Microsoft is getting a public spanking in the August issue of Vanity Fair. A web-based summary of the article is provocatively titled "Microsoft’s Downfall: Inside the Executive E-mails and Cannibalistic Culture That Felled a Tech Giant;" the print headline refers to the last 10 years as Microsoft's "Lost Decade." Vanity Fair covers Hollywood celebrities more than executives, but found an easy target in Redmond and went for it. It's sure to sell some issues as the pre-release tease of the article has already done. The Seattle Times reports:
"Vanity Fair's August issue will feature a piece by contributing editor Kurt Eichenwald looking at 10 years of 'astonishingly foolish management decisions' made by Microsoft--a decade under CEO Steve Ballmer that, Eichenwald contends, led to the decline of the company."
The first obvious response is that "downfall" might be a bit of an exaggeration. Last I checked, Microsoft was profitable and holds market leadership with several products. It can't be denied that Microsoft isn't as influential as it once was, or that it hasn’t made some mistakes over its past ("lost") decade. Vanity Fair did not put Microsoft or Ballmer on trial, but rather proceeded directly to convicting them.
I haven't read the full article yet, but the reviews of the feature are on a par with the article's own assessment of Ballmer. Eichenwald dwells on specific mistakes, skips the successes, and ignores the current trajectory. The article reportedly does not introduce anything that hasn't already been covered.
Considerable emphasis is placed on an HR practice called "stack ranking," which is common in large companies. Stack ranking requires management to rank staff from best to worst. The best get considered for promotions and new opportunities. The ranking process requires the identification of both top and bottom performers regardless of actual team performance. It goes against the current trend of collaboration because it pits employees against each other. It is a vile practice, but it isn't new or exclusive to Microsoft. GE, under Jack Welch, was one example of a company that suggested it was a best practice.
I enjoy making fun of Ballmer as much as the next guy. It’s fun to make fun of companies (and people) when they are down. The Germans have a word for it: schadenfreude, and there’s no shortage of opportunities to do it these days. That's the untold part of Eichenwald's story.
"Disruption" was not a common term a decade ago. Clayton Christensen turned to the computer storage industry in an effort to explain the concept in "Innovator's Dilemma". Today, it is difficult to name an industry that isn't going through a disruptive transformation. One-time huge, powerful, and innovative companies, like Kodak, are now dropping like flies. The Internet, dematerialization, globalization, and other factors are fundamentally changing most industries.
The current rate of change is phenomenal and unprecedented. Rather than buying physical goods, we download apps on devices that didn't even exist just a few years ago. Manufacturing is changing, and fewer things are actually manufactured. Everything is connected, but carriers aren't booming either. Many skills that are in demand are not yet taught at schools. Both communications and business processes are changing, yet these should be integrated together. Entire industries are imploding, as are the past leaders (RIM, Nokia) in industries that are booming.
What is rare and should be celebrated are the companies that are actually holding it together--viable, healthy, competitive, and innovative. Microsoft didn't lose a decade, we all did.
Sure there are some exceptions, but most companies, including Telecom/UC/VoIP vendors, don't look so good in the decade's mirror. Avaya, Microsoft, Cisco, Mitel, and NEC were all better off ten years ago. As were RIM, Nokia, Dell, HP, and many others. Not to mention Nortel, Sun, and WorldCom, among others, who aren't even around anymore. It's been a tough decade, with far fewer winners than losers. Consider the list of bellwethers across industries that have declared bankruptcy in the past decade: United, Delta, American Airlines, GM, Chrysler, and Lehman. Within telecom, we saw Nortel, Zultys, Worldcom/MCI, Global Crossing, XO, Williams, Winstar, Leap Wireless, Covad, and ICG all file for bankruptcy. Some recovered.
The problem is the Steve Jobs Effect--everyone is wondering why [Insert CEO name here] didn't repeatedly invent brand new product categories and transform their company from near bankruptcy to the most valuable company in the world in the span of about 15 years. Let's admit that Jobs was brilliant, but an anomaly. It is time to stop holding other CEOs to his standard. It was a very difficult past ten years--deep economic recessions, huge natural disasters, the biggest bankruptcies in history, two US wars--and a tremendous amount of innovation and disruption.
Sure Microsoft blew it with mobile, the Zune, and Vista--and the company is playing catch-up in key sectors such as search, mobile, tablets, and the cloud. It would be nice to blame everything on Ballmer and stack ranking, but that won't do more than sell magazines. That ignores the fact that Microsoft, under Ballmer, generated a net income of $23 billion in 2011, and that stack ranking is prevalent in several organizations that did not lose a decade, such as IBM.
Dave Michels is a Contributing Editor and independent analyst at TalkingPointz.com
