An excellent post on The New Yorker magazine's website by Nicholas Thompson has done a great job of spelling out Why Steve Ballmer Failed at a high level. The label of "The Anti-Steve Jobs," seems spot on. Given the extraordinary resources we must imagine a man in Steve Ballmer's position must have, it seems incredible that he missed or misunderstood the importance of such innovations as the iPhone and iPad. Microsoft's dedication to riding the money train of the company's number one and two cash cows (Windows and Office) can be traced directly to decisions made by the Microsoft CEO. Now that the money train has started to run into some of the early signs of losing steam, the strategies of Steve Ballmer must be called into question, as they have by many investors and analysts for several years now.
But I would like to dig a bit deeper into the decisions that have left Microsoft making Hail Mary plays, like this weeks announcement to buy Nokia, or last years decision to make their own hardware with the ill conceived Surface RT and slightly better Surface Pro. Because I believe that it is not just the big strategy decisions, but even the little ones where Microsoft has failed. Which may be a cautionary tale as we watch the company go through its changes in the next five to ten years.
Take Windows Phone for instance. Some of us remember that Steve Jobs did not invent the smart phone when he gave us that "One more thing..." speech to introduce iPhone. Many companies had early versions of smart phones years before Apple decided to compete. Microsoft had a sizable share of the market with the older "Windows Mobile" devices. Despite it's popularity with some business users, it was never seen to be a very lucrative marketplace.
After Apple proved that there was a market for such devices, and it was a large and fairly high end market indeed, Microsoft went through classic signs of grief with denial, anger and reluctant admission that they had missed the boat. However, to their credit they did not simply throw in the towel, and they didn't make the mistake of trying to convince a new and hipper generation that the old Windows Mobile devices were the solution.
Instead, they took the time and with great fanfare, they released Windows Phone 7. A remarkably stylish device, with an interface that looked nothing like Apple's or Google's devices. Many critics hailed it as a breakthrough in touch interface design, and the phone won many awards for innovation. It seemed Microsoft still had some magic up their sleeves.
Still many people worried that the software giant could not keep with the number of regular updates that Apple, and even more so Google, were capable of putting out. As with all technology, it wasn't just about the newness, but how fast you can make improvements and keep the experience fresh to get users excited. When the first update to Windows Phone 7 was delayed, and delayed again, there was an uncomfortable feeling going around the tech community that had cheered Microsoft's re-found mojo.
But when Windows Phone 7.5 (Mango) was released, there was a collective sigh of relief and more vendors jumped on the Microsoft wagon. At least for awhile. Microsoft announced that a major upgrade to the software would come in the form of Windows Phone 8.
The bad news was that none of the Windows Phone 7 hardware would be able to run the new mobile OS. That included recently released hardware that consumers had purchased just weeks before the Windows Phone 8 announcement. Microsoft promised a 7.8 release for the older phones. It was supposed to contain some of the new features for the older phones, and was released a few months after the new Windows Phone 8 devices hit the marketplace. Unfortunately, there seem to be some customers that still have not received the 7.8 upgrade. Trouble in the garden?
At the same time, Steve Ballmer announced that Windows 8 would be the new Desktop OS that would also run on a new line of tablet devices featuring a modified version of the Metro UI from Windows Phone 7/8. Microsoft would, finally, be competing with the incredible iPad.
The first of these devices were released in the last quarter of 2012, and featured a version of Windows called simply RT. These devices would only run special apps designed specifically for the new Metro UI style and available exclusively through the new Windows Store, which would complete with Google Play and the AppStore for iOS. While standard windows applications made to run on Windows 7 would not run on RT, Microsoft did include a special version of Microsoft Office for the new tablet computers. If that's seems confusing, it was, and many people were surprised to find that this special version of Windows didn't seem to be Windows at all.
Adding to the confusion was the fact that in early 2013 Microsoft released the Surface Pro which would run a full version of Windows 8 just as on a Desktop or Laptop computer. Meaning that most of the software that had run on Windows 7 would run on the Surface Pro's Desktop while the RT applications would run in the new Metro UI. Well most of the RT apps that is. Some would be incompatible with Pro and some Pro apps would be incompatible with RT.
Making matters worse, the Surface platform was not compatible with the Windows Phone platform. Therefore Apps that users purchased on the Windows Phone store had to be purchased again in the Windows store for Laptops or Surface tablets, if the same app was even available for both platforms. To understand how big of a problem this is, consider that the Apple AppStore features software that runs on both iPhone and iPad. Many applications are made to give the same look and feel but offer more or less features depending on which iOS device was being used. Google's Play store works pretty much the same way for apps purchased for Android phones or tablets.
In other words, the Surface tablet is treated more as a desktop or laptop replacement, and users are expected to buy software made specifically for those devices. However, this completely ignores the fact that many people who are buying smart phones and tablets are leaving the laptop or desktop at the office. In many cases these people are leaving the desktop completely. When they are on the go, they believe that the mobile devices they purchase all work the same, and more importantly they have been taught by Google and Apple to believe that once they purchase an application for one of those mobile operating systems they can use them on any device with the same system. For these types of users the Microsoft Windows Surface and Phone experience end up being different and they must be confused and frustrated to find that they aren't sharing the same store for their purchases.
In fact the problems of the Surface compatibility and performance forced Microsoft to take close to one billion dollars in a write off on their latest quarterly earnings report while they dumped the remaining inventory of the Surface tablets. While they plan to release a second version of both Surface RT and Pro to address some of the performance concerns, it is unclear that Microsoft has understood the other frustrations of its users.
These are just a few of the most recent examples that show how Microsoft and Steve Ballmer in particular have made mistakes both large and small even with their newest and most innovative products. I think it proves beyond doubt that Steve Ballmer just does not get the new technology world in which we live, and that is why he had to leave Microsoft if the company is ever going to have a chance of competing with the new technology titans.
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