The article has been highly anticipated for some time. Like everybody else in technology, I was eagerly waiting to read it.
But I was sorely disappointed. The article, despite the research and extensive interviewing that clearly went into it, entirely misses the forest for the trees. It is deeply superficial. It confuses effect for cause, spins the entire tale around caricatured larger-than-life personalities, and uncritically takes insider accounts of the politicized culture at face value. It only just stops short of being pure TMZ-style celebrity sensationalism. Unfortunately he is never able to rise above his attraction to the human drama, and the temptation to inflate its importance and make it the main plot (he would do well on Aaron Sorkin’s staff). His biggest failing is in what he leaves out: discussion of broader industry structure trends, which in my opinion are the real, if duller, story.
So ultimately, this amounts to little more than an eloquent hatchet job on Ballmer. The sort of thing that adds momentum to a lynching discourse but is ultimately an unimportant subplot. Ballmer is a minor part of the problem, and if replacing him becomes necessary, it will be a minor part of the solution.
So why is this dramatic human story ultimately a distraction (and even a danger), and what is the real story here? Because I do agree with Eichenwald on one thing: Microsoft is in trouble and has been for a while.
This focus on human drama is a common pathology that rears its head when mainstream media (though I suppose, with my Forbes hat on, I am nominally part of it) tackles technology. Industry structure trends and analysis are boring. People-centric stories, especially “glorious leader” heroic narratives, are so much more fun to read and write.
But ultimately, they suggest a dangerous sort of path-dependent “it could have been different if only such and such key person had been different” narrative that gets its emotional power from more hopeful, but ultimately specious counterfactuals. Technological evolution is more robust than that.
Single individuals, sadly for those fond of human dramas, are never that important. Even really big personalities like Ballmer, Gates and Jobs are products rather than makers of history.
So what is the real reason for Microsoft’s woes? The answer lies in that boring old MBA subject of industry structure dynamics. There is less entertaining human drama in that story, but you get both a more robust narrative that is not so sensitive to the speculative impact of individual personalities, and (to the technologist) more interesting conclusions.
Eichenwald’s version of the story is a sort of “personality determinism.” All flavors of determinism are partial truths at best, but personality determinism is particularly weak and small-minded (and peculiarly American). Environmental determinism, which I favor, has its flaws, but is not quite as brittle (and you do need to pick some sort of ism poison to tell a coherent story).
How do the two versions of the Microsoft story differ?
Personality-Determinism versus Environmental Determinism
Eichenwald’s version of the story, as I said, is basically a Steve Ballmer hatchet job. And to be fair to him and other Ballmer-bashers, the guy makes for an attractive target, with his charging bull personality that endears itself to nobody. And he’s a sales guy to boot, and as such, easy in our culture to hate on. He may swing big deals in backrooms but cuts a sorry figure on the marketing stage (a good part of Eichenwald’s story is devoted to an unflattering and unnecessarily extended account of Ballmer’s gauche last performance at the CES stage, with Apple-standards for stagecraft providing the subtext).
Bill Gates, who has retired to a living sainthood, does not get a free ticket out of jail either though. He gets blamed for being an accessory before the fact via a quote from that currently unimpeachable witness, and candidate for postmortem technology sainthood (too soon?), Steve Jobs:
“They were never as ambitious product-wise as they should have been. Bill likes to portray himself as a man of the product, but he’s really not. He’s a businessperson. Winning business was more important than making great products. Microsoft never had the humanities and liberal arts in its DNA.”
Never mind that Jobs, rest his soul, had his own philosophies to defend and axes to grind. Never mind that his implicit suggestion that product-focus ought to be some sort of sacrosanct value for technologists needs more than just pious assertion as justification (after all, as people appear to have forgotten, in the eighties and early nineties, Microsoft’s business pragmatism allowed it to roar ahead of Apple’s product romanticism). Never mind that in a story that is bigger than just this last decade, there were periods that Jobs spent in the doghouse. And never mind that pious and self-serving paean to the “humanities and liberal arts,” guaranteed to tug at the heart-strings of non-technologists.The real problem with this whole approach to analyzing a major large corporation is that it vastly overstates the importance of the CEO’s control over a company’s destiny, and indeed, the company’s own ability to dominate its larger economic environment. The real drama is far grander than the story of any individual within it.
When you start this way, you end up where Eichenwald does. For him, Microsoft’s well-known (and once admired, if hated) fast-follower strategy becomes yet another “leadership” problem that prioritizes feature copying (which, it is uncritically implied, is somehow a vaguely dishonorable business strategy). Management fads like stack ranking end up being presented as the cause of politicized internal cultures that are uncritically presented as “toxic” simply because a few interviewees decide to whine about it.
And of course, we have the ultimate kind of hanging evidence used in CEO inquisitions: the idea that Microsoft let certain great innovations like e-readers and touch-screen devices slip through its fingers.
That last flawed argument has been made since Xerox’s misadventures with PARC, which have been gleefully misrepresented in the popular imagination for decades (I fervently hope Aaron Sorkin never gets his hands on a copy of Fumbling the Future or Dealers of Lightning, the best known versions of the PARC story).
Unfortunately, none of this is particularly compelling as an explanation for Microsoft’s woes. There is plenty of less sensationalist business thinking that demonstrates the flaws. For example, fast-follower strategies are actually more successful in general than innovation-pioneering strategies (as demonstrated in Copycats by Oded Shenkar). Highly politicized cultures based on aggressive internal competition can work wonderfully well in some business environments. There are successful companies that swear by stack ranking (which is not a defense or argument in favor of the mechanism, just an observation that the contextual appropriateness and tastefulness of the application of a management tactic matter more than the tactic itself).
The “innovation leak” myth of missed opportunities is perhaps the most pervasive. Even today, 30 years after the fact, when management thinkers and researchers who study innovation have largely agreed that the story of PARC and Xerox was more about prevailing industry structure dynamics than personalities, in the popular imagination, the drama of individual conflicts among larger-than-life personalities looms large.
It is easy to see why this happens. Going back to the PARC example, the story of Robert Taylor (the big-personality impressario who made PARC happen) and his dramatic confrontations with other strong personalities such as the founder of SDS, Max Palevsky, is an attention-grabber. It is hard not to read the story as a sort of Greek tragedy where early acts of hubris on Taylor’s part result in his fall later, engineered by the envious and unreasonable minor gods in senior Xerox management.
Truth be told, the DNA differences between personal computing technology and the kind of business thinking and competence required to make and sell copiers was so big that the outcome would likely have been the same no matter who had been on the two sides of that story. Elephant and pot-bellied pig DNA just don’t mix.
The story of “culture” is simply the story of “personalities” on a somewhat larger scale. Effective cultures conform to the demands of the specific technology and market. It is tempting to believe that culture can be chosen as an independent management variable and even replace strategy altogether, but the argument does not hold water. Both business strategy and culture follow the logic of the specific product and market in a particular time and place.
In fact, the whole story is simply a gigantic case of mistaking correlation for causation. Microsoft is in trouble. Ballmer is perhaps a not-very-likable personality, let’s blame one for the other.
If Microsoft had succeeded rather than failed, and Apple and Google had failed to make their leaps ahead, similar (and equally contrived) stories could be written in reverse. If Gates had stayed, the story would likely have been the same. If Gates had chosen a technologist instead of a sales maven as his successor, ditto. Momentum and cultural inertia are facts of life, not matters of CEO choice.
So what’s really been going on with Microsoft? Let’s do the environmental determinism version of the story.
Horizontal to Vertical, Enterprise to Consumer
Microsoft and Apple were both born in a decade of deregulation that favored horizontal integration attacks on IBM’s monopoly over computing. You cannot understand what is happening today without going back to the eighties, because the DNA of a company at birth is generally its DNA for life. If it survives at all, its early successes define its later personality.
Microsoft happened to be in the right place at the right time. Intel was positioned to carve out a horizontal processor slice from the computing pie. Microsoft was positioned to carve out a horizontal operating system slice. The software universe was ready for some large-scale bottom up innovation on a relatively open platform (remember Linux didn’t exist back then, so DOS was as open as it got) that did not require midnight visits to mainframe caverns with stacks of punch cards.
There was basically a four-layer cake waiting to be baked. The physical “box” made of commodity parts, minus the processor, was the base layer. It was not really worth monopolizing, and that layer saw the emergence of a large disorganized assembly industry and two majors (Dell and Compaq) in America, and an Asian tsunami of electronics manufacturing.
The processor layer saw Intel emerge as near-monopolist, with players like AMD gradually emerging as competition via antitrust legislation.
The OS layer went to Microsoft.
And perhaps most important, the then-nonexistent application software layer was opened up to the masses. Like most of you technologists over 30, I learned programming on a PC running MS DOS.
It was the PC, not the Mac, that created the modern personal computing software industry. Only a horizontal industry structure could have enabled this. Without it, both the Mac OS and Windows would be walled gardens of limited accessibility and utility. It is fascinating to me that Eichenwald manages to discuss Microsoft without discussing its developer ecosystem, something that was crucial in its early days and remains crucial today.
Apple was not the right answer then for the economy at large.
Jobs followed his personal philosophy of vertical integration and manic focus on usability when the high-leverage move was to sacrifice both in favor of architectural openness, hardware commoditization, and catalysis of a (then non-existent) personal computer software industry. It is something of a miracle that he survived long enough to get a second chance.
It is easy now to underestimate the magnitude of what Microsoft got right back then, starting with the original Gates-Allen BASIC.
For the sake of completeness, I should note that the much-lauded PARC personal computer (which finally saw the light of day very late as the Xerox Star system) was also not the right answer. It was too integrated and custom-built, and too reliant on networked architectures that had no hope of sprouting up overnight. PARC nostalgia often clouds our ability to recognize the genuine differences that both Microsoft and Apple introduced along the way to beating the PARC model.
But the big story then was that IBM was vulnerable to a horizontal integration, openness and hardware commoditization trifecta attack. Again, the story as told seems much more path-dependent than it really was (for example, the famous anecdote about how Gary Kildall of Digital lost what would become the MS-DOS market to Microsoft through a sitcom-ish series of tragicomic events that made IBM turn away from the CP/M operating system). The Ballmer story told by Eichenwald today is strikingly similar to the Gary Kildall story told back then.
Again, even if the story had not played out in this specific way, the broad point of industry structure being friendlier to horizontal organization in that period holds. If not Gates and Microsoft, some other horizontally integrated attacker, not Apple, would have won the day. Because only horizontal integration allowed for the emergence of a powerful enough paradigm to challenge mainframes, and some player would have been in the Goldilocks zone.
Industry structure scholar Charles Fine of MIT has studied these sorts of effects in detail (see for instance, his old classic Clockspeed). Among his broader ideas is that most industries cycle slowly through horizontal and vertical integration phases (loosely speaking). Each has its advantages and disadvantages.
Another such industry structure trend that Microsoft was poised to take advantage of back then was the slow migration of IT from the deep bowels of corporations, to the surface. Then, unlike now, the “personal” in PC was a misleading adjective. The computers were used by individuals, but not really in their personal capacity. Industry was the initially important adopter of personal computing technology because of the advantages it offered over mainframe-based computing (“personal” computing in the home market did not become dominant until the nineties). The PC was really a BC (“business computer”) until the mid 90s.
Again, Eichenwald misses the significance of this subplot. Because enterprise IT is generally a “boring” story in human terms. Apple, iPads and iPhones are sexy. Drones hammering out dull enterprise glue code in Java, on Windows machines, through the late nineties, are not.
This trend too would eventually reverse. By 2004, technology was generally flowing from the consumer sector to the enterprise, reversing the historic flow direction (this is the much-talked-about “consumerization of IT” effect, which is a story that is bigger than Apple and Microsoft).
So what happened? Why did Microsoft lose its lead?
Simply put, the technological winds shifted, starting around 1997, to favor vertical integration.
As the Internet emerged, creating a sort of supercritical soup of technological mixing and matching (not to mention viruses from a newly anarchic Russian sphere — the world is a big place), the relatively open PC platform became increasingly unstable and confusing. It was too open, too vulnerable to the natural chaos that hides in openness. At the same time, as consumer markets and graphical capabilities became increasingly important, and vertical integration began to offer serious advantages.
At a marketing level, the commodity hardware effort had succeeded beyond everybody’s wildest expectations (benefiting Apple as much as Microsoft), leading to the now familiar flood of beige, boxy computers on desks everywhere. Things had gotten cheap enough that there was now a competitive advantage available along the aesthetics vector. People could pay an aesthetics premium without bankrupting themselves.
And Jobs, fresh off yet another radical-but-failed vertical-integration project (NeXT), finally received his cue to step on stage. Candy-colored iMacs burst on the boring beige scene. Jeff Goldblum began telling us superciliously on TV that beige was boring.
Shifting Winds and Stopped Clocks
I’ll offer a bit of an extreme caricature that understates the talents of both Jobs and Gates, but in a way, they were both like a stopped clock that happens to tell the time correctly twice a day. Both had fixed personalities and relatively unchanging philosophies that were more or less effective as winds shifted around them. For example, Eichenwald uses Gates shooting down of the e-reader for not being enough like Windows as a symptom of failed vision. But insisting on a Windows-ish feel to all Microsoft products makes perfect sense for a company whose fundamental DNA is horizontal integration. It is like Intel’s Intel Inside marketing posture. What may make less sense at a product level may make more sense at an industry structure level. Sometimes you have to cede product categories that go against the grain for you.
Jobs’ philosophies looked equally inappropriate when Microsoft was beating Apple. The point is that individual and corporate personalities are relatively static, and it makes far more sense to recognize the fact and develop a certain resilience to unfavorable winds rather than attempting to “change culture” with every swing of the business cycle and industry environment. Better to be a stopped clock that is right twice a day than a late clock that is never right.
Notice something about this telling of the story? There is far less focus on individual names and personalities, internal management fads and dissection of politicized cultures and management fads like Stack Ranking.
Ultimately, these things are a matter of detail. The reason serious study of management focuses on broader environmental macro issues is that ultimately these prevail.
The direction of the wind matters a lot more than the captain of the ship when big technological forces are opening up new oceans of opportunity. There are enough ships waiting and positioned for every possible direction of the shifting wind.
To extend the metaphor further, culture, management and personalities are naturally selected by the wind direction. If the environment selects an aggressively competitive and politicized culture, led by a charging bull, and working off a “fast follower” strategy, that’s what will happen. If the winds shift, those same variables become correlated with “failure.”
There is always somebody in the right place, at the right time, with the right personality, within a company with the appropriate culture to sustain the successful strategy. That does not mean they fundamentally “cause” the success (or failure).
The New Environment
Ironically, the wind is shifting again in favor of Microsoft’s culture, after a decade of favoring Apple’s culture. Things are about to go horizontal again. If Eichenwald’s not-so-subtle call for a Ballmer lynching is successful, Microsoft might end up striving mightily to “change” and become more like Apple and Google just when the environment actually favors a return to its roots.
Unfortunately, Microsoft has very weak table stakes in the new battlegrounds (mobile and cloud, the two ends of the emerging computing world). On the mobile end, it has turned into a contest between Google and Apple, and Google is winning (the Nexus 7 is the most serious shot across Apple’s bows yet).
Ironically, Google is winning using Microsoft’s original winning horizontal strategy: a relatively open OS layer of the stack, commodity hardware based on increasingly open architectures, a new kid on the processing block (ARM) and an exploding market of software innovation much like the eighties world of desktop software.
Apple, to its credit, has managed to adapt its vertical DNA to this increasingly horizontally structured environment in the world of apps, taking advantage of the tighter usability constraints of mobile devices (compared to desktop computers) to sustain a walled garden app model, but ultimately, the economics are not in Apple’s favor. If it does not gradually open up, lower cost and more open Android models will win the day.
Microsoft has no credible offering at this end of the game. Google is out-Microsofting Microsoft.
On the other end, Microsoft’s traditional captive market, the enterprise, is under increasing threat from cloud-and-SaaS everything. Here, its Azure-based offerings are slightly more credible than its mobile offerings. But here too, it faces very tough competition from players ranging from Amazon to Salesforce and Google itself.
Can Microsoft navigate these rough new seas?
Only if it goes back to its roots. Losing your way is one thing. Losing your faith is quite another.
Saving Microsoft
It is crucially important for the world that Microsoft survive as a technology company, and not just because the idea of living in a brushed aluminum Apple world wired to an increasingly hollow-sounding “Don’t Be Evil” Web sounds like a terrible idea to me.
Microsoft is an important force in the marketplace because it represents pragmatism, fast following, commoditization and a concern for the needs of businesses and practicality. If Microsoft does not survive, I hope another company steps into its shoes. These dimensions of corporate diversity matter. We do not want shifting winds to find no ships to propel to greatness in some direction because an Apple-Google monoculture (bi-culture?) spreads through the economy.
So to survive, Microsoft must not doubt or second guess its own strengths. It must not try to become a second-rate Apple or Google. It must strive to become once more, a first-rate Microsoft.
A strong sales culture is not an evil weakness.
A preference for horizontal integration is not a weakness.
Business pragmatism is not ideologically inferior to product romanticism.
These things were valuable once. They will be valuable again. They may have turned temporarily toxic in an unfriendly decade, but they can be restored to health.
Certainly there are problems with Microsoft that go beyond unfavorable winds. The minimum threshold for usability has risen much higher than it used to be. Fast followership requires good radars and disciplined selection of trends to follow and startups to buy, a discipline that seems to have been lost. Strategic fast-following appears to have been replaced by envy-based fast following, which is indistinguishable from thrashing around. The thinking at the top appears to have become intellectually lazy.
All this can be fixed.
But the idea that there is nothing of value in the company that created the modern world of personal computing and fulfilled the vision of a computer on every desk (and then some) is dangerous and toxic. More dangerous and toxic than any amount of internal politicking and stack-ranking. Second guessing your strengths based on transient ill winds is the worst thing you can do.
And even Ballmer deserves a redemptive telling of his tale. It would be a tragedy if his contributions were forgotten, or if the strengths he brought to Microsoft culture were abandoned in a scapegoating-and-purge move. The technology world is bigger than cardboard heroes and villains.
Microsoft may or may not survive. But the grand narrative of technology deserves to be more than a series of Monster of the Week slayings of out-of-favor leaders.
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