To Microsoft’s new chief executive: stop chasing consumers

FT.com

August 26, 2013 5:58 pm

By John Gapper

Individuals don’t buy the products, businesses do – company doesn’t have flair for retail success

To: Microsoft’s new CEO

From: McBain & Booz Consulting Group

First, congratulations. Not only on taking the helm of one of the world’s great companies but also on having the vision to pay us to give you frank advice. Many executives don’t value pure strategy consulting these days and demand hard results. You’re more far-sighted than that.

Talking of vision, that reminds us of what Louis Gerstner said 20 years ago after taking over IBM, another technology company that had lost its way and been overtaken by rivals. Microsoft had undermined IBM’s mainframe computing business with the fast-growing, fashionable personal computer. Funny how times change, isn’t it?

“The last thing IBM needs right now is a vision,” he told the media three months after he arrived. Well, the absolute last thing Microsoft needs is the last chief executive’s vision for it to create “a family of devices and services for individuals and businesses.” You can forget your predecessor Steve Ballmer’s ideas.

Who was he kidding, anyway? The only decent device Microsoft ever created was the Xbox games console and that contributes a derisory amount to the company’s profits. You could ditch it tomorrow and nobody would notice. Come to think of it, that’s not a bad idea.

As for “individuals and businesses”, the phrase makes even us laugh. Individuals don’t buy your products, businesses do. They come preloaded on the PCs used by ever-fewer consumers, while companies pay for licences and software that comprise almost all of your revenues. Yours is a corporate enterprise that’s ashamed to admit it.

Remember the fiascos that pass for Microsoft consumer products? Zune, the lame iPod killer? The Surface tablet (whoops, $900m written off on a poor imitation of the iPad). We could go on, but it’s too painful. Microsoft used to rely on individuals being forced into Windows because it was what they used at work. That trick won’t work any more.

These days, it’s “bring your own device” to connect to the corporate network and who brings Windows Phone? An eccentric – or a patriotic Finn who carries a Nokia smartphone. It’s enough to drive any self-respecting Microsoft executive mad, which could explain Windows 8.

Microsoft isn’t the only technology company suffering from consumer empowerment. Look at BlackBerry, while you still can. It dismissed the iPhone, just as your predecessor did, for not having a keyboard. It thought its grip on businesses was too strong to be broken by a consumer fad. Bye-bye, BlackBerry.

That’s why many people called for a technology visionary to lead Microsoft. Thankfully, the board was wise enough to ignore that and appoint you instead – a solid operating executive with the skill to transform the nuts and bolts of a good business, and revive its culture. Like Mr Gerstner at IBM.

Lots of people criticise Mr Ballmer, and he was a bit of a klutz as far as the consumer market went. But what’s happened to Microsoft over the past 30 years? Has it gone up like a rocket and flamed out, like most technology companies? Not only is it still around but it’s one of the biggest companies in the US – as valuable as Google.

That’s because it is a very effective enterprise computing group. The real threat to Microsoft was that open source software would undermine Windows, but that didn’t happen. Its servers division – a boring, solid performer that churns out cash, is prospering and Microsoft shows every sign of adapting to the era of cloud computing.

Microsoft doesn’t have the instincts and flair of a consumer company – its idea of consumer product development is to call in a bunch of consultants (including us). But it is adept at working with businesses and partnering with other technology companies, just as IBM does.

Yes, mobile is the future of computing and, no, you don’t compete effectively with iOS and Android. But jousting at the latest technology success story can be a waste of time and shareholders’ money. When Mr Gerstner took the job, IBM was threatened by Hitachi, Fujitsu and Amdahl. Have you heard of them lately?

You need to cure Microsoft’s dysfunctional culture, focus on what it does best and bring back its self-belief that it’s one of the world’s most effective companies. Build on its strengths and drop the pretence that it can do everything.

john.gapper@ft.com