In Defense of Steve Ballmer

Tuesday Nov 3rd 2009 by Rob Enderle
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An industry observer rebuts a recent opinion piece in Newsweek calling Ballmer’s tenure a “lost decade” for Microsoft.

Dan Lyons recently posted an opinion piece on why Steve Ballmer is no Bill Gates, titled “The Lost Decade.” Steve Ballmer is under a microscope at the moment, so let’s talk about why this is, and whether the position that Lyons and others are taking is reasonable.

I’ve worked with and for a number of CEOs over the years and am one of the very few people who has been through a formal CEO training program. Let’s be really clear: while being a CEO looks like a lot of fun, it’s far from easy and virtually no one taking the job is qualified to do it.

In addition, when following a founder like a Bill Gates or a Steve Jobs you have an impossibly high bar because you’ll never be as good as a founder who took a company for nothing and made it into something great.

Even when the same founder leaves and comes back, like Michael Dell did at Dell, the conditions have changed to a degree that they generally can’t meet their earlier level of performance. Of all the CEOs that left and came back (recall that Steve Jobs wasn’t CEO when he was fired from Apple), Larry Ellison stands out as one of the few that were successful and he did it by creating the “office of the CEO,” which divides the job up among a number of younger, talented people. Even he didn’t try to duplicate his own success (and near failure) by himself.

The Post-Windows Launch News Gap

Traditionally when a new Windows product launches, it takes up a massive amount of media, largely funded by the various launch budgets from Microsoft and the OEMs. Then this money runs out and the interest in the product’s launch is no longer important (because it has launched) leaving a lot of people with space to fill and nothing much to fill it with.

Historically, at least since Windows 95 when I started following the product, this gap was filled with launch problems.

Well, this time, Windows 7 doesn’t really have any problems. The Microsoft team has managed to process relatively well but that still leaves a news gap and some are starting to fill it with shots at Microsoft’s CEO because, and this is my opinion, the budget for sustaining marketing that should be filling this gap remains too low.

Apple, on the other hand, tends to spike their advertising spending after the launch to help keep any problems from becoming newsworthy or, worse, having anyone target their CEO (which has happened a lot because of Steve Jobs’ illness this year).

It is my belief that stories in a gap tend to drift negative because writers have been so positive during the launch of a new product that they feel the need for balance and negative stories, because they contrast with the earlier positive ones, will pull a bigger audience.

I think we see a similar behavior when a popular celebrity has a problem – saying positive things has become boring, so negative stuff is very popular.

Unfortunately for Steve Ballmer, folks seem to be focused on him as a result.

Following a Founder

Dan Lyons argues that Steve Ballmer is no Bill Gates. Hard to argue against that, but I would counter by saying that even Bill Gates would be no Bill Gates this decade.

The Microsoft that exists and the market it exists in is vastly different than it was when Bill left the company. Much of what Lyons is pointing to actually is a result of decisions made during Bill’s watch. It takes a long time to change a company of Microsoft’s scale and, as Dan points out, Microsoft went flat soon after Bill left the CEO job, which would suggest Bill created the problems Dan is pointing to and Steve has been unable to fix them. That’s a little different than blaming Steve for being the cause.

In fact, the part of Microsoft that continues to run well is the enterprise side and this is the side that Steve Ballmer was responsible for before taking the job of President. You could actually argue that his work has sustained better than Bill’s.

Founders, particularly once they’re gone, tend to become even more legendary. I can’t tell you the number of times folks wished HP’s founders came back last decade or Thomas Watson Jr. came back in the 80s and early 90s. People build these folks into demigods who can solve any problem and forget that forming a company is as much luck as talent – and even the talent likely came from a large number of people who have also left the company.

Think about the poor fool who takes over Apple when Steve Jobs is gone. How would you like to fill those shoes? I don’t think even Bill Gates himself could step in and hope to meet the expectations Bill’s name sets for the job of CEO.

Complexity Increases Personal Risk

Messing with a complex company has huge risks. For instance, Steve Ballmer did try to fix Microsoft’s enterprise pricing problem and with the best of intentions, by any measure, actually made things worse.

This was because in the process of fixing the pricing program complexities, a lot of clients discovered they were underpaying and suddenly were faced with huge surprise bills to Microsoft. I believe that paying these, and dealing with the personal problems associated with massive budget overruns, did a lot to launch the Open Source and Linux movements while damaging Microsoft’s image seriously.

I can recall chatting with a Senior VP at IBM while I was there about why he didn’t fix the obvious problems we both were facing. His response was that fixing them was riskier than leaving them in place because the complexity of the organization would likely bring to surface an even bigger unknown problem, and that problem could be a career killer. In short he, and I’ve seen this with many top executives, saw more personal risk in fixing a problem then leaving it alone.

Turnaround vs. Sustaining Manager

Steve Ballmer has an additional problem. Had he been brought in to turn the company around like Carol Bartz has at Yahoo he would have a year or two where he could make massive changes and even take losses to reform Microsoft into something he could better manage.

This is what Steve Jobs did at Apple when he took the firm over and still, turning the company around was a very close thing. In the end Apple was redesigned specifically around Steve Jobs’ strengths. This goes a long way toward both the pain the firm experienced right after Jobs came back and its success today.

Microsoft continues to generate a massive amount of cash and any major change would likely adversely impact this while the firm was being restructured. As a sustaining manager Steve is measured quarter to quarter and isn’t given the leeway a turnaround manager is given.

In short there are only a relatively small number of changes he can make, leaving the company largely structured around Bill Gates old skill set and not Ballmer’s.

Companies need to be massively restructured from time to time to face a changing world. But a sustaining manager who isn’t a founder is not given the latitude to make those kinds of changes – which is why so many tend to fail and why turnaround managers are in such demand.

Finally, another advantage a turnaround manager has is a lack of attachments to the existing staff. Someone that comes up from inside has as friends the very folks he, or she, must push out of the firm. They know their spouses, their kids; they may have had dinner at their homes and attended family functions.

Firing or demoting people like this is incredibly hard, I know because I’ve had to do it from time to time, and this too goes to why most sustaining managers run into trouble if they like their people. And they typically don’t get the job if they don’t. They often can’t bring themselves to make the critical choices they need to make. These are friends and they want them to be successful.

Turnaround managers have little of this loyalty. They look at folks very objectively (some would argue too objectively at times) and can quickly cut those that need to be replaced by better assets. They don’t have the deep loyalty and can make the hard decisions.

But realize this loyalty works both ways and often a turnaround manager loses critical company assets during the process and the firm doesn’t recover. Sun’s turn around wasn’t successful, for instance.

Wrapping Up: Ballmer May Be the Best Microsoft could Hope For

Microsoft wouldn’t have been as successful as it is without Steve Ballmer, who personally drove much of its corporate success. Most thought Microsoft could never be a corporate player and without Steve it is my belief it never would have been. Something that Google may want to consider given Netscape’s failure.

Following an iconic founder is nearly impossible to do successfully. Novell after Ray Norda, IBM after Thomas Watson Jr., HP after Hewlett and Packard, Intel after Grove, all showcase that being the CEO after an iconic founder has left is nearly impossible to do successfully.

If you look at Microsoft’s results compared to other firms like Sun, Novell, Apple after Steve Jobs left, and a variety of Japanese companies (Sony, for instance) you’ll likely find that Microsoft is actually doing better than most. The bar isn’t what the founder did; it’s what anyone can do after an iconic founder has left. Could Steve do better? Sure, but now name someone who has in a similar situation and I think you’ll find the list is incredibly short.

In the end, I doubt they can find anyone that could do the job better than Steve Ballmer does it and that, were he to step down, we’d likely find out really quickly how fast things could get much worse. Such is the nature of a company like Microsoft and why I’d never envy someone getting the top job after an iconic CEO has left.

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