RIM.

        All these companies failed for a number of reasons. The ones that were actually disrupted, Microsoft, RIM, Nokia, were the winners (3, 2, 1) of the first batch. They thought they had figured out what worked in mobile and what did not.

        And they were getting quite some traction as smartphone sellers, around 2005. The Nokia N95 for instance was rather popular. Nokia kept growing as fast as the market until 2010 or so.

        The disruption wasn’t mobile disrupting the desktop. The disruption was Apple’s way of doing mobile, disrupting the old mobile guard and a bit later the desktop.

      • Rene Stein

        And it wasn’t Apple. It was Android. Had Apple been the only one in the game, Symbian, Windows Mobile and Blackberry all would have survived and been successful. Apple wasn’t going to make the vast majority of smartphones. They had no intention to, only the vast majority of the most profitable ones.

        Android kicked Microsoft in the teeth by offering the licensees of the software complete control over it, free was nice, but I don’t think that was the driver of success for it. It was the fact that Samsung and HTC could do what they want with it and try to differentiate and monetize it how they wanted.

        Now, the question I have to ask is, what was Microsoft doing for the 1.75 years between the launch of the iPhone and the launch of Android?

        Someone at Microsoft clearly recognized the touch/multitouch user interface as important. They demonstrated the original Surface computer the May after the iPhone launched. I think they even said that they had been working with the originator of the multitouch system.

        Why was Microsoft NOT the fast follower? They understood the importance of the mobile market. Bill Gates (Chairman of the Board, and was he still Chief Software Architect at the time?) was actively pushing the idea of multitouch, as he was the one who demonstrated the Surface and claimed that one day, every desk would be a computer.

        Microsoft already had a successfulish mobile platform to build on, they had seen the blueprints for the wave of the future. They had even been working in the same direction for a few years (probably) generating the surface software.

  • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

    The “stupid manager” theory is one particular case of the fundamental attribution error described in social psychology.

    “The fundamental attribution error is the tendency to overestimate the effect of disposition or personality and underestimate the effect of the situation in explaining social behavior.” http://en.wikipedia.org/wiki/Fundamental_attribution_error

    Note that the FAR is more prevalent in the Western cultures compared to e.g. the East Asian cultures.

  • Just

    Sounds like you tore a page out of Cook’s playbook. You bet Microsoft can be turned around, even while Apple’s sliding – the economy has to gain some footing though first.

  • Scott Engler

    The fallacy in this article is the idea that to innovate, Microsoft needed to cannabalize business. That’s not true. Microsoft had resources to extend into many areas and failed. In talking to ex-Microsoft employees they had a divisive culture, an inability to see innovation outside of their current business and basic ole bloat. As Gates said, they made mistakes.

    • Kizedek

      No, the idea is that disruption is a fact of life. If you don’t do it yourself, someone else will. Disrupting yourself often involves cannibalization. You need to be prepared to do it, not kill every baby in the crib because it might grow up and kill its parent.

      • Scott Engler

        The fallacy is the idea that they had to disrupt their core business to innovate in other areas.

        Microsoft was beaten in many areas that didn’t require them to innovate their core at all. They could have defended and extended at the same time, they just couldn’t do the latter.

        In many areas, they had the money, they had the resources, there was no threat to their core profitability, yet… they failed.

        The X-Box is a perfect example of a success. They were able to innovate and create growth without impinging on their core business. I believe they had to move the project off campus to give it the breathing room it needed.

        Most businesses don’t “have” to cannibalize themselves to innovate. They needed to enable an innovation while running a profitable business. You can do both. It wasn’t an either/or situation, it was a both/and situation. We have successful companies that do both very well.

        From what the multiple stories, it looks like their failure was a strategic failure and a cultural failure that was avoidable (as Gates acknowledged, Wall Street is acknowledging now and Ballmer himself acknowledged with the reorg.) This was not a innovators dilemma situation, it was a innovation failure situation.

        Bloat, lack of vision, a divisive culture and tunnel vision are a few of the things I’ve heard.
        Their new vision sounds like Apple.
        Vanity Fair actually did a decent piece on them:

        http://www.vanityfair.com/business/2012/08/microsoft-lost-mojo-steve-ballmer

      • netnegative

        “The X-Box is a perfect example of a success. They were able to innovate and create growth without impinging on their core business.”

        By all accounts the Xbox has been net negative on earnings. Don’t see your point on this one. It’s easy to get market share by losing money.

      • Scott Engler

        The X-box is Microsoft’s clear innovation success. It has been profitable since 2008, they’ve been number one in consoles for 2+ years and overtook established leaders based upon their ability to innovate in the space. That is not “easy” nor is it easy to get market share by losing money, Microsoft has proven that point with its other products. You may debate whether it’s a success, Microsoft would not trade it out.
        Regardless, how you judge success is not the point. Microsoft didn’t have to cannibalize it’s existing space to innovate in another. That’s just not true. Microsoft didn’t have to cannibalize its core to go after gaming, it didn’t have to cannibalize its core to go after the cell market and it didn’t have to cannibalize its core to go after search.
        The did not suffer from the innovators dilemma, nor was it an either/or proposition. They’ve made strategic and execution mistakes.

        http://articles.washingtonpost.com/2013-08-23/business/41439262_1_the-xbox-xbox-s-game-console

      • Tatil_S

        Xbox may be an innovative device, but the business started losing money again in the spring of last year. So far, Xbox lost a lot of money for a long while, then it started making profits, but as Xbox 360 got older and casual gamers moved to mobile, consumers stopped buying Xbox earlier than expected, so the business started losing money again. Up to this point in its lifetime, Xbox may be just over or just under break even, give or take a billion dollars. You can argue that the developments costs of the next gen console and the natural drop in current sales does not make this a fair point in time for a long term evaluation, but if the new gen consoles cost more than the wholesale sale price, as they usually were in the past, there will be another 18 to 24 months of losses to come.

      • cannibalise

        Video game consoles cannibalise “gaming PCs” running Windows, so I don’t really see your point.

      • dannyo152

        I think with XBox, the point isn’t costs and ROI, it is this. It was the product that became king of a shrinking hill. And listen to where Microsoft is positioning XBox, as the nexus between the television and entertainment delivered by the Internet. Right there is how you know Microsoft sees that the product’s growth is to be found among people who are not hiring it for games.

        From there one may speculate on brilliant pre-planned pivot or desperate improvisation lest Microsoft again gets beaten in a market sector they’ve been in for ages with a Windows-centric approach.

      • Kizedek

        Your XBox scenario is just a distraction because we are not talking about creating and selling more than one product per se, we are talking about keeping one type of product (like an OS) going for years and years through a number of paradigm shifts.

        From one perspective, MS has tried to have their “both/and” already…only, they tried to bake it all into one product (the Surface running Windows 8 with Metro), and it didn’t work. Both desktop and mobile, both legacy and metro, both mouse and touch, both new and old… but the same old Windows underneath because they are adamant that this is the value proposition.

        The shift from PC to PostPC is like cameras moving from analog to digital. It’s here, it’s already happened. Canon and Nikon came through, Kodak failed. Is MS going to be like Kodak?

        MS should have just drawn a line under Windows and had a completely new product to develop and sell along side for a short while (it’s probably too late now). Then I would agree with you:

        “Most businesses don’t “have” to cannibalize themselves to innovate. They needed to enable an innovation while running a profitable business. You can do both. It wasn’t an either/or situation, it was a both/and situation. We have successful companies that do both very well.”

        Indeed, Apple has OS X and iOS; Apple has Macs and iPads. However, what you don’t seem to understand is that you *HAVE to be PREPARED” to cannibalize yourself. You have to be prepared that people will buy or prefer the new product IN PLACE of the old one. If you *don’t even take the RISK* in the first place, then your new product will not succeed as it should; it will not be able to accomplish what the old product CANNOT. That is pretty self-evident, is it not?

      • Scott Engler

        Let me simplify. Ball er missed on phones, search, tablets, maps… Almost every growth driver. None of that had anything to do with the innovators dilemma

      • Kizedek

        see above reply to Scott Engler

      • Scott Engler

        Microsoft missed on phones, social, search, tablets, maps… almost every growth driver of the last ten years. None of that had anything to do with the innovators dilemma They didn’t have to be prepared to cannibalize themselves in these areas, they just had to innovate and execute.

      • Kizedek

        @Scott and Guest:
        Oh, don’t get me wrong, guys — I think Balmer/MS missed on all those things and that Balmer was about as inept as they come.

        The debate on this article shows there is some of both at play. I don’t think Horace is saying that Balmer didn’t make mistakes. I think he is saying that it is easy to blame the person and not look any deeper, when other companies like IBM, HP and Dell had similar struggles “remaining relevant”.

        Indeed, when it is all about the incompetent CEO, it downplays the innovations that Apple has actually achieved.

        The present climate (Wallstreet, pundits, press) is that Balmer made certain inevitable mistakes, but he was “executing reliably and competently around the core product” which understandably *had to be sustained* as the company’s cashcow, and the investors had nothing to complain about, indeed they praised it.

        In fact, the word is that he was fired because he rocked the boat TOO much by calling for a reorganization of the company — IOW, he failed to keep sustaining Windows predictably. The “Disruptionist” would say he was guilty of exactly the opposite: too little, too late.

        Conversely, the conventional wisdom is that Apple were supposedly extremely lucky under Jobs, and are seen as doomed because the present CEO can’t possibly maintain the culture instilled by Jobs who was by all conventional accounts something of an anomalous prophet but a lousy manager. The upshot: Apple is lucky, and its success is non-repeatable, certainly NOT sustainable.

        This whole thinking absolutely denies there is such a thing as disruption at all. It doesn’t see the iOS and iPad for what they are; it doesn’t see PC/Post PC, etc. But Balmer definitely failed — he failed to look at Windows critically and instead decided it needed to be protected at all costs, until it was too late.

        But by the same token, you simply CANNOT carry on with business as usual (your contention that MS could have innovated in any number of areas *alongside* “sustaining” Windows) when the whole philosophy about merely sustaining your core product IN THE FIELD OF TECHNOLOGY is WRONG. Full stop.

  • antiflash

    What about a misleading graph prove the “smartest manager theory”.

    • StevenDrost

      Don’t make the mistake of judging a manager based off what the markets will pay for the stock.

    • Rene Stein

      Plus Gates sat on the board for the whole second half as well. It is not like he was completely out of the company.

  • Susheel Daswani

    Hmm, but there is an assumption that the mobile future would have been ‘profit free’ and that MS had to destroy the Windows pipeline. If they delivered a compelling mobile ecosystem well before iOS and Android, they could have reproduced the very same network effects that exist with Windows, and those network effects could have supported a for-fee licensed OS. That is pretty much what Google is doing with Android – they know they make money on ads, ads are going mobile, so position Android and Google services as a platform to build mobile devices on, and then have some hope that they can extend their ad empire to mobile.

  • greg

    Here’s a great article that sums it up – http://bit.ly/1fegOYX – The problem was that Steve didn’t validate the products Microsoft have pumped out with his consumers. If he took “8-seconds” to do so, he could have saved a billion dollars in the process.

  • chano1

    I believe that the main reasons that caused (and are still causing) the failure of MS are:
    - lack of DNA
    - lack of a stimulating internal culture that seeks to regularly reinvent itself;
    - lack of ideas;
    - deadly complacency arising from a belief in their utter invincibility;
    - inability/unwillingness to recognise who the true customer really was, and to serve their needs and wants;
    - refusal to see beyond the franchise;
    - wedded to a culture of success through IP theft, bullying and manipulation;
    - with the success of Windows and Office came a profound balkanisation of the company into fiefdoms and inter-group hostilities. Indeed this may have been encouraged as being good for internal competition.

    There is a lot of fine talent at MS, but it is lost, unrecognised and hence directionless amidst all the internal politicking.

  • synthmeister

    Don’t blame disruption theory when simple incompetence will suffice.

    • LRLee

      If there’d be no disruption (iPod, iPhone, iPad), would we view Ballmer as incompetent? Without Apple, would we even know what is disruptive and innovative in a world dominated by Windows, RIM, and Nokia? Would Android been a still born look alike of a Blackberry? And Samsung would be known for their great appliances?

      • Rene Stein

        I’ve viewed Ballmer and Gates as incompetent for a long time now. They have consistently put forth a vision of computing and failed to enact that vision. In the 1990s and early 2000s they were talking tablets, wearable computers, consumer electronics. The never managed to get any of it going.

      • synthmeister

        I believe that is because they started with the presumption that Intel, Windows and Office would always be their golden ticket to computing nerdvanna regardless of the device or situation.
        Since they were making truckloads of money with that presumption, they ignored the multiple usability issues and power consumption/weight/size/battery life issues required in the mobile space for at least a decade. By 2010, Apple, Google, Amazon, Samsung, etc. all had mature ecosystems–not just devices– running on power-miser ARM systems and MS barely had squat by even 2012.

    • http://www.asymco.com Horace Dediu

      Disruption is caused by simple competence.

      • synthmeister

        Certainly the disrupters were competent but Balmer and Co were incompetent for not fixing the clear shortcomings of of windows devices and software in the mobile space even though these shortcomings were clear 10 years ago. MS did nothing to address the problems of battery life, weight, size and price of their mobile processors, for example, even though these problems were obvious for a decade. They let their destiny become dependent on Intel even though Intel was clearly behind the mobile curve years ago.

        MS should have started serious investments in mobile tech as soon as Gates’ first overweight, underpowered, overpriced tablet flopped. That kind of investment would not have harmed their Windows franchise. Imagine if MS had introduced the Surface Pro or even the RT tablet in 2009 before the iPad, but they couldn’t because Intel CPU were too expensive and power hungry, And MS had neglected to make an ARM version of windows.

  • Rene Stein

    This article is remarkably shallow. His refutation of the “stupid manager theory” is weak. And he shows no real case for the “disruption theory” he proposes. It’s not like those two things are even mutually exclusive!

    I just want to point out a few flaws: “the smart manager must have turned stupid at a specific moment in time”. That statement is false. A smart manager can make a series of not quite optimal choices that over time turn out catastrophic. That’s possible. There are probably other possibilities.

    Another flaw: “most companies in an industry fail in unison”. This is not true in the case of Microsoft. Windows and Office are failing to stay relevant. xBox and their enterprise services are still money making businesses. Microsoft is not failing in unison.

    Another flaw is stated here: “Destroying prematurely the pipeline of Windows in favor for a profit-free mobile future would have been a fireable offense.” This is a false dichotomy. There was not two choices: 1) Keep Windows, fail at mobile and 2) Scuttle Windows, and succeed a a profitless mobile. I’m pretty sure that Apple has proven that wrong.

    This article provides no depth of analysis. It is basically a fluff piece. I used to expect more from Asymco, but over the last few months, I’ve quit expecting much.

    • Keith Jones

      Actually he is saying companies in an industry falls in unison not individual businesses inside a company. Look at it like this: Can you see a similar fate to Dell and HP, Nokia and RIM, GM and Chrysler, etc. It is easy to blame the managers of these companies but really the coincidence of similar companies failing at the same time, indicates that there is a deeper causality. Disruption theory explains the causality.

      Apple is the counterpoint. Look at the culture of the two companies. Microsoft protected its cash cows (Windows and Office) at all costs. Apple built the iPhone specifically to kill its cash cow (iPod), it built the iPad killing another of profit center Macs. Apple is the rare example of a company self disrupting.

      Ultimately, Micorsoft’s decision to protect Windows and Office kept it from exploring mobile. The timidity allowed others to disrupt it.

      • Rene Stein

        Except for the fact that not every company fails at the same time, and some companies stick around through the disruption. Which means that just because a disruptor comes in, the end result is not guaranteed. There is corporate culture involved, which is mostly set by senior employees, i.e. managers primarily.

        Dell and HP are struggling, but IBM saw the writing on the wall a long time ago and their management was smart enough to do something about it. GM and Chrysler failed miserably, but Ford managed to survive the crisis relatively well because they saw what was coming before it hit. Nokia and RIM both failed, but… well, basically every cell phone company other than Samsung and Apple has failed. Samsung succeeded despite there being a disruptive force in mobile. Why?

        What I am saying is that his analysis here is trite, simplistic. We, the people commenting on the article are fleshing it out, providing the meat to the argument, looking at the intricacies.

        Microsoft, for a long time, had something called Windows CE. It was Windows for phones and PDAs. They also had Windows for Tablets, from a long time ago. They had the tools to extend Windows into these two areas long before the iPhone and iPad came around. The incompetence of Gates and Ballmer and other Microsoft management prevented them from doing this. This allowed the disruption to affect them so greatly.

      • StevenDrost

        You pointed out many businesses like Ford vs GM, but GM failed because of Macro economic factors not disruption so it’s not that relevant. As for Samsung they are certainly disruptive, just not in the same way as Apple. They are nearly 100% vertically integrated, willing to test out every niche and rather than go head to head with Apple found larger screen sizes, in addition to spending big to build their brand. As for IBM they are not in the hardware bussiness anymore so how are they relevant? As for Microsoft itself, it’s in many businesses and they are not all failing, but the core is Windows which is not dead, but dying.
        Horace is certainly not parading his support for Ballmer and I think you missed the point and many of his points. Many of your points are irrelevant or incorrect, which is forgivable, but your tone is not. Go away Troll.

      • Rene Stein

        The suggestion in the article is that it is not managerial incompetence that is to blame for Windows being on the decline, that Ballmer and other managers acted in the way that managers are incetivized to do, and did quite well at that. The reason Windows is on the decline is due to a disruptive entry into the computing market (mobile).

        IBM is not in the PC business anymore. Right, their managers were able to see the future, while HPs and Dells were not. Hence they transitioned their company to a place where they would not be disrupted by the decline of the PC market and the rise of mobile.

        The mobile disruption was not an instantaneous thing. It was the inevitable consequence of the computing market. It took years and years of false starts and tying by many companies. The fact that Microsoft had not prepared for it, lies solely on the leadership of Microsoft. Not just Ballmer either, Gates completely missed the boat as well.

      • Keith Jones

        I was actually referring to American Automotive in the late seventies and eighties as imports disrupted them with more fuel efficient cars. The axis of competition changed.

        Funny how now it looks like a serial failures.

      • Rene Stein

        That’s all it takes to be called a disruption? Someone introduces a better product? Then, the theory really should be the better product theory.

      • obarthelemy

        MS explored Mobile pretty much ahead of everyone.

        They failed strategically, at realizing they needed at least a new UI to do that, and a very different type of ecosystem;

        and they failed tactically at executing: their combo UI is only now coming out (and is quite bad right now), more than a year on their ecosystem is still very hole-y….

  • Keith Jones

    Horace: What benefit does Apple get from being in the stock market. I understand that initially it sells part ownership for capital. After that, it it is subjected to the SEC and the vagaries of traders. What it really should be looking for is investors. I gather this is what Dell is looking at, going private to lick its wounds and reorganize. I remember you suggesting Apple go private a year ago. Is there some benefit I am missing? Is there there an intermediate step where Apple sells publicly to investors but is not traded regularly?

    • http://www.asymco.com Horace Dediu

      A company’s ownership or capital structure should not affect its value. This is a financial axiom.

  • paperbirch

    Horace,
    Long time reader, first time poster. I think you have one of the best analytical minds in the business, and are among the most thoughtful technology blogger, and I enjoy reading your articles. I must, however, say that I was a little surprised by the conclusions you came to in this blog regarding the role of the CEO in determining the fate of a technology company. Your previous posts would have suggested a different conclusion.

    Recent history in this area is replete with management failures that have led to the collapse of many companies and sectors, and although I understand your comment on the improbability that a whole set of industry managers can’t all become “stupid” at the same time as may be implied by the “the stupid manager theory”, it is also possible that these managers have been brilliant and very innovate in some aspect of their business at some point in their history, and that they in the end may have become susceptible to the tendency to protect the current business at the expense of new, innovative and disruptive technologies.
    No question Ballmer, the brilliant marketer that he is, helped Microsoft become the behemoth that it became, and likely MS may never have achieved such heights if he wasn’t there at the beginning. While he was marketing MS, Gates was pushing on innovation (some would suggest stealing from others and quashing competition, but nevertheless innovating), and their technology was not always the best but good enough, especially when combined with a muscular & phenomenal business acumen (another kind of smarts, not necessarily technological wizardry).

    However, as we understand, Ballmer continuously quashed any technology that didn’t have windows at the center; we hear they had early ideas on a touch-based tablet technology very early on (likely developed around the same time that the iPhone and iPad were under development at Apple), and as we hear the team that was working on it was chastised and rolled into the existing division and was asked do the difficult task of developing their tablet on the keyboard/mouse-based windows technology. Other similar decisions abound at MS; this apparently was not just Ballmer’s decision as Gates had a lot of say in any new technology or change of direction even as Chairman (apparently Ballmer passed every new idea by Gates before any decision was made).

    Perhaps among the most telling of this tendency was Ray Ozzie’s departure when he felt who couldn’t implement his vision of where MS should be heading technologically.

    Other companies such as Dell had the smarts to come up with a way to manufacture PC’s and later servers (including their perfection of the Just-in-time inventory management system) in a cheap way and also live with low margins. Their fate was starting to look dim even before the iPad appeared on the scene with other Asian manufacturers beating them at their game (e.g. ASUS, Acer, Lenovo, HTC, Samsung, etc). Dell, not known for its technological innovation beyond manufacturing, couldn’t cut it in the commoditized PC environment. This is fully attributable to complete management failure not to anticipate or react to the trend early enough.

    In sharp contrast IBM saw this coming and decided to quite the PC business altogether. We were all horrified by the decision at the time, including myself, and now that looks like one of the most brilliant business decisions ever made, and so prescient. IBM was a company that was going to be broken up in to 5 pieces, and the BOD had the brilliant idea of hiring a non-technology person from the financial sector to fix it. When Lou Gerstner was hired, he accurately analyzed that IBMs problem was cultural and not technological as it had the best minds in the business (including nobel laureates), the most number of patents and original ideas, and thus he spent the next ten years fixing IBMs culture. As we know, the rest is history.

    HP is another company with a similar business as IBM. Early signs of its problems started with Carly Fiorina, and the acrimonious and semi-dysfuncational BOD. Her successor Hurd managed to fix the immediate revenue issues, but failed to address the long term innovation/technology issues (except he bought PALM which could have been HPs ticket out before Android took the world by storm), and he was followed by the disastrous Apotheker, and there is no sign that Meg Whitman can get HP onto a new path beyond stabilizing the companies current businesses. She speaks of a 5 year plan, and hopefully, she has advisors whom she listens to who can help get the company out of it current funk.

    Similarly the Blackberry/RIM Co-CEOs ridiculed the iPhone when it came out 6 years ago, instead of taking it seriously when they had the inside track in Business and Government. Similarly, where might we be now if Nokia’s management had taken the arrival of the iPhone as a “Clear & Present Danger”; they then compound their early mistake by abandoning their internal technologies and hitching their wagon on another company’s (Ballmer’s) paper plans.

    On the positive side of the leger, I mentioned IBM above. Google’s leadership is not afraid to try new things and they encourage their employees to innovate. Although they have a proclivity for stealing ideas/technologies/intellectual property/copy right/etc., they are constantly watching what their competition is doing and take it as a threat to their immediate & long term businesses. Even after spending a huge amount of effort on Android, they also appear to be not afraid to change, as they appear to be pivoting towards their Chrome technology, which appears to be more in line with their long term objectives. Their problem is not to be afraid of new things, rather they try too many things, and that could hurt them in the very long term (e.g. premature technologies such as driverless cars, Google Glass, non-main line businesses such as electricity generation, sub-oceanic cables, and the myriad of non-profitable ventures).

    Apple and Steve Jobs is the staff of legend and I won’s say much here beyond suggesting that we go back and study the early decisions he made after he returned including to jettison many products & technologies in order to focus on few innovative ideas, and the decision to partner with MS (despite it being a hard pill to swallow for many Apple funs), the switch to INTEL, etc, (Jobs not intimidated by such massive shifts, etc. etc.).

    Amazon’s Bezos is another example of a leader not afraid to try new things, and alway thinking of the long term (perhaps a little too much as it has not been hugely profitable in the recent past).

    We are also witnessing similarly aggressive and bold moves by Marissa Mayer, cleaning up a period of dysfunction at Yahoo, including poor recent decisions by its brilliant co-founder and former CEO Jerry Yang.

    In the end, all these companies hire from the same pool of talent, and they all have brilliant employees who can innovate and disrupt, but in my opinion, their fate is inextricably linked to the decisions and choices made by their leadership, and the culture they engender.

    BTW, I believe we are all good at something, and may even come up with some good or brilliant ideas sometimes, but when you are the leader of a multibillion dollar company, that is just not good enough, and there aren’t too many CEOs with the multifaceted skills and sustained brilliance of the Steve Jobs and Lou Gerstner’s of this world.

    • StevenDrost

      It seems as though you agree with Horace for the most part. These were companies all run by competent bussiness people who found ways to maximize profits. But this is the technology bussiness, being operationaly competent is only half the battle, innovate or die.

      • paperbirch

        Not quite. What I am saying (or trying to say) is that none of these leaders need to be described as incompetent to explain why they fail. They may have been good at somethings at some point in the life of their companies, but long term and sustainable success requires exceptional leaders, not only with incredible foresight but also fearless to risk their current successful revenue streams to come up with something better. When analysts ask Apple management about cannibalizing their existing line of products, their pat answer is “rather us than somebody else”.

        Regarding Ballmer, I think he was good under Gates at the job he was assigned, but then after that, he presided at the top of the most important tech company of our time and managed to fritter away a good part of their important franchises, similarly to the way John Sculley (the sugar-water salesman) managed to do during his reign at Apple. IMO neither of these people could have ever started from scratch a successful tech company such as MS, Apple, Google or Yahoo, or the myriad of others; they just don’t have it in them.

  • Guest

    Let me simplify, then. Ballmer missed on phones, search, social, maps and many more. Thats where the big value creation happened. None of that had to do with the innovators dilemma.

    • obarthelemy

      The worse thing is, they didn’t fail at spotting the trend, they failed at executing.

      • Iconoclysm

        That’s exactly right. Someone is not doing a good job of looking at the big picture…that is the fault of the CEO for sure.

    • Iconoclysm

      Failed at search? Sorry, but MS entered that area long after Google and have had more penetration than anyone else.

  • peter

    It seemed that many commenters believe that the ‘incompetent manager’ hypothesis explains Microsoft’s failings sufficiently and easily. The drawback of that hypothesis is that it is indistinguishable from the ‘rotten luck’ hypothesis — they just drew the wrong CEO from a stack of potential candidates. Also, it assumes that Microsoft did not see the future coming, failed to innovate and did not execute properly commercially. I think that misses a few points.

    The financial evidence seems to suggest that Microsoft is doing everything right
    1) sales more than doubled in the past 10 years , up $4B in the past year alone
    2) profits are up 150% in the past 10 years, except for 2011 Microsoft has never been this profitable
    3) R&D spending was $9-10B in *each* of the past three years

    On foresight and innovation; Microsoft had a mobile strategy (Windows CE) before anybody else, they went after Netscape because they saw the Internet threat, they went for music (Zune), they tried search (Bing), build a gaming platform (Xbox), and they had tablet computers before anybody else.

    You cannot argue that they did not try to innovate or did not try to be fast-followers. Also, I don’t think you can say that they are incompetent, they are financially just way to successful for that. What you can say is that they have problems in converting R&D into profitable new businesses. Somehow they are unable to nurture and grow new businesses to great success, like Apple, Samsung and Google have done in the past decade.

    If find the explanation that Microsoft was pre-occupied with running and protecting Windows/Office a convincing theory. In fact, if the technology had been more stable (say like in automobiles or candy bars) then Microsoft’s approach to things would have kept them on top for another 50 years. In other words, in any industry — other than technology — Steve Ballmer would have been able to run the company forever.

    Finally, if the incompetent manager suggests that the CEO is somewhat omnipotent and personally involved in every error made. The reality is that the CEO gets a lots of ‘help’ from all levels of management in his/her organisation in messing things up (i.e. it runs much deeper than a single flawed individual who makes mistakes). (For the record, I don’t like the way Ballmer ran Microsoft — messing up Windows Vista and Windows 8 was unforgivable and less-than-competent.)

    • obarthelemy

      I think managers are competent at what is asked of them. For having worked for a couple of large US IT companies, I think the issue is with what’s being asked of them: toeing the line and pleasing their boss, instead of growing the company and pleasing clients. There are huge internal political games being played, and managers are good at playing those games because that’s what is required to get and keep their jobs.

  • http://nhsvault.blogspot.com Richard Blogger

    No. As a Windows Developer of 20 years I totally disagree. Microsoft has several times made a complete u-turn based on an command from above.

    In the 90s Bill Gates stopped all work in Microsoft and told the company that they had to design all products with the Internet in mind. That was a huge disruption to the company, but it made the products better.

    Early in its development (‘Longhorn’) Vista was innovative with an entirely new object-based file system and UI. Development of Longhorn was stopped by a command from above (Jim Allchin) and most of the innovation stripped out. Rather than being a new operating system Vista was branched off Windows Server 2003. As everyone knows, painfully, Vista was not a success, Windows 7 was effectively the update that made Vista usable. This command from above did a lot of damage.

    • obarthelemy

      I’d argue that “Longhorn” did a lot of damage, and that the command from above barely saved the day barely in time.

      • http://nhsvault.blogspot.com Richard Blogger

        On what evidence do you say that Longhorn “did damage”? I’m interested. As a writer I was “embedded”, with corpnet access, into one of the teams for 18 months (with the intention to write a book about one of the core technologies – a technology that was then ripped out of Longhorn). The Longhorn vision, in my opinion, was a game changer, innovative. The problem, as always, was the obsession to deliver to ludicrous timescales. When Microsoft dumped the Longhorn work to produce Vista as a mere update of Windows Server 2003, they lost the vision. Clearly you disagree. I am interested why: what do you think that the Longhorn development did wrong?

      • obarthelemy
      • robmoir

        Longhorn was full of innovative ideas but failed as a whole product. It got stuck in development hell with people chipping away at those individual components but with no idea how to integrate them properly into the whole, and this is why the reset / plan b button was pushed.

  • tpurves

    There is also a well accepted theory that managers (or people) can be “situationaly” smart. That people can have different comparative advantages depending on the situation. I think that you refereed to this yourself with respect to managers vs leaders.

    At this point microsoft (and many disrupted companies) has filled itself with people and processes who may have been smartest in one historic context (say the 90s). But the only problem is that the 90s have been over for a while, and the enormous assets that they built in that era are finally starting to erode to the forces of an entirely new environment.

    But context change. And should it be surprising that the same organizations (or organisms) that were absolutely best evolved for one environment are the very same ones most imperiled when transplanted to another?

    Cactus plants look like very smart creatures in the desert. But even if they are super desert-smart, for that very same reason, it doesn’t mean we’d expect them to flourish if suddenly transplanted to the boreal forest.

    Maybe Balmer is just a cactus.

    And if the whole tribe has recently decamped from the desert to the forest, maybe we don’t bring the cactus with us.

    • JohnFaig

      Interesting point about situations. That is probably why the 10 largest technology companies (by market cap) are different each decade.

  • James King

    As others have pointed out, Microsoft was early to the areas of innovation in which they were soundly beaten by others. It’s pat to state that it was “disrupted” not to mention semantical. It was clearly a failure of leadership. True leaders don’t suffer from myopia, hence the term “vision.” The problem is that truly great leaders are rare. Ballmer was clearly a very good leader. But apparently not great. Apple is the example of a company that has many great leaders at the top. This is likely because Jobs himself became a great leader. Like can recognize like. B. Gates was always more ruthless than great. It’s easy to confuse the two when it comes to success.

    James King

    • paperbirch

      Good comments

  • GregQ

    “Destroying prematurely the pipeline of Windows in favor for a profit-free mobile future”

    Hmm, let’s see, Apple is sitting on $100 billion in cash, with a market cap how many times bigger than Microsoft’s? Pretty much ALL due to that “profit-free mobile” market.

    Are you an idiot, or a liar?

    Microsoft didn’t fail to make money off the mobile market because the money isn’t there, they failed to make money off of it because their products suck, and when you’re buying something for yourself, that actually matters.

    • Kizedek

      You mis-understand. What Horace is saying is that what worked for Apple wouldn’t necessarily work for MS. Balmer would be trading a current “sure bet” (with a limited shelf-life left), for a bet on a future in which MS has no experience and success.

      Therefore, he was caught between a rock and a hard place — he would have been fired either way; and probably the sooner by doing what MS should have done years ago! MS should have bitten the bullet and disrupted their “sure thing” with Windows and Office years ago, by ditching legacy and basically starting from scratch as Apple did with OS X (first on PowerPC and then on Intel) and then iOS on ARM.

      Samsung is the only one right now, besides Apple, getting any of those mobile profits at all. Just because you enter the market, doesn’t assure you of success. And yet, Samsung’s profits pale against Apple’s. You have to have the DNA of innovation and great products to get Apple’s kind of profits in hardware or new markets.

      The curse is that Balmer had to face two potentially fatal choices continuously for about the last 12 years: Bet the company now, or bet the future of the company. Either way, it is clear that MS as a monopolistic sustaining company would never continue to fare well at their core business without disrupting themselves.

      • kgelner

        “Google has shown MS that its traditional business model would be *profit-FREE* in mobile! ”

        No, Google wasn’t in mobile at all in the timeframe that Microsoft was selling Windows Phone. From Microsoft’s perspective at the time they could continue to earn revenue just as they always did from Windows Mobile, they just needed to have the UI for Windows Phone take a leap to beat out the iPhone and continue on the same model they had been using.

      • http://www.laugh-eat.com/ mdelvecchio

        keep in mind — MS had hardware smartphones before both iOS and Android. they just werent great. if MS had done its job properly they would have improved them to the same sort of tech that Apple did by the time Apple got in w/ the iphone in 2007. theres *no reason* MS (Ballmer) shouldnt have been there first — they were fishing in that pond for years! plenty of time to build a first-mover advantage. yet….nothing. didnt happen.

      • Kizedek

        But it happened, didn’t it? (and some time ago now) It’s not about “continuing to earn revenue”. That’s sustaining, and that’s the point. That’s going to get disrupted when the next big thing comes along. All phones and mobile OS’s got disrupted six years ago; a couple of platforms managed a lingering death over a couple of years. Google immediately turned Android around at that time. What has MS done in the meantime, except hasten Nokia’s demise?

        It’s about where the puck is going. As others have noted, MS failed to start from scratch in Mobile years before, when they could have. If you decide there is no time *then*, if you decide you “just needed” to do X or Y based on what worked for you in the past, there will certainly be no time in the future when the need for transition is patently obvious to every half-wit in the world. The spirit of innovation doesn’t say, “I’ll just tweak this”; it says, “let’s change the game”!

        Apple didn’t have to create iOS from scratch. They could have “continued to earn revenue” on the iPod. But the phone was becoming more important than the MP3 player (just as Post PC became more important than PC). So Apple made both a phone AND re-invented the iPod, AND introduced the iPad, not worrying that the traditional iPod would be disrupted and fade, not worrying that iPads might outsell Macs.

        For Apple, iOS devices were a carefully considered strategy that changed the game and, if anything, have REVIVED interest in Mac. For MS, Metro and Surface were a too-little-too-late reaction that have shown the world it can survive WITHOUT MS’ Windows and Office — which MS STILL thinks are God’s gift to the world. What hubris!

        in technology, you can’t afford to ONLY say, “I’ll just tweak this and we are good to go because it’s always worked for us in the past”. You have to drop the hubris and look at yourself and your products & services critically.

      • JohnFaig

        True statement – “It’s about where the puck is going.” M$ was/is in the business of continuous innovation. They talk to their customers (individuals & corporations) and ask them what they want. They add the new features and ring the cash register. This type of product development PREVENTS discontinuous innovations.

  • StevenDrost

    Teachers design their curriculum for the test, business like Microsoft focus on improving their profits. Both are the wrong strategy, teachers should be fostering students interests and helping them improve their ability to learn, Microsoft should be focused on building amazing products, software and services. If they execute on those dimensions then profits will follow. The problem with Microsoft is the way the shareholders, board and of course the CEO define success, its a problem of values.
    Interestingly, no one values Apples ability to generate profit, they are measured by their ability to make great and innovative products. Why?

  • pvt_zim

    I beg to disagree. A do blame CEOs for not being able to respond to disruptions. Loosing the ability to see market trends — I daresay reality — is a mistake. Caving in to the pressures of the incentives is a mistake. Not listening to smart people is a mistake. Even if probably most of us would make these mistakes. They are primed to make these mistakes but these are still mistakes in my book.

    And I think failures can happen in simultaneously. George Lucas, James Cameron, and Ridley Scott come to mind. If we consider these directors as CEOs, who have great creative control over their movies — just like CEO have over their companies’ products, let it be strategic or artistic direction, the people they chose to work with and listen to — I would say that they failed at unison — OK, I took a little liberty with the timing to make my point — with their latest movies. And the problems with these movies seem symptomatic: cliche characters, suspect plot lines (complex for complexity’s sake or plain as day), just to name a few. As if they had too much control and did not listen to good advice. As if their egos were not in check. I see a parallel there with CEOs of failing companies.

    And on that note let me recommend The James MacTaggart Memorial Lecture 2013 by Kevin Spacey:

    Lots of interesting thoughts on success, failure, and innovation in the content industry. I believe a lot of them apply to our beloved tech industry.

  • poke

    Is self-disruption irrational for public companies? I can see that a privately held or family run company might want to stay in business indefinitely, but who is being served by a company like Microsoft or Apple disrupting themselves? Why keep a name going?

    • Stephen

      Money, of course. Being publicly held just means that even more people benefit from its success, and hurt from its failure.

      When Apple launched into new markets with the iPod, iPhone, and iPad, they made the people working at Apple (and their investors, large and small) richer. These people could have left Apple and started a new company, but they would have had far fewer resources, which would have made it much harder. As long as you have management who is amenable to internal disruption, it’s going to be much easier and much more likely to succeed.

  • Insider

    Microsoft will need to focus on what they do best in order to get a turnaround. Trying to focus on what they don’t do best didn’t get them anywhere. The whole culture and DNA is impossible to change. Not with a CEO for hire anayway …
    Enterprise software is their strong – Office, SQL and the whole Windows ecosystem can survive if they cut the crap and make it better. But in order to become trully irreplaceable they will need to get higher up on the value chain and get into the enterprise at a much higher level with ERP suites that create virtually indestructible vendor lock in. For a company it’s far easier to replace let’s say SQL server with MySQL than it is to replace Excel or Word with some of the alternatives. But replacing the ERP kind of software with all the extensions that it may have (reporting, BI, integrations of all kinds, etc) – this is next to impossible due to the costs involved and because of that – very rare. They should buy a company like SAP which does that very well (enterprise software + strong vendor lock in) and that would be totally in line with their habits of maintaining monopolies. Innovation is overrated and totally misunderstood. Innovation for the sake of innovation sucks. No CEO for hire will be able to make MSFT succeed by employing the same tactics they used 20 years ago because that doesn’t work anymore. MSFT has become a utility like company with Windows and Office. To keep it that way they will need to get a notch higher on the value chain and stop trying nonsensical things such as bing, surface, etc.

    • http://www.laugh-eat.com/ mdelvecchio

      ” Innovation for the sake of innovation sucks.”

      innovation isnt innovation unless it adds value to a thing. adding value to a thing is the opposite of sucking.

    • Jason

      “Microsoft will need to focus on what they do best in order to get a turnaround”

      This is what I believe to be the biggest misconception with this entire article and related comments. Microsoft doesn’t do anything ‘best’. Every MSFT product to date could be rated as terrible to “good enough”. Name one product that MSFT has created that is revered. (one could possibly argue the 360, but that would mostly be due to exclusive games and not the hardware)

      I think this is why MSFT is where it’s at. They don’t have a specialty.

      • Insider

        They may not do anything ‘best’ but when they own 90% of the market with “good enough” – this is very hard to displace. So you can call that ‘best’ even if it does’t totally satisfy the term from a purely semantic standpoint.

      • macbrewer

        It’s not an issue of semantics. Best has a very clear meaning, and MSFT is never going to be the poster child for it. In fact, ‘Apple-like’ clearly means ‘easy to use’ and ‘Microsoft-like’ basically means kludge-like. (reach for the manual every time you use it).

      • Will

        Windows 7, Xbox 360, Office, Azure, Office 365…

    • JohnFaig

      True that “innovation is overrated and totally misunderstood.” There has been relatively no innovation at the desktop of server level over the past 5-10 years. All of the innovation has come in the nascent are of web services, which are driven by high volume consumer devices, rather than corporate IT departments. M$ should consider a breakup and maybe one or more of the pieces will mute it’s DNA into something that supports more innovation.

  • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

    Just a side note: funny to compare the comments and discussions going on on asymco.com with the ones generated by this same post on linkedIn.

  • kgelner

    If what you said was true Jobs would have been fired for producing the iPhone and/or the iPad because they had the potential to reduce both iPod and Mac sales, both of which the company depended on fully at the time.

    Even if Microsoft had come up with a mobile platform that demolished Windows on PC’s instantly, it wouldn’t have mattered because they make so much on Office, and enterprise server revenue.

    • http://www.laugh-eat.com/ mdelvecchio

      Bingo.

      But please note the plural of PC is PCs. It’s not possessive so there is no apostrophe used.

      • Andriba

        I believe that Americans use “PC’s” as a plural of PC, while Brits use “PCs”. It could be the other way around …

  • deviladv

    John Gruber Just posted on his blog and I had the need to reply to Gruber quickly. So here’s as good as any. Here is what he said:

    “I strongly disagree with Dediu on this one. Vehemently.

    Look no further than mobile. Microsoft correctly saw that mobile was important to the industry. They saw this early — “Pocket PC” devices first appeared in 2000, and by 2003 they had “Windows Mobile”. They blew it. They had a market lead at some point, but during a time when the handheld market was tiny. The technology wasn’t there yet to make mobile computing desirable to the mass market. By the time the technology was there, when Apple unveiled the iPhone in 2007, Microsoft was not only caught flatfooted, but Ballmer himselfseemed incapable of recognizing just how remarkable the iPhone was.

    Microsoft, in theory, could have produced the iPhone first — not the actual iPhone, of course, but the game-changing device that set the stage for the future where mobile is the primary computing platform for most people, most of the time. That wouldn’t have disrupted Microsoft’s lucrative existing businesses — or least not immediately. And if anything, it might have helped shore up Microsoft’s Office business for another generation.”

    http://daringfireball.net/linked/2013/08/30/ballmer-dediu

    I disagree with Gruber actually. Microsoft’s two top customer groups were the OEMs that bought windows, and the major companies that bought Office and business class products and server software. The OEMs were not innovating and not providing the hardware that Microsoft would need to create such a situation. Microsoft would have to disrupt their core OEM license business to manufacture their own hardware to propel things faster, as most OEMs of the day were creating uncompelling devices. Microsoft was always geared to be a software company and eschewed most hardware. The 90s and early 2000s the mantra was that if you were into software you didn’t want to be into hardware because hardware margins were razor thin and software was where it was at. Apple proved how that was wrong and how everyone was doing it wrong. microsoft was simply being like every other company and being iterative and throwing things against the wall to see what stuck and was not trying to be that innovative.

    • http://www.laugh-eat.com/ mdelvecchio

      why dont you respond on the DF twitter? write a blog post and link to it.

    • Kautokeino

      While you are right about the OEM strategy and that is may have limited Microsoft, this is kind of a cop-out argument.

      If Microsoft had been willing, it could have worked closer with OEMs to come up with great multitouch devices instead of relying on them to take the lead. An example of how this would have worked is Windows XP for Tablets, which was a concerted effort with many OEMs involved.

      Instead it was Google that managed to recognize what the iPhone represented much sooner than Microsoft and the other mobile vendors, and turned Android around from being a BlackBerry clone to supporting capacitive touchscreens (and later multitouch).

    • JohnFaig

      To my earlier point. M$ is not an innovative company – it’s just not in their corporate DNA. They didn’t know how to develop markets for mobile products. These products were buried deeply within M$ and had limited financial and marketing support. I wonder what would have happened if they rolled those new products into their ELAs like they did with Office and server-based products….

  • Stephen

    I think the cause is simpler, but everyone is afraid to admit it. (I’m going to get flamed for it.) Nobody(*) really likes Windows. It’s always been too complex, and too ugly. Developers put up with it, because it has the most users. Users put up with it, because it has the most apps. It was just that for so long, people didn’t really have a choice.

    (* Almost nobody. A vanishingly small fraction of people. You don’t count.)

    In every place where this cycle got broken somehow, and people had a choice (mobile, the web, servers, etc.), Microsoft got absolutely killed.

    The one place where they’ve had any success is with the Xbox, which hides every recognizable piece of Windows from users. Even with the 360, the best they’ve managed is a tie with Sony for second place, well behind Nintendo’s Wii. (Nintendo seems to be trying to self-destruct now, though, so Microsoft stands a chance at #1 there due primarily to the incompetence of their competitors. It’s a long shot. Xbox is a competent system, but in no way “disruptive” to Sony/Nintendo.)

    Microsoft was never an innovator of technology. They were an innovator in business. They knew how to take a small lead, and exploit it really really well, for a long time. As long as there’s no real competition, that’s a workable strategy. Not only is it asking to be disrupted, though, it’s a situation in which self-disruption is impossible. When you depend on being the biggest gorilla, the only thing you can do is buy other companies, which they did, constantly.

    • http://www.BarnesFamily.com/ davebarnes

      I think you correct and I think it is overlooked by technology people and market analysts.
      Many people go into work every day and use Windows and it is not a pleasant experience. They don’t like their job so dislike gets pushed (to some degree) onto Windows. They don’t like the application they use most often so dislike…Windows. In the old days, blue screen of death, …Windows.
      Now, you bring out a phone and call it Windows. Why not just call it: the Black Plague?

    • Insider

      So true…

      Let’s go back 20 years and see why MSFT are where they are.

      Their strong was Windows desktop + Office really. Everything came following that train.
      Windows is actually not bad as a desktop OS – it does the job very well.

      But their innovation from a technological standpoint has stalled around 1992-1993. In Windows there was no fundamental improvement for the users since Windows 3.1, ok Windows 95 was an improvement in usability but I would hardly call that fundamental. Extending the same concept to the network servers has popularized the IT jobs that almost anybody with or without training could become a network / server admin. Since the whole thing got so popular and due to good developer tools, the platform gained the traction it got.
      But let’s not forget that the whole Windows + PC stuff is mainly an “Office” tool – like when you are in the office and actually sitting at your desk. A fairly small segment of the population with an even smaller set of needs are served by that technology.
      In contrast, the mobile is about real life stuff: where do I eat now (apps), how do I get there (maps), what is my heart rate (apps + sensors), etc, etc.

      The whole Pocket PC / Windows mobile was a lazy move to mobile and I call it lazy because they just copied the Windows desktop and loaded it into a smaller form factor.

      From the end user’s perspective their whole technological innovation was made of iterative and marginal improvements from the original starting point. But nothing really disruptive or extraordinary. Their lack of ability to truly innovate is reflected in the blunders represented by Vista, Win 8, the Office ribbon. I won’t mention the security holes in the Windows core which have ruined lives and opened the gates of our cyber world to very very nasty things (spyware, computer hijacking, identity theft, hackers,…).

      The dilemma is the lack of real innovation not now but many years ago …

    • Rukakika

      Absolutely true. People are stuck with Windows at work and put up with it rather than like it.. Given the option, they’ll choose something besides Windows at home. Gates and Ballmer never got that. They think everyone loves Windows and wants Windows on their work computer, home computer, running their home, playing music in their car, on their laptop, their tablet and their phone. But people don’t love Windows. They tolerate it. MS’s entire marketing strategy – shoving their products down everyone’s throat, destroy competitors through vaporware announcements and restrictive OEM contracts – blew up when people finally had a choice.For all of the harm they’ve done – arguably they’ve stifled innovation more than anyone in order to maintain their monopoly – they should go down in flames and I wouldn’t lose a minute’s sleep over it. Windows was never that great a product, and neither is Office which has become so enormously bloated because MS needs to justify new versions and upgrade fees.

      • JohnFaig

        Excellent points that bear repeating:

        “…MS’s entire marketing strategy – shoving their products down everyone’s throat, destroy competitors through vaporware announcements and restrictive OEM contracts…”

        “… Windows was never that great a product, and neither is Office which has become so enormously bloated because MS needs to justify new versions and upgrade fees …”

    • Space Gorilla

      You’re exactly correct, I don’t know anyone who likes using Windows. They use it because they have to (work), or think they don’t have a choice (everyone has a Windows PC so I have to buy one too). But now there are different options for consumers and the Windows empire is collapsing.

      • JohnFaig

        It’s not just a Windows backlash. Also remember that back-end network services and user interface improvements (e.g., HTML5) make the desktop OS less important – unless it has some innovative features.

      • Space Gorilla

        Yes, and cross platform file standards also make Windows less of a ‘must buy’. More data in the cloud does the same thing, Windows becomes less and less relevant to end users. Ten years ago my parents might have purchased a cheap Windows laptop to take to Arizona for the winter. Today they’ll buy an iPad.

    • obarthelemy

      I beg to mostly differ.

      1- for regularly trying Linux desktop distros, Windows is far better in terms of reliability, compatibility with various devices, and even UI.

      2- The Windows model of a user-managed OS, while significantly rising the bar, is very flexible.I can install anything on my PC, and tweak it beyond recognition.

      3- Performance, reliability, features… are rather class-leading.

      I’ve been messing around with Linux forever, never had as good an experience (and lots more issues). I regularly try out my brother’s Mac’s, the OS is different, but not better nor easier.

      Windows is my favorite desktop OS. By a mile.

      • mjw149

        I agree the poster went too far. It’s mostly a fine, popular OS with a bad brand. The Windows XP years and corporate utilization just give it a Chevrolet/office supplies stigma.

      • macbrewer

        You really should try some other OS. Seriously.

    • JohnFaig

      You hit the nail on the head, “Microsoft was never an innovator of technology.” They are known as a fast-follower, which is a company that enters a new market and tries to use its distribution muscle to become the leader. Xbox has no killer innovations. Unfortunately,for M$, the network service leadership (e.g., auction, books, social networking, etc.) is established by the “first-mover” pioneers. There is no distribution or manufacturing economies of scale.

    • macbrewer

      Agree 100% with this. I’ve always said this. Not even the biggest windows fanboys really like the OS, or they are certainly afraid to admit it.

  • aardman

    Apple was on a death spiral pre Steve Jobs return and reached unprecedented heights with him on the helm. So what’s that again about the CEO not really that significant in determining the success or failure of a company?

    • http://www.laugh-eat.com/ mdelvecchio

      who said that?

  • http://www.ben-evans.com Benedict Evans

    If Microsoft is absent from mobile, it is not for lack of trying. Microsoft pushed very hard in smartphones, in PDAs and in tablets. It didn’t get very far, at least outside the USA, but that was not because of conflicts with the existing business.

    There’s a misconception floating around that Microsoft failed in Mobile because it tried to force the Windows UI into mobile devices. This isn’t true. From PocketPC on, MS mobile products tried very hard to be native to mobile. MS didn’t have the spark of inspiration that was multitouch, and didn’t realise that that was the right technology when it appeared. But neither did Palm or anyone else, at first.

    In other words, I really don’t think that the core principle of disruption applies. Microsoft didn’t ignore the threat that would eventually crystallise into the iPhone: it did everything it could to make just that product – but failed.

    Sometime, companies just get it wrong. Sometimes, they don’t think of X before someone else does it, and don’t realise the mistake until it’s too late. There are not always broad structural frameworks to explain why.

    • berult

      A powerful incumbent has all the tools to come up with as finely tuned a disruption as the market, which they to a large extent own, can bear to ingest. They can face up to the ‘when’, the ‘who’, the ‘how’, the ‘which’. They simply cannot fathom the ‘why’, being ethnocentrically the point of origin of all market effects, by virtue…by vice of their hegemonic domination.

      Disruption theory gets to the core of the highly contextual ‘why’. The ‘why’ interrogative breaks the mould…and the spell… of infatuated incumbency. The ‘why’ binds the ‘when’, the ‘who’, the ‘how’, the ‘which’ interrogatives to the subjunctive conditional; the very non-incumbent notion of quantum uncertainty rolls the dice, and summons the old exclamative away.

      The motivational ‘why’ assumes the future to be the only legitimate incumbent. Once in a while, time reverses its course, flows as a broadside from the future on to the past, and graciously syncs with the counterclockwise mind. Why; the interrogative that was, for Microsoft, dutifully and systemically out of the question.

    • obarthelemy

      As an ex-Windows Phone (HTC HD2) user, I can attest you’re wrong: my phone kept displaying those horrendous dialog boxes, with little red crosses for “close”. I remember my over-arching desire to just stick a mouse and keyboard to the thing when I had to use it.

    • JohnFaig

      Microsoft introduced a range of products, but they were treated like second-tier products inside of M$. They lacked core competencies to innovate, because the directions were so far afield from what made them successful. Similar to IBM making PCs. There is no technical reason they were not successful. PCs were lower margin than their other businesses and they didn’t fully embrace component-oriented products (from hardware to OS/2).

  • baerjamin

    I strongly believe the turning point for Microsoft was predicated on a single unifying decision: that Windows could provide / should provide the basis for all devices from PCs, laptops, mobile and tablet devices. Balmer was pretty firm on this as early as mid-2000′s. Where Apple and Google recognized the very different use case(s) for tablets and smartphones and designed new OS’s for each independent and with no binary compatibility with desktop environments Microsoft insisted on a single unifying and compatible infrastructure. That was a brain dead decision that doomed the Company.

    • Kautokeino

      When it comes to user interfaces, I agree. But when it comes to operating systems as a foundation, I disagree. If Microsoft had managed to make the Windows NT kernel and frameworks as efficient and flexible as the NeXT system Apple aqcuired, they would have had an easier time making a competitor to iOS (which is just a stripped down OSX with a different GUI layer).

    • Andre Wilson

      This is exactly the point Dedui is making. Microsoft was unable to move away/disrupt their Core business – The Innovator’s Curse/Dilemma. Ballmer tried to compromise – despite saying no compromise – by using the same OS on both PCs and Mobile devices. Big mistake.

    • obarthelemy

      Actually, the issue is not so much the underlying OS (Android is based on Linux, iOS on BSD, both desktop, even servers, stalwarts) as the User Interface / OS Shell. As MS is demonstrating now with Metro, a Touch UI on top of Windows is both possible, and required.

      Too bad it’s so little, so late, so buggy, so incomplete, and with so few apps and even fewer *good* apps; and even “badder” that they did a 180 on their mistake and now want to force a Touch UI on desktop users…

      But still, it *is* doable. I’m curious as to whether they’ll make it work eventually and quickly enough. Looking ahead, melding Mobile and Desktop is probably in the cards in a few years, so iOS and Android also have work to do on that front.

  • Andriba

    I think that, in this case, Horace is wrong, and the single mistake that doomed Microsoft on mobile was made by Bill Gates shortly before Balmer took over. Around Y2K, Harel Kodesh tried to persuade Steve Ballmer and Bill Gates that they had to “start again” with Windows Mobile CE, because the idea that they could make Microsoft Windows 95 work on a mobile device the same way it worked on a desktop PC simply did not work.
    Back then, BillG said “We don’t have time to start from scratch.”

    http://ipadtest.wordpress.com/2010/03/11/who-fatally-wounded-microsoft-it-was-bill-gates/

    or http://www.breakingwindows.net/

    Balmer faithfully believed and implemented the Gates strategy, until it finally proved unworkable, and Microsoft had to “start from scratch” in replacing Pocket PC for the mobile phone. This involved a series of failures, including various new and incompatible versions of Windows Mobile, together with the failed Zune music platform and the disastrous Pink/Kin devices. During all of this time, Ballmer was “in charge” but Gates was a “back seat driver”.

    If Microsoft had indeed made the kind of “CEO transition” that Horace describes, rather than handing to a Gates’ puppet, I would hope that the new leader would have questioned the company’s strategies from a technical viewpoint, and avoided at least some of the billion dollar losses that Microsoft has squandered its success on. The real question is whether it is too late for Ballmer’s successor to succeed.

    • JohnFaig

      Great points. A few additional thoughts. From a software design perspective, Microsoft’s code is very poor. Apple is based on a more mature kernel (Unix) and Jobs rewrote the whole OS “outside” of Apple (NeXTStep). The combination of poor M$ software and more modern Apple software enables Apple to rev its OS faster than M$. With the exception of recent history, M$ was a much bigger company than Apple – they should have invested in some parallel development (to at least hedge their bets). At the end of the day, I don’t think Microsoft was very visionary. They were smart businessmen with tough business practices. To this day, the perspective that has made them successful is desktop- and server-centric.

  • sn0k1e

    Microsoft has always been “the desktop software” company. They still are. Their household name and titan size in this field are the only reasons for their mild successes in other fields. Face it. Microsoft never “nailed it” in the consumer product market. Their biggest succes remains the office and business markets.

    • obarthelemy

      “desktop” isn’t the opposite of “consumer”; “entreprise” is.

  • Andriba

    I think the reason that this post is generating so much discussion is that Horace combined two separate points. One is that successful companies fail, often unexpectedly and sometimes spectacularly, and that this is an almost inevitable by-product of becoming a successful company. Once successful, they seek or are forced to seek stability, while the disruptors who will depose them have no reason to care for stability. The other point Horace makes is that Microsoft fits this pattern, and that Steve Ballmer’s failure to lead as CEO was an inevitable product of “the Innovators Dilemma”, in which apparently “smart managers” suddenly become “stupid managers” as the company is disrupted by more agile, innovative upstart rivals.

    The problem with this explanation is that, before being made CEO, Steve Ballmer never was a “smart manager”. He was perhaps a smart salesman and he was loyal to Bill Gates over many years. Very few publicly-quoted corporations would have allowed their departing leader the freedom to appoint someone who was a “stupid manager” from the start as his replacement, simply based on years of loyalty.

  • Anders Elfström

    I’m not so sure there is an inherent symmetry between a CEOs ability to be responsible for the success or failure of a company. I would think that the CEO often have the ability to, single handedley, screw things up, but need a lot of support to succeed. On the other hand, failure often seem to be the result of external forces, as in the case of Microsoft in mobile, totally out of the hands of any one person, but success has to be the result of actions, timeing and execution etc.
    I’m not saying that Balmer has, single handedley, made Microsoft fail in any regard. I want to question the notion that: If the failure of a company can be attributed to the CEO, then the success also need to be attributable. I don’t think that success and failure are two sides of the same coin, if you know what I mean?

    • Walt French

      Over the company’s life-or-death measures, sure, I’ll take asymmetry. But as a mathematician, I insist that a continuously-differentiable curve has a single slope at any point.

      The riskiness complicates it. A company might gamble on a 10% chance that will pay out a hundred-fold but bankrupt it 90% of the time; most companies won’t take that chance even though shareholders would be thrilled if they owned stock in 30 such companies that actually were good assessors of risk. I think that’s what’s happening here.

      Except that by now (I think they would’ve done quite well had they been broken up in 2000), the 10% chance is survival at a half of its current profit level.

  • JoshJ

    The “stack ranking” performance evaluation system seems like it may have been a pretty big cause of dysfunction at Microsoft.

    Apparently MS started using this during Ballmer’s tenure.

    I think a CEO can be blamed for creating a toxic corporate culture.

  • jayconde

    Can galvin succeed with his current
    approach or should he another model even if it is not preferred style?

    • http://www.asymco.com Horace Dediu

      Who is Galvin?