Good-Bye, Steve Ballmer

By sheer coincidence, the two most influential computer people of the last decade are both Steves. One, Steve Jobs, is widely hailed as a genius. He started Apple, got fired, and came back to the rescue, making the company he inherited at the brink of collapse the most valuable company of all times.

The other, Steve Ballmer, took the most valuable company of all times and from a position of absolute dominance ran it to a state of also-ran. Mr. Ballmer, after years of the Internet wondering why he was still in charge, finally announced he was going to retire in a year.

But was it his fault? Is Steve Ballmer to blame for the loss of Microsoft’s monopolies in the same way that Steve Jobs is single-handedly responsible for the success of the iPod, iPhone, and the various MacBooks?

To answer that question, we need to look at what type of company Microsoft was. When Bill Gates created it, Microsoft was a smallish company with a knack for doing the same things as others, but better. Better, here, was defined by the business case, not by the technology. And for a long while, Microsoft succeeded with an ethos of being smarter than the competition.

The crown achievement of early Microsoft was undoubtedly MS-DOS. When IBM realized it needed to field an entry in the emerging market of personal computers, it was hurriedly looking for an operating system. In the end, Microsoft’s MS-DOS won. Crucially, IBM believed in the product so little, and Bill Gates so much, that MS-DOS was not proprietary to IBM.

Microsoft’s early win was the ability to sell MS-DOS to IBM’s competition. The entire decade of the 80s was spent in a constant price war, with the effect of reducing prices of PCs while simultaneously improving performance. By the end of the decade, computers were ready for the next quantum leap: the Internet.

Of course, Microsoft didn’t see it coming. Instead, the company realized that the text mode interface it had been pushing was not user friendly. Apple’s Macintosh computers were selling well, despite their outrageous prices. IBM and Microsoft started a project called OS/2, with the specific intent (on IBM’s part) of making the operating system available only on IBM hardware.

The project was delayed over and over, and Microsoft finally came up with its own windowing software, with the “clever” name Windows. Things were good, but Microsoft was already missing the next boat.

Much of the 90s were spent getting ready for the Internet. There were regulatory hurdles to overcome – like the provisions that didn’t allow commerce on the Internet; PCs had to get the hardware (i.e. modems) and software (i.e. TCP/IP stacks) to connect to the budding networks. Mindsets formed by CompuServe and Prodigy had to change. But by the middle of the decade, Netscape came out and the world was forever changed.

Microsoft slept. The company so completely missed the boat on the Internet that to connect to it, you needed a third-party library named WINSOCK.DLL. Back in the day, getting your PC connected to the Internet was as arcane as ten years later upgrading your TiVo to a bigger hard drive.

Then Bill Gates woke up and told the company it was missing the boat. A giant reallocation of resources started, and shortly thereafter we got Internet Explorer, the bastard child of browsers that still snagged the virtual entirety of the market. So much so that when I complained that a Yahoo! property didn’t support Firefox, the product manager told me “only geeks use that crap, and you geeks always think you are everybody; guess what, nobody cares about your Firefox.”

But the pattern was already visible: if Bill Gates hadn’t been careful, Microsoft would have been dead in the water. With the main interface of your computer being the browser, it wouldn’t have mattered what goodies Microsoft put into Windows. The only thing that would have been quantifiable was how fast the computer got from turned off to Netscape.

So, if Steve Ballmer made “a” mistake, it was not to throw the company around at the next big problem. Instead, he focused on shifting resources in a more managed way, without the drama of a company-wide memo telling people they have to change the way they think about computers.

Turns out, that’s a bad thing. Who knew.

The next Internet moment for Microsoft was in a small market (at the time, and now again): music players. Apple had figured out that people like playing music, and that the options they had at the time (mostly CD players) were severely deficient. So they pushed the iPod onto the market, creating the first music player since the Walkman that people needed to have.

Microsoft responded with the Zune. We found it very ironic that the company chose a dark shade of brown for the player, almost asserting that it was a “piece of shit.” For the record, it wasn’t. But it was simply a me-too product with no features that made it better or more desirable than the iPod. By that point, it was obvious that Microsoft had been coasting for a while, thinking that people would choose whatever it created that wasn’t worse, because they had bought everything else from Microsoft.

So far, so good. You can lose the music player market and not care a lot, no matter how much money there is in that particular market. After all, Sony had owned that market before, so it didn’t come at a loss for Microsoft.

But then there were online services. Microsoft had an early start on those when it bought Hotmail. After that, crickets. Microsoft finally decided to throw money at the problem, with horrifying results. The history of Microsoft online services should be studies in management case studies all over the world, as an example of how even the best management cannot turn a flawed product into a swan.

Microsoft simply didn’t understand online services. I know this, because at the time they were trying to break into them, I worked for one of their big competitors, Yahoo!. We saw Microsoft bumble, hem, haw, always missing the boat by a mile. They changed the branding of their product a few times, deciding they needed something catchy to move people over (they ended up with live.com).

Yahoo! of course missed the boat, too. We both didn’t see Google coming, which is particularly bad for Yahoo!, since there wouldn’t be the Google we know now if Yahoo! hadn’t used it as its own search engine.

Then there was the XBox. On the outside, it was a success: no serious game would be published without an XBox version. Microsoft went from no presence in the game console market to becoming a market leader. We shouldn’t underestimate that.

Unfortunately, the game console market was about to decline. Microsoft ended up being the company that invented the perfect quill the day before someone patents the ballpoint pen.

And the next market that Microsoft missed turned out to be its undoing.

Steve Jobs pushed the iPhone. He definitely was a visionary: back in 2007, when it came out, nobody in America thought anyone needed a smartphone. Microsoft had been trying to push Windows CE, later Windows Phone for ages with no success. This was the age of the Treo and the Blackberry, of slow networks, of high-cost minutes.

I used to work with people that stood in line on the day the iPhone came out. It was horrendously expensive and not very functional. It had a few cool features that made it stand out – most notably, visual voice mail. Jobs genius, as usual, had been to focus on the barrier to entry. Solve an existing problem, even if it means that once you are successful, the problem will go away automatically.

When the iPod came out, one of the features was that if you unplugged the earphone, the music would pause. No music player mentions the feature any longer, but back in the day music players were so uncommon, you constantly had to deal with people that bugged you while you were listening. So you unplugged the buds to hear what people were saying. If the player paused, it meant you didn’t have to worry about missing your music.

Visual voice mail solved a problem of the day: phone companies loved billing the minutes you needed to listen to your voicemail, so the process was incredibly cumbersome, slow, and cryptic. After all, they didn’t want you to get it done fast. Worse, people still called, so when you’d log on to voicemail, you’d hear you had 20 messages. Since the messages were always played first to last, you had to sift through all of them to get to the latest one (which is the one you probably wanted to get to, the one that had just been recorded).

Of course, once the iPhone was successful, nobody would care about visual voice mail, since nobody would actually call any longer. Which is what happened. But back in the day, it took a Steve Jobs to see that.

Well, Microsoft had been dabbling in mobile operating systems for a decade and had gotten no traction, so it decided the problem was that people didn’t want mobile operating systems. That’s a little like the cable companies telling us we don’t want fast Internet access, because nobody buys their overpriced fast packages.

Steve Ballmer himself went on a road trip, telling everyone that the iPhone was not going to be successful. It was too expensive, and nobody wanted a smartphone anyway. He was not alone in that feeling: a host of different executives went around, telling everybody that the world not only wasn’t ready for a smartphone, but that they already had built one or many, and nobody had wanted them.

As usual with Apple, the iPhone had its early flaws. There was no developer SDK, which means the only apps you could use were web-based. The only network on which the iPhone was available was AT&T, which didn’t have the best reputation or the best network. The iPhone also used up a ton of data bandwidth, and the network frequently couldn’t cope.

But the iPhone was definitely what people wanted. It had all the innards that enabled geeks to make it do a range of things and connect to a set of services, and it still was a sleek phone, with high quality voice. Plus it had visual voice mail.

That was the end of it. It was a paradigm shift similar in magnitude to what Netscape had accomplished in the mid-90s. Then, computers were finally connected to a global network. Now, computers became dramatically portable. The iPhone was for many people the first computer they interacted with. For the first time, computers became the only device that people used on a day-to-day basis.

And this is where Ballmer slept.

Really, Ballmer didn’t sleep. Microsoft didn’t sleep either. The company had had a phone offering for many years, but had failed to gain market traction. Ballmer’s Microsoft knew how high the stakes were, and for the first time bet the bank on mobile: if customers told them that Windows for Phones in its many incarnations was hard to use because it was a desktop operating system pushed into a little device, they were going to reverse the paradigm: from now on, all computers were going to be operated like mobile phones. Thus was born Windows 8.

Microsoft’s problem, at that point, was that it had entered the market very late. In addition to the high end, swallowed up in its entirety by Apple, there already was an entrant that gobbled up more and more of the low end. Google’s Android was already well-established when Microsoft came a-knocking, and the Redmond giant had to face a problem it had always created for others: a flood of apps that created a barrier to entry for the new operating system. Even if your Windows Phone had been the bee’s knees, you wouldn’t have been able to do anything with it.

If you look in hindsight, Ballmer’s only problem was that he was no visionary. He was a great manager that did the right thing at the right time, but he didn’t have the foresight required from a man in his position, nor the insight to find the woman that could do it for him. He was a blind man, pushed by others in directions he couldn’t discern.

There is a famous incident where Steve Ballmer is reported to have thrown chairs in a meeting. Maybe it was a single chair. That many people remember Steve Ballmer for this anecdote and nothing else is telling. Steve Ballmer was capable and made no mistakes. But in the high stakes game of high technology, that’s simply not enough.

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