My Thoughts on Steve Ballmer and Microsoft’s Problem

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As a fan of Apple, and most everything they do (yes, I disagree with some things), I’ve always liked that company’s arch-nemesis- Microsoft CEO Steve Ballmer. He’s loud, boisterous, and at times obnoxious, but for some reason he seems likable.

Now, that doesn’t necessarily make him a good CEO. During the 2000s he ran the company fine. Microsoft, sitting pretty from the 90s, was able to sail on through the past decade, milking profits from two products- Windows, and Office. And that was fine. Apple was still trying to get a foothold in the PC market, and began to diversify(read: iPod, iPhone). This is where Microsoft got into trouble.

Ballmer, and for that matter the whole executive team at Microsoft, were stuck in their ways, and couldn’t get out. They attempted to dip into the music player market several times. First with the PlayforSure initiative, and then with the Zune. Both duds. For whatever reason, Microsoft can’t do hardware. (They sunk billions into the Xbox to make it a viable product, a success most companies can’t afford.)

That leads me back to Ballmer, and Microsoft. They’re still hugely profitable, but in an aging market. In new areas such as mobile phone and tablet operating systems, they have little and nothing to offer. Yes, Windows Phone 7 is very nice, but it’s not catching on in the market. They’re scrambling to make something happen.

It appears Microsoft, with Ballmer at the helm, doesn’t know what to do next. Just like Apple of the early 90s, they’re stuck in their ways, and the industry is passing them by, in a technical sense at least.

So, there have been rumblings in the past few years, that Ballmer needs to go. He doesn’t know how to compete when Microsoft isn’t dominant. The company and their investors are panicked. One big investor has even suggested that Microsoft should boot Ballmer. Expect to hear more outcries like this. Especially since Microsoft stock has remained stagnant for a decade.

So, Microsoft is still in good shape, and they will be for some time. They need to act, but with competitors like Android, which is free for any mobile maker to adopt, and iOS which owns the majority of mindshare these days, Microsoft has a tough battle ahead, and I’m not sure backward-thinking Ballmer is the man to fix the problem.

The thing is, Ballmer and Microsoft seem to be spinning their wheels, and trying to get the proverbial toothpaste back in the Windows-based tube. Microsoft needs to decide if they are a software company or a “Windows” company. And they need to do it in a hurry. Shoehorning a mouse-driven OS on a tablet, as Microsoft did in the early 2000s with their disastrous tablet initiative, isn’t a winning strategy.

Besides, with Ballmer making premature announcements regarding Windows 8, he’s on thin Ice. But, to remove Ballmer would be an admission of failure, and since Bill Gates still controls the board, it would be an admission that he failed as well. Besides, they are friends, and to remove Ballmer would be a hard thing to do. That’s not to say it wouldn’t be a smart business decision however.

On the flip side, as Apple and Google begin to eat Microsoft’s lunch, Ballmer only knows how to compete with a like-minded company-Google. That’s why he bought Skype, so Google couldn’t. It wasn’t an acquisition that they needed, or one that adds much value, but they were afraid that Google was going to grab them, swallow up their user base and integrate them into their own user-base. Something that Microsoft couldn’t afford to let happen. It would kill Microsoft’s Live Messenger and other offerings in one acquisition.

In short, Microsoft isn’t in trouble now, but the writing is on the wall. They need to do something to future proof the company. It’s always easy to fix someone else’s problem looking from the outside in, but it’s apparent there are problems in the company. Plus, their company culture, that was built up over their heyday in the 90s and 00s, won’t allow them to admit a mistake, and they may be riding it to the bottom.

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  • Brandon

    So, let me get this out of the way. I think Ballmer needs to stop being the voice of the company, not necessarily the CEO. I think that’s the biggest issue Microsoft faces on a day to day basis is he just isn’t a good salesman anymore. He needs to stop being in front of people. Yes, Apple has Jobs run the events and create passion, but a lot of the time he hands the details of an announcement over to the people who run the various divisions. Ballmer doesn’t create passion… he creates a wondering amazement of when is he going to go crazy. Microsoft needs a VP that can get on stage and WOW the crowd.

    Second – Microsoft needs to stop putting the focus on the consumer market and social. They just aren’t good at it. They excel at business productivity devices, OSs and applications. That’s their core competency and they should stick to it. For as many bombs in the consumer market as they’ve had lately – they are still (IMHO) still killing it in the business space. Windows 7 (as a business OS), Windows Server 2008 (R2), Hyper-V, Exchange and countless other products are the best they have ever been and continue to get better and better.

    Apple doesn’t try to compete in the business space because it isn’t their core competency and they know it. Yes, they’ve made inroads to the enterprise space – but not because that was their goal. People found a use for the devices in that role. Microsoft needs to take the opposite approach – Build and design for the business/enterprise space and if people find a use in the consumer space, then so be it. Take Windows Mobile (from CE to 5.x) as an example. It was never targeted at the consumer space. It was designed for business use and it was still popular as a consumer product. Microsoft helped define the smartphone category using a non-consumer targeted OS. There’s no reason they should have come out with WP7 and targeted the consumer. It should have been an enterprise class mobile OS… with a sprinkling of consumer desires (social / games). With that style of device and marketing, there’s no reason they couldn’t have kicked the snot out of RIM, Google and Apple.

    Finally, I really don’t think Microsoft makes all that much in the consumer space. Their bread and butter comes from licensing through business channels. So why are they so focused on consumers? Let Apple run amuck in the consumer space. Let Google play search engine advertiser to the gods. When its all said and done, the big money comes from multi-million/billion dollar organizations that need to have standardized platforms, enterprise class mobile device security and seamless platform integration. That’s what Microsoft does.

  • ralphie

    heyday. not hay day.

  • http://isource.com Alex Jordan

    You have it exactly. I didn’t add this sore of Point-of-view in the article, because it get’s really technical, but, yes, Microsoft isn’t selling to end-users as Google and Apple are. And it’s beginning to show, and it’s beginning to hurt them.

  • Jhrogersii

    In my humble opinion, Microsoft right now needs one thing above all- focus. On what, I am not completely sure, but they need it company-wide, and fast. While Microsoft’s strength has always been in the enterprise space, I’m not convinced that they can’t have success in the consumer market. It is obvious that they have the talent and the resources to succeed. Their Xbox team, with its now industry standard Xbox Live online gaming environment, is proof of that. And, while they are extremely late to the game, they have done a respectable job of making Windows Phone into a viable and usable product that is beginning to win some people over in the tech world.

    Again, it all comes down to focus. As good a salesman as Steve Jobs is, the most important thing he did when he took the reigns of Apple was to make tough choices, and to bring focus to the entire company. He methodically crafted an image that is now so easily recognized.

    Even when Apple was struggling through the mid to late nineties, it was clear that they had a lot of creative and talented people. Look no further than the last Newton MessagePad for proof of that. However, that same device is proof of what was wrong with the company at the time, as well. Apple sunk millions of dollars that they couldn’t afford into a product that was too far ahead of it’s time, and as such, wasn’t commercially viable. While they lost millions making a revolutionary product, Palm made mobile mainstream with a device that was small, affordable, and easy to use. It was later revealed that Apple had a prototype of a smaller, cheaper Newton before the original PalmPilot hit market, but their leadership lacked the vision to see it’s worth.

    Today’s Microsoft reminds me of the Apple of the 90s, just with a lot more money and resources. In a way, that makes their situation harder to get out of. Apple had their back against the wall, so the tough choices and changes necessary to become the company they are today were more easily accepted. They had to either change, or cease to exist. Microsoft isn’t there yet, but they are definitely headed in that direction. However, since they are still profitable and have undeniable success in several areas, it may be more difficult to accept change.

    As the CEO, I think Steve Balmer has to bear the brunt of the responsibility for Microsoft’s current condition. Rather than bringing the focus that is so necessary to harness the incredible talent and resources at his disposal, he seems better known for wildly swinging in hopes of hitting something, anything out of the park. Microsoft’s purchase of Danger, the successful maker of the Sidekick, is a perfect example. Microsoft took a successful mobile phone development team, and used them to create the Kin, one of the biggest mobile marketing disasters in the last 10 years. The Sidekick was well designed and perfectly targeted at and priced for a particular market segment. The Kins cost more than many Android smartphones, didn’t do near as much, and required expensive data plans. Considering that they were targeted at tweens and teens, this all sounds absolutely absurd, and it was. Through a complete lack of focus, Microsoft completely wasted what should have been a valuable resource. The Kin failed miserably, the Danger team was dissolved, and to add insult to injury, the principle developers of the Sidekick are now working for Google. I don’t see how Microsoft could have possibly messed this up worse than they did.

    I guess I would have to side with those that think Ballmer should be fired. Sure, he isn’t the salesman that Steve Jobs is. However, he doesn’t have to be. Most successful CEOs aren’t as magnetic as Jobs. However, effective CEOs are in touch with what’s going on in their market, have vision, and are able to harness their corporate resources to create successful products that generate profits. There is no evidence in Steve Ballmer’s performance to date that proves he is capable of this. The longer Microsoft’s board waits to move on, the more precarious a position they may eventually fins themselves in.