RSSMicrosoft, don't give up on Steve Ballmer just yet
By Joe Wilcox | Published January 22, 2010, 3:08 PM
Ten years ago last week -- Jan. 14, 2000 -- Steve Ballmer took over the chief executive's position as Bill Gates stepped back to be Microsoft chairman and chief software architect. Ballmer has officially entered his second decade as Microsoft's CEO. There are fairly constant complaints about Microsoft's performance under his leadership.
NBC is sending Conan O'Brien packing; today ends his seven-month career as "The Tonight Show" host. Should Microsoft do something similar -- remove Ballmer and replace him with someone else, even Gates in a move like Jay Leno coming back and replacing O'Brien? I expect that many commenters to this post will answer "YES!" to that question. But I wouldn't give up on Ballmer just yet.
"Dump Ballmer" has been an ongoing theme among commenters to my blog posts -- going back a good five years. The fire Ballmer whiners often point to Microsoft's share price, which isn't much different today than when he took over the company. Microsoft shares have consistently struggled to stay above $30. The stock opened today at $29.84. In December, with 2010 prediction "Microsoft pushes out Steve Ballmer," Newsweek observed: "Microsoft stock has dropped by nearly 50 percent on his watch, lagging not just other tech companies but even the Dow Jones industrial average."
Ballmer's performance is sure to be scrutinized during the next week. Yesterday, Google reported strong earnings. Analysts predict that Apple will report record fourth calendar quarter Mac sales when it announces earnings on Monday. Two days later, on January 27, Apple will launch a new product, presumably the over-rumored tablet. One day later, Microsoft will announce fourth calendar quarter earnings. Analyst consensus is $17.79 billion revenue, up 7 percent year over year. But the year-ago comparison is relatively weak. Q4 2008 sales disappointed, compelling Microsoft to announce in January 2009 layoffs of 5,000 employees over 18 months (The number already is higher).
Apple's and Google's good performance will likely shine a light on Microsoft's quarterly earnings and 2010 business strategy. Apple comparisons will be about Mac and iPhone sales and expectations the company's "latest creation" sets. At least in mindshare, Apple is a winner. Meanwhile, Google continues to dominate search, has put principles before profit in China and woos more developers and handset buyers to Android. All the while, analysts and pundits will ask about Ballmer and whether he is the right man to run Microsoft.
What strange timing -- if it is -- that Gates launched a new Website this week and started regular tweets. As of this afternoon, Gates had amassed over 300,000 Twitter followers in just a few days. Where is Ballmer's Twitter feed or personal blog? Microsoft's CEO needs both, something to make him more personal and approachable. He has a huge PR problem.
Ballmer as the Millennial Leader
There is no question Ballmer was the right man to take over Microsoft in 2000, and it's right to ask whether he is best choice for the 2010s. Microsoft entered the new millenium as a mature rather than a growth company. Gates' aggressive competitive style suited growth Microsoft, but not really the more mature company. Growth companies look for new customers, while mature companies seek to keep them. The marketing approach is different. Ballmer is at heart a sales guy. Among the most important customer retention business strategies enacted during his leadership:
- Tying Microsoft employee evaluations to customer satisfaction. If customers aren't happy, Microsoft employees don't get good reviews or pay raises.
- Software Assurance, which initially infuriated customers but locked them into two- or three-year upgrade contracts that smoothed out Microsoft's revenue stream.
- "Get the Facts" campaign, which effectively dismissed Linux as a competitive threat -- at least on the desktop, although the open-source OS has traction on Intel-based servers.
- "Integrated Innovation," which starting with the 2003 product release cycle tied more Office features with server software, driving upgrades of the productivity suite and pulling new server software sales.
But the list of missteps is a long one, too -- so long I'll offer just a handful of them. In fairness, most of the worst mistakes came when Gates was at least somewhat hands on at Microsoft:
- Obsessing about Google in search, when the real threat was in platforms, where Microsoft failed to protect its operating system franchise.
- After winning the browser wars with Netscape, abandoning the territory. Internet Explorer stayed at v6 until Mozilla released Firefox in 2004.
- Chasing Research in Motion in enterprise handsets instead of innovating around features useful to everyone. Apple and Google did just that, with focus on usability.
Only three examples are necessary, because there is consistency to Microsoft's mistakes under Ballmer's leadership: Making too many decisions based on what competitors were or were not doing. Gates was equally guilty, but the approach worked better for a growth company. Ballmer leads Microsoft well when focusing on existing customers rather than chasing competitors. His misplaced Google obsession on search, rather than platforms, is example.
Who should lead Microsoft into the 2010s?
However, is customer first the best strategy for Microsoft in the 2010s? Wall Street analysts and investors clearly don't see Microsoft as a growth company, as an innovator. Apple innovation is exhausting. I agree with Darby Lines (aka "The Angry Drunk") regarding the needless noise about Apple's January 27 product announcement(s): "At this point the incessant coverage of the Apple tablet is science fiction at best." Apple has dominated tech coverage through most of January without ever announcing one damn thing. As I've asserted so many times in the past, in business perception is everything. Positive perceptions fuel speculation about rumored Apple products. Apple is perceived as an innovator -- and the company's stock is soaring as a result -- while Microsoft is seen as something like the new IBM.
Microsoft's success in the 1980s and 1990s shifted computing and informational relevance from the mainframe to the PC. IBM struggled, even as its mainframe monopoly remained solid. The company had to call in outsider Lou Gerstner to aright the listing business. IBM reinvented itself under Gerstner's leadership around services. The question: Does Microsoft need an outsider to come in to shake it up? During 2008 and 2009, Microsoft retreated to the enterprise, where its Office-Windows-Windows Server applications stack dominates. Problem: There's a new applications stack -- mobile device-to-cloud service -- that is rapidly shifting computing and informational relevance away from the PC, much as the mainframe was displaced starting three decades ago. Microsoft isn't ready to compete.
Unquestionably, Microsoft's senior leadership needs some new outside blood. A new blood transfusion could be as effective as brain transplant. I'm not ready to give up on Microsoft's CEO, who only really is coming into his own after Gates stepped into semi-retirement in June 2008. Except for Ballmer's Google search obsession, he managed Microsoft quite well over the last 18 months -- and during tough times.
The September 2008 stock market crash still rocks world economies, even as public company shares rally (buoyed by government bailouts across the globe). Ballmer has rightly called the econolypse a "fundamental economic reset." The credit-driven, debt-creating bubble economy is gone. Businesses and consumers across mature markets are seeing recovery to a lower level than before the bubble burst. I consider Ballmer's post-economic collapse leadership to be exceptional for astutely understanding the new world order, holding onto existing customers and making Microsoft a leaner company.
Ballmer deserves more credit than he often is given by critics and frustrated investors. In July 2009, he told financial analysts: "For the last 12 months, I've actually been running our Windows business." Well, hell, Windows 7 is pretty good, right? Perhaps Ballmer should next run Windows Mobile, before iPhones are as common on city streets as classic and nano iPods.
Microsoft needs to take More Risks
I don't believe that Microsoft should oust Ballmer during 2010. But I expect to hear more calls to do just that after next week's quarterly results are announced. Ballmer should stay. Microsoft needs his commitment. Microsoft needs Ballmer's charisma.
But Microsoft needs something more from Ballmer, or else he will eventually fail as chief executive: More willingness to take risks. The focus on keeping existing customers creates risk aversion. Likewise, Microsoft fails to take risks for fear of disrupting existing revenue streams, particularly Office and Windows. It's long past time when Microsoft should be more the risk taker, as it was when launching Xbox in 2001 and committing to losing billions of dollars over several years. Microsoft also should better communicate to everyone the risks being taken with Azure and other cloud services.
Risk-taking must replace Microsoft's culture of risk aversion. Gates' 1995 Internet Tidal Wave and 2002 security and privacy memos set Microsoft down new paths that dramatically changed its fortunes. It's long past time for Ballmer to write a memo that sets Microsoft's future agenda for employees. Mobility, cloud services and truly risk-taking innovation must be the priorities; risk-taking innovation should be Microsoft's top priority for the new decade. Ballmer should show Microsoft employees, customers, developers and investors why he is in charge. If he lays out the vision, he also should be given time to succeed executing it. A company as large as Microsoft takes time to change course.
Microsoft is where IBM was in the late 1980s -- watching its dominant computing platform and applications stack decline. During his Consumer Electronics Show 2009 keynote, Ballmer spoke of the importance of taking risks, of making seemingly risky investments, during economic hard times. It's time for Ballmer to put up or shut up.
Bill Gates wasnt stupid. He stepped down at a time whereby the market and consumer has matured drammatically. Most of the MS products are reaching the absolute limits of their capabilities. If MS wants to make the headway that Apple made with the iPhone they need to start listening to their consumers. Windows 7 was a great start.
Score: 3
|ballmer has been with microsoft since its inception.
further, bill gates is still involved with the company and they work together.
putting bill gates back in charge really won't change anything at microsoft, other than the name plate on the golden door.
Score: 0
|Microsoft, please Please PLEASE get rid of that cheap song-and-dance accountant.
NOW.
Score: -5
|I really don't follow your reasoning here Joe.
In the first part of the article you go a long way to show that Ballmer is good at running a company that is mature.
Then you go on to say that he does not take risks. Which is true. And that the regions where he has taken risks, he is not good. And you give his obsession with google as an example.
Finally, you go on saying that MS needs to be more bold at taking risk, well calculated risks, and innovate.
And then after dismissing Ballmer completely as a risk taking manager, you conclude he is the right person to lead MS in a risk taking strategy !
This is not reasoning, this is a blind leap of faith!
Your articles are really weird.
Score: 2
|Why do people fixate on gadgets, and miss everything else where MS did a lot of progress? Take Azure - nobody has anything like it today, MS anticipated this market. Actually Ray Ozzie did, but who hired the guy? Ballmer.
Next innovation - instant servers that can be up and running in 30 minutes.
Let the kids run around with Web 2.0 silliness, because the saying is "If you want to get rich in the gold rush, sell shovels".
Microsoft is selling shovels, so I'm not worried about their future.
Score: 1
|Steve Ballmer is actually a really cool guy with great sense of humor (yes he has a great sense of humor) and a very positive thinking attitude. Sure he goes crazy sometimes but hey, nobody's perfect :)
If you have seen some of his interviews you will know what I mean and you will agree with the statement otherwise if you a typical anti-MS troll you would mod me down and call me a MS fan-boy. In pretty much every interview I have seen he always talks about moving forward, you never sit still doing nothing, you innovate and this is part of the reason why MS is so successful. You just have to keep keep moving.
Check these videos:
http://www.youtube.com/watch?v=Ar_r2kE9Ej4
http://www.youtube.com/w...EJ0nFBg&feature=fvw
http://www.engadget.com/...book-pro-caught-on-vide/
http://www.youtube.com/w...?v=lVMy0PFr8no&NR=1
http://www.youtube.com/w...p;NR=1&feature=fvwp
Score: 2
|MS need new blood full stop.
No ifs or butts, as with most companies that have long term management a change is a must to bring fresh ideas to a stale and outdated thinking that MS has now become.
Windows 7 is what vista could and should have been, and the proof is vista was a mess untill 2 services packs later.
They need to get people who do not think and act like the current MS management who have failed to refresh their products to make people want to buy them.
Until that happens, ms will struggle.
Score: -1
|"They need to get people who do not think and act like the current MS management who have failed to refresh their products to make people want to buy them."
You mean like Windows 7? Obviously people aren't buying that product, it's only the best selling OS MS ever made, and in a 3 month period sold more then all versions of OSX combined in its entire product life.
"Until that happens, ms will struggle."
Yea...with about $14 BILLION quarterly revenue...they are obviosuly struggling, they need to find a way to make money QUICK!!
Score: 3
|Ballmer's charisma, eh? A few articles back it was another Microsoft exec (Ozzie, I think) that Wilcox was pushing as a potential frontman. Ballmer has all the charisma of a dog that tries to jump and lick people's faces, and then growls when they push him away. He's a bean-counting functionary at best and a buffoon at worst who only talks *at* people, not to them. In my view, Microsoft desperately needs somebody (a) knows how to listen, not just preach the party line, (b) who truly gets technology and the internet and (c) is ready to take those risks that keep being mentioned. In short, it probably needs an outsider.
Score: -1
|@psycros I pushed Bill Buxton as frontman, not CEO. No mention of Ray Ozzie in either role.
Score: 0
|If you went back in time to the 1980s, you'd tell IBM that it must succeed with personal computers, or it will miss the next era of computing. IBM did miss out on the PC era, just like Microsoft will miss the mobile era. But in the aftermath, IBM is still OK, still a strong company, still attracting Department of Justice scrutiny for its mainframe monopoly.
The lesson is that Microsoft will live on, with its desktop monopoly, even though it has already lost the mobile war. Microsoft cannot regain a place in mobile, as we'll see when its next mobile platform (WinMo7 / Zune phone) fails to gain traction.
However, Ballmer should still go. Ballmer and Gates both failed to predict the technology future. Gates failed to see the internet, and was only able to turn the ship around by using monopoly practices (which raised the ire of the DoJ).
In the mobile field, Microsoft is naked. It can't use its desktop monopoly to force its way in. WM7 will be like OS/2. Backed by a big company, but failing in the market. Microsoft cannot dislodge popular existing OSes (Android / iPhone) unless it releases a new platform that is so different and revolutionary that it totally changes the way we do mobile. WM7 won't do this. Catching up will not achieve a win.
I disagree that search was a mistake for Microsoft. To succeed in mobile, you need an OS, maps and a search engine. The money will come from search. The 3 big players, Google, Apple and Microsoft will eventually all have OS, maps and search (stay tuned for Apple to announce its own search engine).
Failing in mobile will be Ballmer's biggest mistake. Microsoft now cannot win, and must move on. Spending money resuscitating the patient doesn't help when the patient is already dead.
Score: 0
|Got to love it. These two chaps created a successful entity. Now, everybody has something to contribute about what's wrong with the company.
A little like becoming a parent then everyone, surreptitiously comments, 'well, if it was me, i'd have asked for blond hair and blue eyes'.
This is their brain child. They can do whatever they want to. A more productive discourse would be to create another system then implement all the unsolicited advice.
Don't get me wrong. Ballmer? Something not fastened down.
Engineers make the impossible possible? Certainly not my 'paper engineers'. All the right qualifications but completely lost in uncharted frontiers. They learn a protocol, execute to the letter and 25 years later, they are still in the same technical role with a few more people reporting to them.
New breed coming through though - Facebook kid. A new guard like that 'Technical Fellow, Mark Russinovitch i think,' that created 'sysinternals' and busted MS regarding server and workstation architecture back in '96.
Score: 1
|This is what happens to a tech company when the engineers are out and the bean counters and the sales people are in.
Steve Jobs is a marketer. Steve Ballmer is a salesman. That's the difference.
Marketers take risks. Engineers make the impossible, possible. Salesmen and bean counters are only interested in preserving the income stream and market share.
I once attended a talk by Bill Gates, back in the 80's. He said then that Microsoft is not interested in getting a slice of the current pie. Microsoft is interested in creating a new, bigger pie, and and getting a slice of that pie. Whatever happened to that attitude?
Bill Gates also said that he was going to stay in the business as long as it was fun and interesting. I suppose it quit being fun and interesting for him. But, can we find somebody for whom creating exciting new products that delight customers IS fun and interesting? Can we find somebody who is again motivated by being the underdog. Can we again find somebody who runs a company where the employees are committed to working long hours to create something they believe in and are not defecting over to Google? A company that interns actually want to work for because they see a future there?
I say this as a committed and loyal consumer of Microsoft products, and as someone who has never owned, nor ever planned to own an Apple product.
I love MS for what it once was, for the people I know who work there, and for their support of us developers over the years. I admire Apple from at arm's length, and until Apple comes up with a product that offers more than just a "wow" factor and lack of interoperability, I'll keep them at arm's length.
Score: 1
|i thought the bing route was the right direction. The live and MSN route was horrible
Score: 1
|Don't throw the whole portal idea out the window just yet. Yes, connected applets are the rage now, but only on mobile. On the desktop I'd rather have a beautiful unified launch pad for all that stuff (My Yahoo/Yahoo Mail does a pretty fair job). Bing is simply a reinvention of the Yahoo directory concept from the mid-90's..but so poor is Yahoo's self-promotion you'd hardly know they still had such a service. Windows Live was indeed a poor retooling of MSN and little more than a promotional tool tied to Vista. But the base concept is still potent for the "second screen" (or first, depending on where the TV falls in that scheme). And Windows Live Messenger is still the most used IM around, last I heard..and I don't even know if the iPhone has an app for that. There's room for innovation on every platform as long as it adds value and brings content to us in the right context. Of course, what we'll get instead is freaking "widgets" for our TVs. As if we're gonna sit on our couches watching Twitter feeds.
Score: 0
|You can't warez iPod or some weird s*** tablet or the way users browse the web and harvest ads? But you can Windows. And Xbox games.
Anyone feeling me?
Score: -2
|almost yes...!
Score: 1
|Not really. Try learning English.
Score: 1
|First off.. NO CEO needs a Twiter account. Actually NO ONE needs twitter all. Ballmer should be let go, but not becuase of his Stock problem, but because of his lack of vision.
Score: -1
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