With Steve Ballmer abruptly and unexpectedly announcing that he will leave his CEO position at Microsoft within the next 12 months, analysts closeted and otherwise are coming out of the woodwork to try and explain this turn of events, and Ballmer's tenure leading the firm. But looking at Ballmer's 14-year reign, it's not hard to draw a single, obvious conclusion.
Microsoft's problems over the past decade-plus weren't Ballmer's fault. Indeed, they were probably unavoidable.
Now, before the Ballmer haters in the audience knee-jerk disagree with those statements, let me explain. And let me explain by comparing Microsoft with everyone's favorite Microsoft comparison, Apple. Apple and Steve Jobs.
When Steve Jobs returned to Apple and then assumed control of the company in 1997, the firm was months away from insolvency. So Jobs One, so to speak, was returning Apple to profitability and to long-term viability. The first step in this plan was simplifying the company and reducing the number of products it sold and maintained. And as part of that step, Jobs axed some beloved but unprofitable and strategically out-of-date products like the Newton.
Next, Jobs had Apple's designers morph an in-development thin client network computer into a low-end Macintosh called the iMac. It was a smash success and helped Apple turn the corner, both financially and spiritually. Over the next several years, Jobs and Apple—Jobs, really—revamped the entire Mac lineup and repositioned the firm as a healthier entity for the long term.
But it wasn't the Mac that catapulted Apple into the tech industry's biggest and most powerful company. No, it was Jobs's decision to focus on mobile devices, first with iPod and then with iPhone and iPad, each of which redefined existing markets so dramatically that they were basically new markets. The rest, as they say, is history, and while Apple's bland and deliberate new CEO, Tim Cook, now faces challenges that are eerily similar to those that Ballmer faced over the past decade, that's a discussion for another day. Let's compare Ballmer's 2000s decade to Jobs's.
When Ballmer assumed the leadership of Microsoft in 2000, it was a seamless transition of power; he had been number two to Bill Gates for years and his ascension to CEO was preordained. Microsoft stock had hit its historic high in just the previous year, the firm had minted more employee millionaires than any company before it, and Windows was so dominant that antitrust regulators from around the world were still busy trying to prevent Microsoft—then characterized as the all-powerful Borg—from illegally extending that power into other markets.
Microsoft rightfully touts the technological transitions it made in the past, such as the move to bring GUI computing to the mainstream with Windows and its belated but perhaps too-forceful embrace of the Internet in the late 1990s. But the firm missed the two biggest trends of the past decade—mobile devices and cloud computing—in ways that its chief rivals, Apple and Google, did not. How is this?
Simple. As we sailed into the 2000s, Microsoft was the most powerful tech company on earth. Windows and Office were—and still are—dominant. More to the point, Windows and Office (and, increasingly, Server) were—and still are—cash cows . . . giant ATM machines that continue pumping out record profits and revenues regardless of the external pressures that are changing other parts of the tech industry.
When you're a Steve Jobs running Apple and you've performed a Herculean effort to transform a dying Mac business into a viable foundation for the future of the company and you still can't make a dent in the Windows monopoly that dominates that market, what choice do you have? When you've faced extinction, as Apple did, doing something new and different isn't just a good idea; it's your only option. So you innovate.
Microsoft was sitting on a mountain of ever-expanding cash during this time period. Windows, Office, and Windows Server kept churning out profits and revenues that kept exceeding any rational explanation. These product lines weathered bombs like Windows Me and Windows Vista, they weathered stupid features like Clippy and Internet Explorer integration, and they stood strong in the face of free alternatives like Linux and OpenOffice. Nothing, it seemed, could bring these products down.
So how could anyone expect Steve Ballmer or anyone else for that matter to make even a single decision that would do anything that could harm any of these core products? No matter how far-seeing you are, no matter how much you want to be that Monday Morning Quarterback and retroactively make the right decision that somehow saves the company, the truth is that only an outright madman would have tried to harm Windows, Office, or Server 10 years ago in order to push some silly product that might or might not be viable let alone hugely successful down the road. And such a person would never be running Microsoft, let alone have the backing of its board of directors.
So Mr. Ballmer did what anyone credible would do: everything he could to ensure that Windows, Office, and Server were continually ever-more successful. The firm killed dozens of potential hits, like an early version of Office on the web called NetDocs, the Courier tablet, and many more. And it did so for perfectly reasonable and logical reasons.
The results of Ballmer's decade-plus time running Microsoft were inevitable. And while it is correct to blame the man for all the disasters just as we must credit him for all the successes—this strategy did, after all, result in a tripling of Microsoft's revenues over the 13 years that have thus far occurred—we must also understand that certain things are beyond the control of an individual.
If Apple wasn't flailing in the late 1990s, it never would have needed to look outside the company for a replacement OS and thus found Steve Jobs, whose skill set and mania were curiously ideally suited for the company's next decade. But even Steve Jobs couldn't have prevented the past decade-plus at Microsoft. No one could have.
Having completely missed mobile devices and cloud computing, Microsoft now ironically calls itself a devices and services company, a moniker that does nothing more than call attention to the fact that these are two key areas in which the firm cannot effectively compete. Its Xbox consoles, while popular with fans, are money losers and its Surface tablets are a disaster. Bing has lost $17 billion over the past decade, and Microsoft's online ad business was the subject of a $6.2 billion write-off of its own. These kinds of miscues would sink other companies, but Microsoft, ripe with profits, weathered it all. Allowed it to happen.
There is no version of history where someone else running Microsoft could have gotten this right. And that, ultimately, is Steve Ballmer's legacy. He was a good guy, a smart guy, a business man and a marketer, and he did the best he could given the situation he was handed.
Looking ahead, Microsoft has enough resources and heft to make its next transition, but it can't come from inside, where calcification and an overly complex and huge hierarchical structure renders decisive decision making impossible. So Microsoft's next leader should come from outside the company, and as with Alan Mulally at Ford, he or she should be given the freedom and power to rework the company into something that makes sense for the competitive climate of today, not the past. If this doesn't happen, the next decade will be as inevitable as the last, but the results will be even more disastrous.
