Steve Ballmer leaves behind a Byzantine bureaucracy and an outdated vision the company can ill-afford
There is an old corporate joke, which, in the light of Steve Ballmer’s recent resignation as CEO of Microsoft Corporation, deserves a replug.
It goes like this: the outgoing CEO of a company met with his replacement for an exit interview. Before leaving, the departing CEO told the incoming one he had left three very important letters for him, just as his predecessor had done. He explained that the new CEO would find opening the letters, in order, most useful when faced with a grave crisis.
Several months passed before a major, company-threatening event came up. The new CEO remembered the letters and opened the first. It said: “Blame it on your predecessor and start new product lines.” The new CEO did so, and to his surprise, the problem was averted.
The next crisis was even more serious, the shareholders had started calling for the CEO’s resignation. Rushing to his drawer, the new CEO opened the second letter carefully to read the word “restructure.” He did so, and was even able to keep his job as business went back to usual.
When the next serious event, the worst of the lot, took place, the CEO knew he had a last lifeline. With a smile he opened the last letter, to read: “Write three letters.”
The joke reflects , with startling clarity, the 13-year tenure of Mr. Ballmer — a man who blamed Bill Gates during the transition, tried new Operating Systems, introduced new devices and even brought about a restructuring exercise before the times caught up with him.
Mr. Ballmer’s surprise but long overdue retirement announcement on Friday came after years of criticism over the waning growth and stock price of Microsoft, a behemoth whose monopolistic power was once so great that American regulators sought to break it up.
Handed the reins by Mr. Gates in 2000, Mr. Ballmer never really got ahead of the curve in turning his company into a maker of devices and a provider of services rather than a peddler of software.
Whether it was the introduction of MP3 player Zune in 2005 (an unmitigated marketing failure), the launch of Windows Vista in 2007 (a botched operation from the start), or the Windows Phone-Nokia tie-up in 2011 (a partnership that was too little, too late), Mr. Ballmer’s Microsoft acquired a reputation for merely bringing in flashier models of its rivals.
Living to tell the tale
Take for instance, Microsoft’s foray into the tablet market with Surface. Some would argue Microsoft had absolutely no business entering a hardware market dominated by a free, open-source platform that can be adapted to nearly any hardware.
Indeed, Mr. Ballmer may go down as the only CEO who lived to tell the tale after the company took a near $1-billion write-off for an oversupply of the struggling Surface RT tablet.
How he survived for so long is anyone’s guess. Despite claims that he was an abject failure or the theory that he only got the job due to his friendship with Mr. Gates and Paul Allen during their college days, Mr. Ballmer was adept at extracting profits out of successful, existing product lines.
For all his faults, Mr. Ballmer has a firm grasp of the enterprise market — and Microsoft’s revenue and profitability reflect this. However, the more telling fact is that booming sales from the company’s flagship enterprise software notwithstanding, Microsoft’s stock has functioned like a thermostat set to $30.
Frankly, what matters is not whether Microsoft is profitable today, but whether it can remain profitable and relevant over the next 10 years. After all, a large company with entrenched profits can cruise for a long-time before it sinks. BlackBerry is a perfect example.
A glimpse of where Microsoft will be in 10 years will be seen shortly, when the company chooses its next CEO. Though there are numerous choices, two candidates with different visions of the future are the most viable — one being India-born Satya Nadella who looks after the company’s cloud offerings. The other is Qi Lu, a true “insider man” who has been in charge of the company’s loss-making Bing division. The pick of Mr. Lu or others like Tony Bates over Mr. Nadella will signal the return of the old guard; but the situation clearly requires a “wartime” CEO like Mr. Nadella or Ben Horowitz of Opsware fame.
Whoever is in the hot seat will have his work cut out. The staffing and corporate culture issues that have plagued Microsoft have to be sorted out. Microsoft, under Mr. Ballmer’s reign, has slowly become a public sector bureaucracy that could put the Indian government to shame. The company’s stack-ranking system, in particular, does little to boost employee morale and, in fact, has driven down performance wherever it was used. Indeed this is a problem some of the bigger Indian IT firms such as TCS and Infosys are experiencing as well.
Secondly, Microsoft needs to sort out its communications and marketing strategy — it often has good products that trip on the marketing wires.
Just as importantly, the company needs to abandon the mindset that has it behaving as if it still commands a monopoly.
Above all, Microsoft needs and deserves a technology visionary to lead it. Google has Larry Page. Amazon has Jeff Bezos. Yahoo has Marissa Mayer. Oracle has Larry Ellison. Microsoft would want a CEO that matches up to this hall of fame. Even if Mr. Gates refuses to play a second innings a la Narayana Murthy, it is up to him to find a suitable successor.